-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OqrEKywB7UfDXJZbdT4q/wm1vb+sJcZKIJtka6Rij2BEoVZyEaChY+oFkMEAz4fu iscSsLKQiHsM2vRNREreRA== 0001091439-08-000007.txt : 20080429 0001091439-08-000007.hdr.sgml : 20080429 20080429120257 ACCESSION NUMBER: 0001091439-08-000007 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20080429 DATE AS OF CHANGE: 20080429 EFFECTIVENESS DATE: 20080501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST CENTRAL INDEX KEY: 0001091439 IRS NUMBER: 000000000 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-83423 FILM NUMBER: 08783907 BUSINESS ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416 BUSINESS PHONE: 763-765-6551 MAIL ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416 FORMER COMPANY: FORMER CONFORMED NAME: USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST DATE OF NAME CHANGE: 19990721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST CENTRAL INDEX KEY: 0001091439 IRS NUMBER: 000000000 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-09491 FILM NUMBER: 08783908 BUSINESS ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416 BUSINESS PHONE: 763-765-6551 MAIL ADDRESS: STREET 1: 5701 GOLDEN HILLS DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55416 FORMER COMPANY: FORMER CONFORMED NAME: USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST DATE OF NAME CHANGE: 19990721 0001091439 S000009942 AZL Legg Mason Value Fund C000027522 AZL Legg Mason Value Fund 0001091439 S000009943 AZL Money Market Fund C000027523 AZL Money Market Fund 0001091439 S000009944 AZL Neuberger Berman Regency Fund C000027524 AZL Neuberger Berman Regency Fund 0001091439 S000009945 AZL Schroder Emerging Markets Equity Fund C000027525 AZL Schroder Emerging Markets Equity Fund Class 2 C000048321 AZL Schroder Emerging Markets Equity Fund Class 1 0001091439 S000009946 AZL OCC Opportunity Fund C000027526 AZL OCC Opportunity Fund 0001091439 S000009947 AZL Columbia Technology Fund C000027527 AZL Columbia Technology Fund 0001091439 S000009948 AZL Oppenheimer Global Fund C000027528 AZL Oppenheimer Global Fund Class 1 C000027529 AZL Oppenheimer Global Fund Class 2 0001091439 S000009949 AZL Oppenheimer International Growth Fund C000027530 AZL Oppenheimer International Growth Fund 0001091439 S000009950 AZL Oppenheimer Main Street Fund C000027531 AZL Oppenheimer Main Street Fund Class 1 C000027532 AZL Oppenheimer Main Street Fund Class 2 0001091439 S000009952 AZL AIM International Equity Fund C000027534 AZL AIM International Equity Fund 0001091439 S000009953 AZL OCC Value Fund C000027535 AZL OCC Value Fund 0001091439 S000009954 AZL PIMCO Fundamental IndexPLUS Total Return Fund C000027536 AZL PIMCO Fundamental IndexPLUS Total Return Fund 0001091439 S000009955 AZL LMP Large Cap Growth Fund C000027537 AZL LMP Large Cap Growth Fund 0001091439 S000009956 AZL Turner Quantitative Small Cap Growth Fund C000027538 AZL Turner Quantitative Small Cap Growth Fund 0001091439 S000009958 AZL Van Kampen Comstock Fund C000027540 AZL Van Kampen Comstock Fund 0001091439 S000009960 AZL Van Kampen Equity and Income Fund C000027542 AZL Van Kampen Equity and Income Fund 0001091439 S000009961 AZL Van Kampen Global Franchise Fund C000027543 AZL Van Kampen Global Franchise Fund 0001091439 S000009962 AZL Van Kampen Global Real Estate Fund C000027544 AZL Van Kampen Global Real Estate Fund 0001091439 S000009963 AZL Davis NY Venture Fund C000027545 AZL Davis NY Venture Fund Class 1 C000027546 AZL Davis NY Venture Fund Class 2 0001091439 S000009964 AZL Van Kampen Growth and Income Fund C000027547 AZL Van Kampen Growth and Income Fund 0001091439 S000009965 AZL Van Kampen Mid Cap Growth Fund C000027548 AZL Van Kampen Mid Cap Growth Fund 0001091439 S000009966 AZL Dreyfus Founders Equity Growth Fund C000027549 AZL Dreyfus Founders Equity Growth Fund 0001091439 S000009967 AZL Dreyfus Premier Small Cap Value Fund C000027550 AZL Dreyfus Premier Small Cap Value Fund Class 1 C000027551 AZL Dreyfus Premier Small Cap Value Fund Class 2 0001091439 S000009968 AZL Franklin Small Cap Value Fund C000027552 AZL Franklin Small Cap Value Fund 0001091439 S000009969 AZL Jennison 20/20 Focus Fund C000027553 AZL Jennison 20/20 Focus Fund 0001091439 S000009970 AZL Jennison Growth Fund C000027554 AZL Jennison Growth Fund 0001091439 S000009971 AZL Legg Mason Growth Fund C000027555 AZL Legg Mason Growth Fund 0001091439 S000014964 AZL TargetPLUS Equity Fund C000040649 AZL TargetPLUS Equity Fund 0001091439 S000014965 AZL First Trust Target Double Play Fund C000040650 AZL First Trust Target Double Play Fund 0001091439 S000017464 AZL Small Cap Stock Index Fund C000048313 AZL Small Cap Stock Index Fund 0001091439 S000017465 AZL TargetPLUS Balanced Fund C000048314 AZL TargetPLUS Balanced Fund 0001091439 S000017466 AZL TargetPLUS Growth Fund C000048315 AZL TargetPLUS Growth Fund 0001091439 S000017467 AZL TargetPLUS Moderate Fund C000048316 AZL TargetPLUS Moderate Fund 0001091439 S000017468 AZL NACM International Fund C000048317 AZL NACM International Fund 0001091439 S000017469 AZL Schroder International Small Cap Fund C000048318 AZL Schroder International Small Cap Fund 0001091439 S000017470 AZL S&P 500 Index Fund C000048319 AZL S&P 500 Index Fund Class 1 C000048320 AZL S&P 500 Index Fund Class 2 485BPOS 1 file001.txt ALLIANZ VIP TRUST 485B MAY 1, 2008 FILE NOS. 333-83423 811-9491 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] POST-EFFECTIVE AMENDMENT NO. 24 AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] AMENDMENT NO. 25 ------------------------------- ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST 5701 Golden Hills Drive Minneapolis, MN 55416 (763) 765-7330 ----------------------------- NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS: H. Bernt von Ohlen Allianz Investment Management LLC 5701 Golden Hills Drive Minneapolis, MN 55416 COPIES OF COMMUNICATIONS TO: Michael J. Radmer DORSEY & WHITNEY LLP 50 SOUTH SIXTH STREET, SUITE 1500 MINNEAPOLIS, MN 55402 Approximate Date of Proposed Public Offering: May 1, 2008 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2008 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485 [ ] on (date)pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. PART A - PROSPECTUS _____________________ ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AZL(R) AIM INTERNATIONAL EQUITY FUND AZL(R) COLUMBIA TECHNOLOGY FUND AZL(R) DAVIS NY VENTURE FUND AZL(R) DREYFUS FOUNDERS EQUITY GROWTH FUND AZL(R) DREYFUS PREMIER SMALL CAP VALUE FUND AZL(R) FIRST TRUST TARGET DOUBLE PLAY FUND AZL(R) FRANKLIN SMALL CAP VALUE FUND AZL(R) JENNISON 20/20 FOCUS FUND AZL(R) JENNISON GROWTH FUND AZL(R) LEGG MASON GROWTH FUND AZL(R) LEGG MASON VALUE FUND AZL(R) LMP LARGE CAP GROWTH FUND AZL(R) MONEY MARKET FUND AZL(R) NACM INTERNATIONAL FUND AZL(R) NEUBERGER BERMAN REGENCY FUND AZL(R) OCC OPPORTUNITY FUND AZL(R) OCC VALUE FUND AZL(R) OPPENHEIMER GLOBAL FUND AZL(R) OPPENHEIMER INTERNATIONAL GROWTH FUND AZL(R) OPPENHEIMER MAIN STREET FUND AZL(R) PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND AZL(R) S&P 500 INDEX FUND AZL(R) SCHRODER EMERGING MARKETS EQUITY FUND AZL(R) SCHRODER INTERNATIONAL SMALL CAP FUND AZL(R) SMALL CAP STOCK INDEX FUND AZL TARGETPLUSSM BALANCED FUND AZL TARGETPLUSSM EQUITY FUND AZL TARGETPLUSSM GROWTH FUND AZL TARGETPLUSSM MODERATE FUND AZL(R) TURNER QUANTITATIVE SMALL CAP GROWTH FUND AZL(R) VAN KAMPEN COMSTOCK FUND AZL(R) VAN KAMPEN EQUITY AND INCOME FUND AZL(R) VAN KAMPEN GLOBAL FRANCHISE FUND AZL(R) VAN KAMPEN GLOBAL REAL ESTATE FUND AZL(R) VAN KAMPEN GROWTH AND INCOME FUND AZL(R) VAN KAMPEN MID CAP GROWTH FUND PROSPECTUS DATED MAY 1, 2008 - -------------------------------------------------------------------------------- ALLIANZ INVESTMENT MANAGEMENT LLC (THE "MANAGER") Shares of each Fund are sold exclusively to certain insurance companies in connection with particular variable annuity contracts and/or variable life insurance policies they issue. The insurance companies invest in shares of the Funds in accordance with instructions received from owners of the applicable annuity or life insurance contract. This Prospectus must be accompanied or preceded by a current prospectus for the variable annuity contracts or variable life insurance policies that invest in the Funds. - -------------------------------------------------------------------------------- QUESTIONS? CALL TOLL FREE AT 1-877-833-7113 OR CONTACT YOUR INVESTMENT REPRESENTATIVE. The Securities and Exchange Commission has not approved or disapproved the shares described in this Prospectus or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus may contain information on Funds not available under your variable annuity contract or life insurance policy. Please refer to your variable annuity contract or life insurance policy prospectus for information regarding the investment options available to you. THESE SECURITIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR AN AFFILIATE OF ANY BANK, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), OR ANY OTHER AGENCY OF THE UNITED STATES, OR ANY BANK OR AN AFFILIATE OF ANY BANK; AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF VALUE. "AZL" is a registered service mark of Allianz SE. Allianz SE is the ultimate owner of the Manager. - -------------------------------------------------------------------------------- Not FDIC Insured o May Lose Value o No Bank Guarantee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ALLIANZ VIP FUNDS - -------------------------------------------------------------------------------- TABLE OF CONTENTS OVERVIEW...................................................3 - -------- AZL(R) AIM INTERNATIONAL EQUITY FUND...................7 ------------------------------------ AZL(R) COLUMBIA TECHNOLOGY FUND.......................10 ------------------------------- AZL(R) DAVIS NY VENTURE FUND..........................13 ---------------------------- AZL(R) DREYFUS FOUNDERS EQUITY GROWTH FUND............16 ------------------------------------------ AZL(R) DREYFUS PREMIER SMALL CAP VALUE FUND...........19 ------------------------------------------- AZL(R) FIRST TRUST TARGET DOUBLE PLAY FUND............22 ------------------------------------------ AZL(R) FRANKLIN SMALL CAP VALUE FUND..................26 ------------------------------------ AZL(R) JENNISON 20/20 FOCUS FUND......................29 -------------------------------- AZL(R) JENNISON GROWTH FUND...........................33 --------------------------- AZL(R) LEGG MASON GROWTH FUND.........................36 ----------------------------- AZL(R) LEGG MASON VALUE FUND..........................39 ---------------------------- AZL(R) LMP LARGE CAP GROWTH FUND......................43 -------------------------------- AZL(R) MONEY MARKET FUND..............................46 ------------------------ AZL(R) NACM INTERNATIONAL FUND........................49 ------------------------------ AZL(R) NEUBERGER BERMAN REGENCY FUND..................51 ------------------------------------ AZL(R) OCC OPPORTUNITY FUND...........................54 --------------------------- AZL(R) OCC VALUE FUND.................................57 --------------------- AZL(R) OPPENHEIMER GLOBAL FUND........................60 ------------------------------ AZL(R) OPPENHEIMER INTERNATIONAL GROWTH FUND..........63 -------------------------------------------- AZL(R) OPPENHEIMER MAIN STREET FUND...................67 ----------------------------------- AZL(R) PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND..70 ---------------------------------------------------- AZL(R) S&P 500 INDEX FUND.............................75 ------------------------- AZL(R) SCHRODER EMERGING MARKETS EQUITY FUND..........77 -------------------------------------------- AZL(R) SCHRODER INTERNATIONAL SMALL CAP FUND..........81 -------------------------------------------- AZL(R) SMALL CAP STOCK INDEX FUND.....................84 --------------------------------- AZL TARGETPLUSSM BALANCED FUND........................86 ------------------------------ AZL TARGETPLUSSM EQUITY FUND..........................92 ---------------------------- AZL TARGETPLUSSM GROWTH FUND..........................97 ---------------------------- AZL TARGETPLUSSM MODERATE FUND.......................103 ------------------------------ AZL(R) TURNER QUANTITATIVE SMALL CAP GROWTH FUND.....109 ------------------------------------------------ AZL(R) VAN KAMPEN COMSTOCK FUND......................112 ------------------------------- AZL(R) VAN KAMPEN EQUITY AND INCOME FUND.............115 ---------------------------------------- AZL(R) VAN KAMPEN GLOBAL FRANCHISE FUND..............118 --------------------------------------- AZL(R) VAN KAMPEN GLOBAL REAL ESTATE FUND............121 ----------------------------------------- AZL(R) VAN KAMPEN GROWTH AND INCOME FUND.............124 ---------------------------------------- AZL(R) VAN KAMPEN MID CAP GROWTH FUND................127 ------------------------------------- PRINCIPAL INVESTMENT RISKS...............................130 - -------------------------- MORE ABOUT THE FUNDS.....................................148 - -------------------- TEMPORARY DEFENSIVE POSITIONS........................148 ----------------------------- FUND MANAGEMENT........................................149 - --------------- THE MANAGER........................................149 ----------- THE SUBADVISERS OF THE FUNDS.......................149 ---------------------------- THE PORTFOLIO MANAGERS OF THE FUNDS................152 ----------------------------------- DUTIES OF THE MANAGER AND SUBADVISERS..............161 ------------------------------------- PAYMENTS TO AFFILIATED INSURANCE COMPANIES.........162 ------------------------------------------ TRANSFER SUPPORTED FEATURES OF CERTAIN ANNUITY CONTRACTS ........................................162 ---------- MANAGEMENT FEES....................................163 --------------- LEGAL PROCEEDINGS..................................164 ----------------- THE ADMINISTRATOR AND DISTRIBUTOR..................184 --------------------------------- THE CUSTODIAN......................................184 ------------- LICENSING ARRANGEMENTS.............................184 ---------------------- SHAREHOLDER INFORMATION................................188 - ----------------------- PRICING OF FUND SHARES.............................188 ---------------------- MONEY MARKET FUND..................................188 ----------------- PURCHASE AND REDEMPTION OF SHARES..................188 --------------------------------- MARKET TIMING......................................189 ------------- DISTRIBUTION (12B-1) FEES..........................189 ------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES.................190 ---------------------------------- FINANCIAL HIGHLIGHTS...................................191 - -------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 - -------------------------------------------------------------------------------- OVERVIEW ALLIANZ VIP FUNDS - -------------------------------------------------------------------------------- OVERVIEW The Allianz Variable Insurance Products Trust (the "VIP Trust") offers 36 separate investment portfolios (together, the "Funds," "VIP Funds" or "Allianz VIP Funds," and each individually, a "Fund," "VIP Fund," or "Allianz VIP Fund"). Within the scope of an investment program approved by the Board of Trustees to the VIP Funds (the "Board" the "Trustees" or the "Board of Trustees"), the Funds are managed by Allianz Investment Management LLC (the "Manager"), which in turn has retained certain asset management firms (the "Subadvisers") to make investment decisions on behalf of the Funds. The Manager was formerly known as Allianz Life Advisers, LLC. The Manager selected each Subadviser based on the Subadviser's experience with the investment strategy for which it was selected. Set forth below are the Funds and the corresponding Subadviser. The VIP Trust provides investment vehicles for variable annuity contracts and variable life insurance policies offered by the separate accounts of various life insurance companies affiliated with the Manager. The separate accounts buy, and own, shares of the Funds on behalf of owners of variable annuity contracts and variable life insurance policies who direct purchase payments to subaccounts of the separate accounts that invest in the Funds. Therefore, you cannot directly purchase, nor will you directly own, shares of the Funds. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 3 - -------------------------------------------------------------------------------- OVERVIEW ALLIANZ VIP FUNDS - --------------------------------------------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------------------------- FUND SUBADVISER - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL AIM International Equity Fund Invesco Aim Capital Management, Inc. (formerly A I M Capital Management, Inc.) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Columbia Technology Fund Columbia Management Advisors, LLC - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Davis NY Venture Fund Davis Selected Advisers, L.P. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Dreyfus Founders Equity Growth Fund** Founders Asset Management LLC (affiliated with The Dreyfus Corporation) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Dreyfus Premier Small Cap Value Fund The Dreyfus Corporation (affiliated with Founders Asset Management LLC) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL First Trust Target Double Play Fund First Trust Advisors L.P. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Franklin Small Cap Value Fund Franklin Advisory Services, LLC - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Jennison 20/20 Focus Fund Jennison Associates LLC - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Jennison Growth Fund Jennison Associates LLC - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- Legg Mason Capital Management, Inc. (affiliated with ClearBridge AZL Legg Mason Growth Fund Advisors, LLC) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- Legg Mason Capital Management, Inc. (affiliated with ClearBridge AZL Legg Mason Value Fund Advisors, LLC) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- ClearBridge Advisors, LLC (affiliated with Legg Mason Capital AZL LMP Large Cap Growth Fund Management, Inc.) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Money Market Fund* BlackRock Institutional Management Corporation - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL NACM International Fund Nicholas-Applegate Capital Management LLC (affiliated with the Manager) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Neuberger Berman Regency Fund Neuberger Berman Management Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL OCC Opportunity Fund Oppenheimer Capital LLC (affiliated with the Manager) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL OCC Value Fund** Oppenheimer Capital LLC (affiliated with the Manager) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Oppenheimer Global Fund OppenheimerFunds, Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Oppenheimer International Growth Fund OppenheimerFunds, Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Oppenheimer Main Street Fund OppenheimerFunds, Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- Pacific Investment Management Company LLC ("PIMCO") (affiliated with AZL PIMCO Fundamental IndexPLUS Total Return Fund the Manager) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL S&P 500 Index Fund The Dreyfus Corporation (affiliated with Founders Asset Management LLC) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Schroder Emerging Markets Equity Fund* Schroder Investment Management North America Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Schroder International Small Cap Fund Schroder Investment Management North America Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Small Cap Stock Index Fund The Dreyfus Corporation (affiliated with Founders Asset Management LLC) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- First Trust Advisors L.P. (Equity Portfolio)/PIMCO (Fixed Income AZL TargetPLUS Balanced Fund Portfolio) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL TargetPLUS Equity Fund First Trust Advisors L.P. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- First Trust Advisors L.P. (Equity Portfolio)/PIMCO (Fixed Income AZL TargetPLUS Growth Fund Portfolio) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- First Trust Advisors L.P. (Equity Portfolio)/PIMCO (Fixed Income AZL TargetPLUS Moderate Fund Portfolio) - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Turner Quantitative Small Cap Growth Fund* Turner Investment Partners, Inc. - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Comstock Fund** Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Equity and Income Fund Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Global Franchise Fund Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Global Real Estate Fund Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Growth and Income Fund Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- - ------------------------------------------------------ ------------------------------------------------------------------------- AZL Van Kampen Mid Cap Growth Fund** Van Kampen Asset Management - ------------------------------------------------------ ------------------------------------------------------------------------- * The following Funds (Subadvisers) changed effective on the following dates: --------------------- ----------------------------------------------- ---------------------------------------------------- DATE CURRENT FUND NAME (SUBADVISER) PREVIOUS FUND NAME (SUBADVISER) --------------------- ----------------------------------------------- ---------------------------------------------------- --------------------- ----------------------------------------------- ---------------------------------------------------- June 26, 2007 AZL Turner Quantitative Small Cap Growth Fund AZL LMP Small Cap Growth Fund (Turner Investment Partners, Inc.) (ClearBridge Advisors, LLC) --------------------- ----------------------------------------------- ---------------------------------------------------- --------------------- ----------------------------------------------- ---------------------------------------------------- December 10, 2007 AZL Money Market Fund AZL Money Market Fund (BlackRock Institutional Management (Prudential Investment Management, Inc.) Corporation) --------------------- ----------------------------------------------- ---------------------------------------------------- --------------------- ----------------------------------------------- ---------------------------------------------------- December 10, 2007 AZL Schroder Emerging Markets Equity Fund AZL Oppenheimer Developing Markets Fund (Schroder Investment Management North America Inc.) (OppenheimerFunds, Inc.) --------------------- ----------------------------------------------- ----------------------------------------------------
** At a Special Meeting of Shareholders held on September 19, 2007, shareholders of each of the Acquired Funds in the following table approved an Agreement and Plan of Reorganization (the "Plan") between each Acquired Fund and its corresponding Acquiring Fund. Under the Plan, effective September 21, 2007, a "Reorganization" was completed whereby each Acquiring Fund has acquired all of the assets and assumed all of the liabilities of its corresponding Acquired Fund in exchange for shares of the Acquiring Fund. Shares of each Acquiring Fund have been distributed proportionately to the shareholders of the corresponding Acquired Fund in complete liquidation of the Acquired Fund and the assumption of the Acquired Fund's liabilities. As a result of the Reorganizations, the Acquired Funds are no longer available.
- ---------------------------------------------------- ---------------------------------------------- Acquiring Funds Acquired Funds - ---------------------------------------------------- ---------------------------------------------- - ---------------------------------------------------- ---------------------------------------------- AZL(R) Van Kampen Comstock Fund AZL(R) AIM Basic Value Fund - ---------------------------------------------------- ---------------------------------------------- - ---------------------------------------------------- ---------------------------------------------- AZL(R) OCC Value Fund AZL(R) OCC Renaissance Fund - ---------------------------------------------------- ---------------------------------------------- - ---------------------------------------------------- ---------------------------------------------- AZL(R) Van Kampen Mid Cap Growth Fund AZL(R) Van Kampen Aggressive Growth Fund - ---------------------------------------------------- ---------------------------------------------- - ---------------------------------------------------- ---------------------------------------------- AZL(R) Dreyfus Founders Equity Growth Fund AZL(R) Van Kampen Strategic Growth Fund - ---------------------------------------------------- ----------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 4 - -------------------------------------------------------------------------------- OVERVIEW ALLIANZ VIP FUNDS - -------------------------------------------------------------------------------- ANTICIPATED SUBSTITUTION OF SHARES OF CERTAIN FUNDS OF THE VIP TRUST FOR SHARES OF OTHER FUNDS Allianz Life Insurance Company of North America and its subsidiary Allianz Life Insurance Company of New York, and their separate accounts Allianz Life Variable Account A, Allianz Life Variable Account B, and Allianz Life of NY Variable Account C (the "Separate Accounts") (collectively the "Exemptive Order Applicants"), all of which are affiliates of the Manager, have filed applications with the Securities and Exchange Commission for exemptive orders (the "Exemptive Order Applications") that would permit them to substitute shares of certain Funds of the Allianz Variable Insurance Products Trust for shares of certain other funds offered under certain variable annuity contracts and variable life insurance policies issued by the Exemptive Order Applicants. If the SEC grants the relief requested in the Exemptive Order Applications, the Exemptive Order Applicants would be permitted to substitute shares of the Replacement Funds for shares of the Replaced Funds held by the Separate Accounts as shown in the following table:
- ---------------------------------------------- ---------- --------------------------------------- ----------- REPLACEMENT FUND SHARE REPLACED FUND SHARE CLASS(ES) CLASS(ES) - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Jennison 20/20 Focus Fund Class 2* Jennison 20/20 Focus Portfolio Class 2* - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL S&P 500 Index Fund Class 1 Dreyfus Stock Index Fund, Inc. Initial Class 2* Service* - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Small Cap Stock Index Fund Class 2* Dreyfus Investment Portfolios Small Service* Cap Stock Index Portfolio - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Schroder Emerging Markets Equity Fund Class 1 Templeton Developing Markets Class 1 Class 2* Securities Fund Class 2* - ---------------------------------------------- ---------- --------------------------------------- -----------
* A distribution fee is assessed against assets attributable to this class of shares at an annual rate of 0.25% of the average daily net assets attributable to the class. It is currently anticipated that if the SEC grants the relief requested, the substitutions described above will take place in 2008. Neither the Manager nor the VIP Trust are applicants on the Exemptive Order Applications. Also, pursuant to the Exemptive Order Applications, neither the contract owners, the Replaced Funds, nor the Replacement Funds will bear any costs of the Substitutions, and all legal, accounting, and transactional costs and any brokerage or other costs incurred in the Substitutions will be paid by the Exemptive Order Applicants or the Manager, and accordingly, the Substitutions will have no impact on the fees and expenses paid by the Funds and borne by the shareholders of the Funds. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 5 - -------------------------------------------------------------------------------- OVERVIEW ALLIANZ VIP FUNDS - -------------------------------------------------------------------------------- Certain of the Funds may have names, investment objectives, strategies, portfolio manager(s), and characteristics that are substantially similar to other mutual funds managed by the Subadvisers. However, the asset size, portfolio composition, fees, and expenses of a Fund may be different from those of any similar fund, and performance may be better or worse. No representation is made that the Funds will perform in an equivalent manner to the similar funds. Other funds may be added or removed from the VIP Trust from time to time. The following Funds have names that suggest a focus on a particular type of investment: AZL AIM International Equity Fund AZL Columbia Technology Fund AZL Dreyfus Founders Equity Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL Franklin Small Cap Value Fund AZL LMP Large Cap Growth Fund AZL NACM International Fund AZL Schroder Emerging Markets Equity Fund AZL Schroder International Small Cap Fund AZL TargetPLUS Equity Fund AZL Turner Quantitative Small Cap Growth Fund AZL Van Kampen Global Real Estate Fund AZL Van Kampen Mid Cap Growth Fund In accordance with Rule 35d-1 under the Investment Company Act of 1940 (the "1940 Act"), each of these funds has adopted a policy that it will, under normal circumstances, invest at least 80% of its assets (exclusive of collateral received in connection with securities lending) in investments of the type suggested by its name. In addition, although it is not reflected in its name, the AZL Jennison 20/20 Focus Fund has adopted a policy to invest at least 80% of its total assets in approximately 40 (which may range up to 45) equity and equity-related securities of companies that the Subadviser believes have strong capital appreciation potential. For this policy, "assets" means net assets plus the amount of any borrowings for investment purposes. In addition, in appropriate circumstances, synthetic investments may be included in the 80% basket. A Fund's policy to invest at least 80% of its assets in such a manner is not a "fundamental" policy, which means that it may be changed without the vote of a majority of a Fund's outstanding shares as defined in the 1940 Act. The name of each of these Funds may be changed at any time by a vote of the Trustees. However, Rule 35d-1 also requires that shareholders be given written notice at least 60 days prior to any change by a Fund of its 80% investment policy. THE INVESTMENT OBJECTIVE OF EACH FUND, EXCEPT THE AZL MONEY MARKET FUND, MAY BE CHANGED BY THE TRUSTEES WITHOUT SHAREHOLDER APPROVAL. The Trustees have authorized the Trust to issue two classes of shares, Class 1 and Class 2, for the following Funds: AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, AZL Oppenheimer Main Street Fund, AZL S&P 500 Index Fund, and AZL Schroder Emerging Markets Equity Fund (the "Multi-Class Funds"). Class 1 and Class 2 shares of the Multi-Class Funds are substantially identical, except that Class 1 shares are not subject to a 12b-1 distribution fee (see "Distribution (12b-1) Fees" in the "Shareholder Information" section of this prospectus), while Class 2 shares are subject to a 12b-1 distribution fee in the amount of 0.25% of average daily net assets attributable to Class 2 shares. For certain variable annuity contracts or variable life insurance policies, Class 1 shares of the AZL S&P 500 Index Fund and AZL Schroder Emerging Markets Equity Fund are available as an investment option. Currently, only Class 2 shares of the AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, and AZL Oppenheimer Main Street Fund are available under variable annuity contracts and variable life insurance policies that offer the Multi-Class Funds as investment options. Class 1 shares of the AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, and AZL Oppenheimer Main Street Fund may be made available in the future to certain variable annuity contract owners and variable life insurance policy owners. The following is a summary of certain key information that describes each Fund's objectives, principal investment strategies, principal investment risks and certain performance information. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 6 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) AIM INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- AZL(R) AIM INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL AIM International Equity Fund is to provide long-term growth of capital. The Fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in a diversified portfolio of international equity securities whose issuers are considered by the Fund's Subadviser to have strong earnings momentum. The Fund invests in marketable equity securities of foreign companies that are listed on a recognized foreign or U.S. securities exchange or traded in a foreign or U.S. over-the-counter market. The Fund will normally invest in companies located in at least four countries outside of the United States, emphasizing investment in companies in the developed countries of Western Europe and the Pacific Basin. At the present time, the Fund's Subadviser intends to invest no more than 20% of the Fund's total assets in foreign companies located in developing countries, i.e., those that are in the initial stages of their industrial cycles. The Fund may invest up to 20% of its total assets in securities exchangeable for or convertible into marketable equity securities of foreign issuers. The Fund may also invest up to 20% of its total assets in high-grade short-term securities and debt securities, including U.S. Government obligations, investment grade corporate bonds, or taxable municipal securities, whether denominated in U.S. dollars or foreign currencies. The Subadviser focuses on companies that have experienced above-average, long-term growth in earnings and have strong prospects for future growth. In selecting countries in which the Fund will invest, the Subadviser also considers such factors as the prospect for relative economic growth among countries or regions, economic or political conditions, currency exchange fluctuations, tax considerations, and the liquidity of a particular security. The Subadviser considers whether to sell a particular security when any of these factors materially changes. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O GROWTH STOCKS RISK O FOREIGN RISK O EMERGING MARKETS RISK O INTEREST RATE RISK O CONVERTIBLE SECURITIES RISK O SELECTION RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking safety of principal - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking to add an international stock investment to your O Seeking a stable share price portfolio - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking capital appreciation and are willing to accept O Investing emergency reserves the higher volatility associated with investing in foreign stocks
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 7 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2003: 27.14%, 2004: 22.13%, 2005: 16.36%, 2006: 27.04%, 2007: 14.62%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q4, 2003) 14.51% Lowest (Q1, 2003) -5.76% AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL AIM International Equity Fund 5/1/2002 14.62% 21.35% 14.43% MSCI EAFE Index 11.17% 21.59% 15.00%
The Fund's performance is compared to the Morgan Stanley Capital International, Europe, Australasia and Far East (MSCI EAFE) Index, an unmanaged market capitalization-weighted equity index comprising 20 of the 48 countries in the MSCI universe and representing the developed world outside of North America. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 8 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.90% Distribution (12b-1) Fees(1) 0.25% Other Expenses(2) 0.18% ----- Total Annual Fund Operating Expenses 1.33% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses((3)) 1.33% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) Other expenses have been restated to reflect current expenses. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.45% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $135 $421 $729 $1,601 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 9 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) COLUMBIA TECHNOLOGY FUND - -------------------------------------------------------------------------------- AZL(R) COLUMBIA TECHNOLOGY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Columbia Technology Fund is capital appreciation. Under normal market conditions, the Fund invests at least 80% of its total net assets, plus any borrowings for investment purposes, in stocks of technology companies that may benefit from technological improvements, advancements or developments, as well as those expected to benefit from their extensive reliance on technology in connection with their operations and services. The Fund will notify shareholders at least 60 days prior to any changes in this policy. The Fund invests mainly in common stocks of U.S. and foreign technology companies that the Subadviser believes have, or will develop, products, processes or services that will provide significant technological improvements, advances or developments, as well as those expected to benefit from their extensive reliance on technology in connection with their operations and services. The Fund may invest in companies in all stages of corporate development, ranging from new companies developing a promising technology or scientific advancement to established companies with a record of producing breakthrough products and technologies from research and development efforts. The Fund will invest in companies of all sizes, and expects to invest a significant percentage of its assets in small- and mid-cap companies. The Fund's current focus includes companies from the following industries: o biotechnology, o cable and network broadcasting, o communications, o computer hardware, o computer services and software, o consumer electronics, o defense, o medical devices, o pharmaceutical, and o semiconductors. The Fund may also invest in securities convertible into or exercisable for stock, including preferred stock, warrants and debentures, and certain options and financial futures contracts ("derivatives"). The Fund may also invest in foreign securities, including American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and NASDAQ-listed foreign securities. The Fund may engage in frequent trading in order to achieve its investment objectives. The Fund may also invest in other securities for temporary defensive purposes, or when cash is temporarily available. For more information, please see the discussion under the heading "Temporary Defensive Positions" in the section titled "More About the Funds" later in this prospectus. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o SELECTION RISK o MARKET RISK o INDUSTRY SECTOR RISK o GROWTH STOCKS RISK o CAPITALIZATION RISK o FOREIGN RISK o INITIAL PUBLIC OFFERINGS RISK o LIQUIDITY RISK o CONVERTIBLE SECURITIES RISK o DERIVATIVES RISK o FREQUENT TRADING o ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 10
- --------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ----------------------------------------------------------------- --------------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ----------------------------------------------------------------- --------------------------------------------------------- - ----------------------------------------------------------------- --------------------------------------------------------- O Investing for long-term goals, such as retirement O Needing current income - ----------------------------------------------------------------- --------------------------------------------------------- - ----------------------------------------------------------------- --------------------------------------------------------- O Seeking long-term capital appreciation O Seeking safety of principal - ----------------------------------------------------------------- --------------------------------------------------------- - ----------------------------------------------------------------- --------------------------------------------------------- O Willing to assume the greater risks of share price fluctuations that are typical for an aggressive growth fund focusing on the stocks of emerging technology companies - ----------------------------------------------------------------- ---------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002:-41.13%, 2003: 41.96%, 2004: -4.33%, 2005: 0.70%, 2006: 2.56%, 2007: 22.75%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 18.56% Lowest (Q3, 2002) -26.82% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 11
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL Columbia Technology Fund 11/5/2001 22.75% 11.48% 1.43% S&P 500 Index 5.49% 12.83% 6.94%
The Fund's performance is compared to the Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index") The S&P 500(R) Index is an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.80% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.15% ----- Total Annual Fund Operating Expenses 1.20% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.20% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.35% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $122 $381 $660 $1,455 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 12 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) DAVIS NY VENTURE FUND - -------------------------------------------------------------------------------- AZL(R) DAVIS NY VENTURE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Davis NY Venture Fund is long-term growth of capital. Under normal circumstances, the Fund invests the majority of its assets in equity securities issued by large companies with market capitalizations of at least $10 billion. The Subadviser tries to identify businesses that possess characteristics it believes foster the creation of long-term value, such as proven management, a durable franchise and business model, and sustainable competitive advantages. The Subadviser aims to invest in such businesses when they are trading at a discount to their intrinsic worth. The Subadviser selects companies with the intention of owning their stocks for the long term. The Fund has the ability to invest a limited portion of its assets in companies of any size, to invest in foreign securities, and to invest in non-equity securities. The Subadviser considers selling securities if it believes the stock's market price exceeds the Subadviser's estimates of intrinsic value, or if the ratio of the risks and rewards of continuing to own the company is no longer attractive. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O FOREIGN RISK O EMERGING MARKETS RISK O HEADLINE RISK O INDUSTRY SECTOR RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- --------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital O Worried about the possibility of sharp price swings and dramatic market declines - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O More comfortable with established, well-known companies O Interested in earning current income - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for the long term O Investing for the short term - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 13 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, 5 years, and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE (CLASS 2 SHARES) Performance information is presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. [BAR CHART GRAPHIC - 2002: -24.18, 2003: 29.43%, 2004: 10.56%, 2005: 9.68%, 2006: 13.91%, 2007: 4.15%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 16.61% Lowest (Q3, 2002) -17.49%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL Davis NY Venture Fund (Class 2) 11/5/2001 4.15% 13.24% 6.55% Russell 1000 Value Index -0.17% 14.63% 9.80%
The performance of Class 2 shares of the Fund is compared to the Russell 1000 Value Index, an unmanaged index that measures the performance of the certain securities found in the Russell universe with less-than-average growth orientation and low price-to-book and earnings ratios. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided by the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 14 - -------------------------------------------------------------------------------- FEES AND EXPENSES Fees and Expenses are presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 2 Management Fee(1) 0.75% Distribution (12b-1) Fees((2)) 0.25% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 1.09% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.09% ===== (1) Effective December 1, 2007, the Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.75% on the first $100 million, and 0.70% thereafter through April 30, 2009. If this voluntary fee reduction were reflected in the table, the Net Annual Operating Expenses would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 2 shares to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS 2 $111 $347 $601 $1,329 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 15 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) DREYFUS FOUNDERS EQUITY GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) DREYFUS FOUNDERS EQUITY GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Dreyfus Founders Equity Growth Fund is long-term growth of capital and income. To pursue this goal, the Fund invests primarily in common stocks of large, well-established and mature companies. The Fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks that are included in a widely recognized index of stock market performance. While a significant portion of these stocks normally would be expected to pay regular dividends, it may invest in non-dividend paying companies if they offer better prospects for capital appreciation. The Fund will provide notice to shareholders at least 60 days prior to any change in this policy. The Fund defines large capitalization as companies with market capitalizations within the range of the Russell 1000 Growth Index, which is the large cap Russell index used by the Fund for comparative purposes. At times, the Fund may overweight or underweight certain industry sectors relative to its benchmark index. The Fund may also invest up to 30% of its total assets in foreign securities. The Fund will not invest more than 5% of its net assets in bonds, debentures, convertible securities, and corporate obligations rated below investment grade. The Subadviser manages the Fund using a "growth style" of investing, searching for companies whose fundamental strengths suggest the potential to provide superior earnings growth over time. The Subadviser uses a consistent, bottom-up approach to build equity portfolios which emphasizes individual stock selection. The Subadviser goes beyond Wall Street analysis and performs intensive qualitative and quantitative in-house research to determine whether companies meet its investment criteria. The Subadviser continually monitors the securities in the Fund's portfolio, and will consider selling a security if its business momentum deteriorates or valuation becomes excessive. The Subadviser also may sell a security if an event occurs that contradicts the Subadviser's rationale for owning it, such as a deterioration in the company's financial fundamentals. In addition, the Subadviser may sell a security if better investment opportunities emerge elsewhere. The Subadviser also may liquidate a security if the Subadviser changes the Fund's industry or sector weightings. The Fund may, but is not required to, use derivatives, such as futures, options and forward contracts, as a substitute for taking a position in an underlying asset, to increase returns, to manage interest rate risk, or as part of a hedging strategy. The Fund may engage in frequent trading in order to achieve its investment objectives. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o ISSUER RISK o SELECTION RISK o GROWTH STOCKS RISK o INDUSTRY SECTOR RISK o FOREIGN RISK o DIVIDEND RISK o CURRENCY RISK o DERIVATIVE RISK o FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 16
- -------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Seeking safety of principal - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o Seeking income and growth of capital o Investing for the short-term or investing emergency reserves - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o Seeking to add a large capitalization component to your portfolio - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, 5 years, and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -30.70%, 2003: 24.25%, 2004: 7.72%, 2005: 4.56%, 2006: 12.93%, 2007: 8.75%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 12.08% Lowest (Q2, 2002) -16.12% AVERAGE ANNUAL TOTAL RETURNS - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 17
ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Dreyfus Founders Equity Growth Fund 11/5/2001 8.75% 11.44% 3.78% Russell 1000 Growth Index 11.81% 12.11% 5.12%
The Fund's performance is compared to the Russell 1000 Growth Index, an unmanaged index that measures performance of individual securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.77% Distribution (12b-1) Fees((1)) 0.25% Other Expenses((2)) 0.16% ----- Total Annual Fund Operating Expenses 1.18% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses((3)) 1.18% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) Other expenses have been restated to reflect current expenses. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $120 $375 $649 $1,432 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 18 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) DREYFUS PREMIER SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- AZL(R) DREYFUS PREMIER SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL Dreyfus Premier Small Cap Value Fund seeks investment returns that are consistently superior to the Russell 2000(R) Value Index. The Fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks of small U.S. companies. The Fund will provide notice to shareholders at least 60 days prior to any change in this policy. Smaller companies are generally newer and often entrepreneurial companies with market capitalizations ranging between $100 million and $3 billion at the time of purchase. This range may fluctuate depending on changes in the value of the stock market as a whole. The Subadviser uses a disciplined process that combines computer modeling techniques, fundamental analysis and risk management to select undervalued stocks for the Fund. In selecting securities, the Subadviser uses a computer model to identify and rank undervalued stocks. Undervalued stocks are normally characterized by relatively low price-to-earnings and low price-to-book ratios. The model analyzes how a stock is priced relative to its perceived intrinsic value. Then, based on fundamental analysis, the Subadviser generally selects the most attractive of the higher ranked securities, drawing on a variety of sources, including Wall Street research. The Fund's portfolio is constructed so that its sector weightings and risk characteristics are substantially similar to those of the Russell 2000 Value Index. The Fund may invest in securities issued in initial public offerings (IPOs) and securities of real estate investment trusts. The Fund may, but is not required to, use derivatives, such as futures and options, as a substitute for taking a position in an underlying asset, to increase returns, or as a hedging strategy. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O VALUE STOCKS RISK O CAPITALIZATION RISK O DERIVATIVES RISK O FOCUSED INVESTMENT RISK O ISSUER RISK O INITIAL PUBLIC OFFERINGS RISK O REAL ESTATE INVESTMENTS RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 19
- --------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking to avoid market risk and volatility - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital O Unwilling to accept the greater risks associated with small capitalization companies - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to accept the risk associated with investing in O Investing for the short-term or investing emergency undervalued smaller-capitalization stocks for the reserves potential reward of greater capital appreciation - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE (CLASS 2 SHARES) Performance information is presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. [BAR CHART GRAPHIC - 2005: 3.39%, 2006: 13.40%, 2007: -8.24%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2006) 10.41% Lowest (Q4, 2007) -8.14% AVERAGE ANNUAL TOTAL RETURNS - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 20
ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Dreyfus Premier Small Cap Value Fund (Class 2) 5/3/2004 -8.24% 7.63% Russell 2000 Value Index -9.78% 9.75%
The performance of Class 2 shares of the Fund is compared to the Russell 2000 Value Index, an unmanaged index that represents the performance of certain securities found in the Russell universe with low price-to-book and earnings ratios. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES Fees and Expenses are presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 2 Management Fee(1) 0.90% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 1.29% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.29% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.85% through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 2 shares to 1.35% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS 2 $131 $409 $708 $1,556 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 21 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) FIRST TRUST TARGET DOUBLE PLAY FUND - -------------------------------------------------------------------------------- AZL(R) FIRST TRUST TARGET DOUBLE PLAY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL First Trust Target Double Play Fund is total return. The Fund seeks to achieve its objective by investing in the common stocks of companies that are identified by a model based on two separate strategies. Approximately one-half of the common stocks in the Fund's portfolio are selected using The Dow(R) Target Dividend Strategy, and the other one-half are selected using the Value Line(R) Target 25 Strategy. While both of these strategies seek to provide above-average total return, each strategy follows a different principal investment strategy. Because different investments often react differently to economic and market changes, diversifying among investments that have a low correlation to each other has the potential to enhance returns and help reduce overall investment risk. The Fund's investment model has been developed to achieve this kind of diversification. The securities for each strategy are selected only once annually on or about the last business day before each Stock Selection Date. The "Stock Selection Date" will be on or about December 1 of each year. First Trust Advisors L.P. ("First Trust") serves as the Fund's Subadviser for both strategies and generally follows a buy and hold strategy, trading as soon as practicable to the Stock Selection Date and/or when required by cash flow activity in the Fund. First Trust may also trade because of mergers and acquisitions if the original stock is not the surviving company and to reinvest dividends. Between Stock Selection Dates, when cash inflows and outflows require, the Fund purchases and sells common stocks for each of the two strategies according to the approximate current percentage relationship among the shares of the stocks. Certain provisions of the 1940 Act, as amended, limit the ability of the Fund to invest more than 5% of the Fund's total assets in the stock of any company that derives more than 15% of its gross revenues from securities related activities ("Securities Related Companies"). If a Securities Related Company is selected through application of the investment strategy described above, First Trust will depart from the Fund's investment strategy in order to comply with this limitation. Any amount that cannot be allocated to a Securities Related Company because of the 5% limit will be allocated among the remaining portfolio securities in proportion to the percentage relationships determined by the investment strategy. The performance of the Fund will depend on First Trust's ability to effectively implement the investment strategies of the Fund and also on the performance of the stocks selected that meet the stock selection criteria. The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities of a limited number of issuers or it holds a large portion of its assets in a few issuers, the value of its shares will be more susceptible to any single economic, political or regulatory event affecting those issuers or their securities than shares of a diversified fund. The SAI has more information about the Fund's authorized investments and strategies, as well as the risks and restrictions that may apply to them. THE DOW(R) TARGET DIVIDEND STRATEGY This investment strategy looks for common stocks issued by companies that are expected to provide income and have the potential for capital appreciation. The Dow(R) Target Dividend Strategy seeks to achieve its objective by investing approximately equal amounts in the common stock of the 20 companies included in the Dow Jones Select Dividend IndexSM that have the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio. First Trust selects the common stocks of the 20 companies in the following manner: o Starting with the 100 stocks in the Dow Jones Select Dividend IndexSM, First Trust ranks the stocks from best (1) to worst (100) based on two factors: o Greatest change in return on assets over the last 12 months. An increase in return on assets generally indicates improving business fundamentals. o Price-to-book ratio. A lower, but positive, price-to-book ratio is generally used as an indication of value. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 22 o First Trust then selects an approximately equally-weighted portfolio of the 20 stocks with the best overall ranking on the two factors. VALUE LINE(R) TARGET 25 STRATEGY The Value Line(R) Target 25 Strategy seeks to achieve its objective by investing in 25 of the 100 stocks to which Value Line(R) gives a #1 ranking for "TimelinessTM" based on the Value Line Investment Survey(R). The 25 stocks are selected on the basis of certain positive financial attributes. Value Line(R) ranks approximately 1,700 stocks, representing approximately 94% of the trading volume on all U.S. stock exchanges. Of these approximately 1,700 stocks, only 100 are given their #1 ranking for TimelinessTM, which reflects Value Line's view of their probable price performance during the next six to 12 months relative to the others. Value Line(R) bases its rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. The 25 stocks are selected annually from the 100 stocks with the #1 ranking on or about the last business day before each Stock Selection Date. Companies that, as of the Stock Selection Date, Value Line(R) has announced will be removed from Value Line's #1 ranking for TimelinessTM will be removed from the universe of securities from which stocks are selected for the Fund. First Trust selects the common stocks of the 25 companies in the following manner: o Starting with the 100 stocks to which Value Line(R) gives the #1 ranking for TimelinessTM, First Trust removes from consideration the stocks of companies considered to be financial companies and the stocks of companies whose shares are not listed on a U.S. securities exchange. o First Trust then ranks the remaining stocks from best (1) to worst (100) on the following four factors: o 6-month price appreciation, and o 12-month price appreciation, and o Return on assets, and o Price to cash flow. o The First Trust adds up the numerical ranks achieved by each company in the above steps and selects the 25 stocks with the lowest sums. The selected stocks are weighted by market capitalization subject to the restriction that no stock will comprise less than approximately 1% or more than 7.5% of the Value Line(R) Target 25 Strategy portion of the portfolio on or about the Stock Selection Date. The securities will be adjusted on a proportional basis to accommodate this constraint. The Fund may engage in frequent trading in order to achieve its investment objectives. - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in the value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o LIMITED MANAGEMENT RISK o INVESTMENT STRATEGY RISK O FOREIGN RISK O CURRENCY RISK o FOCUSED INVESTMENT RISK O CAPITALIZATION RISK o NON-DIVERSIFICATION o DIVIDEND RISK o LICENSE TERMINATION RISK o FREQUENT TRADING o ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 23
- --------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Looking primarily for regular income - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o Seeking long-term growth of capital o Seeking safety of principal - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ o More comfortable with established, well-known companies - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2007: 8.47%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2007) 4.23% Lowest (Q4, 2007) -1.91% AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL First Trust Target Double Play Fund 12/27/2006 8.47% 7.51% S&P 500 Index 5.49% 4.82%
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 24 The Fund's performance is compared to the S&P 500 Index, an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.60% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.18% ----- Total Annual Fund Operating Expenses 1.03% Fee Waiver((3)) 0.24% ----- Net Annual Fund Operating Expenses((3)) 0.79% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.45% through April 30, 2009. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.79% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $304 $545 $1,238 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 25 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) FRANKLIN SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- AZL(R) FRANKLIN SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Franklin Small Cap Value Fund is long-term total return. The Fund seeks to achieve its objective by normally investing at least 80% of its net assets, plus any borrowings for investment purposes, in investments of small capitalization companies. Small capitalization companies are companies with market capitalizations similar to those that comprise the Russell 2500TM Index at the time of purchase. The Fund will provide notice to shareholders at least 60 days prior to any change to this policy. The Fund invests in equity securities that the Subadviser believes are currently undervalued and have the potential for capital appreciation. Common stocks, preferred stocks, and convertible securities are examples of equity securities. In choosing investments that are undervalued, the Fund's Subadviser focuses on companies that have one or more of the following characteristics: O Stock prices that are low relative to current, or historical or future earnings, book value, cash flow, or sales - all relative to the market, a company's industry or a company's earnings growth; O Recent sharp price declines (fallen angels) but still have growth potential in the Subadviser's opinion; O Valuable intangibles not reflected in the stock price such as franchises, distribution networks or market share for particular products or services, underused or understated assets or cash, or patents and trademarks. A stock price is undervalued when it is less than the price at which the Subadviser believes it would trade if the market reflected all factors relating to the company's worth. The Subadviser may consider a company to be undervalued in the marketplace relative to its underlying asset values because of overreaction by investors to unfavorable news about a company, an industry or the stock market in general, or as a result of a market decline, poor economic conditions, tax-loss selling, or actual or anticipated unfavorable developments affecting a company. The types of companies the Fund may invest in include those that are attempting to recover from business setbacks or adverse events (turnarounds) or cyclical downturns. In addition to price, the Fund, in choosing an investment, may consider a variety of other factors that may identify the issuer as a potential turnaround candidate or takeover target, such as ownership of valuable franchises, trademarks or trade names, control of distribution networks and market share for particular products. Purchase decisions may also be influenced by income, company buy-backs, and insider purchases and sales. The Fund may invest a significant portion of its assets in the financial services sector. The Fund may invest up to 25% of its total assets in foreign securities. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O VALUE STOCKS RISK O FOREIGN RISK O EMERGING MARKETS RISK O CAPITALIZATION RISK O INDUSTRY SECTOR RISK O LIQUIDITY RISK O ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 26
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement o Seeking to avoid market risk and volatility - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital O Investing for the short-term or investing emergency reserves - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Willing to accept the additional risk associated with investing in undervalued small capitalization securities for the potential reward of greater capital appreciation - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2004:23.10%, 2005: 7.03%, 2006: 15.41%, 2007: -4.37%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2006) 11.85% Lowest (Q4, 2007) -7.52%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Franklin Small Cap Value Fund 05/01/2003 -4.37% 14.31% Russell 2000 Value Index -9.78% 16.06%
The Fund's performance is compared to the Russell 2000 Value Index, an unmanaged index that represents the performance of certain securities found in the Russell universe with low price-to-book and earnings ratios. The index does not reflect - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 27 the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.75% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.11% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.11% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.35% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $113 $353 $612 $1,352 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 28 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) JENNISON 20/20 FOCUS FUND - -------------------------------------------------------------------------------- AZL(R) JENNISON 20/20 FOCUS FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Jennison 20/20 Focus Fund is long-term growth of capital. This means that the Subadviser seeks investments whose prices will increase over several years. The Fund normally invests at least 80% of its total assets in approximately 40 (which may range up to 45) equity and equity-related securities of companies that the Subadviser believes have strong capital appreciation potential. The Fund's strategy is to combine the efforts of two portfolio managers with different styles and to invest in stocks in which the portfolio managers have a high level of conviction for outperformance in the intermediate and long term with limited downside potential in the short term. The Fund's growth portfolio manager invests in companies that exceed $1 billion in market capitalization at the time of investment which are experiencing some or all of the following: high sales growth, high unit growth, high or improving returns on assets and equity and a strong balance sheet. These companies generally trade at high prices relative to their current earnings. The Fund's value portfolio manager invests in companies that exceed $1 billion in market capitalization at the time of investment which are selling at a price that is low relative to a company's earnings, assets, cash flow and dividends. The Fund primarily invests in common stocks, nonconvertible preferred stocks and convertible securities. Equity-related securities in which the Fund also invests include ADRs; warrants and rights that can be exercised to obtain stock; investments in various types of business ventures, including partnerships and joint ventures; securities of real estate investment trusts ("REITs"); and similar securities. Convertible securities are securities - like bonds, corporate notes and preferred stocks - that the Subadviser can convert into the company's common stock, cash value of common stock, or some other equity security. The Subadviser may buy common stocks of companies of every size - small-, medium- and large-capitalization - although the Fund's investments are mostly in medium- and large-capitalization stocks. Over the long term, there will be an approximately equal division of the Fund's assets between the two portfolio managers. All daily cash inflows (that is, purchases and reinvested distributions) and outflows (that is, redemptions and expense items) will be divided between the two portfolio managers as the Subadviser deems appropriate. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the appropriate allocation. As a consequence, the Subadviser may reallocate assets from the portfolio segment that has appreciated more to the other segment. The Fund may engage in frequent trading in order to achieve its investment objectives. Reallocations may result in additional costs since sales of securities will result in higher portfolio turnover. Also, because each portfolio manager selects portfolio securities independently, it is possible that a security held by one portfolio segment may also be held by the other portfolio segment of the Fund or that the two portfolio managers may simultaneously favor the same industry. In addition, if one portfolio manager buys a security as the other portfolio manager sells it, the net position of the Fund in the security may be approximately the same as it would have been with a single portfolio and no such sale and purchase, but the Fund will have incurred additional costs. The Subadviser will consider the timing of any reallocations based upon the best interests of the Fund and its shareholders. To maintain the Fund's federal income tax status as a regulated investment company, the Subadviser also may have to sell securities on a periodic basis and the Fund could realize capital gains that would not have otherwise occurred. In addition to the principal strategies, the Fund may also use the following investments and strategies to try to increase the Fund's returns or protect its assets if market conditions warrant: foreign securities, money market instruments, repurchase agreements, REITs, initial public offerings U.S. Government Securities, derivatives and short sales. The Fund may hold up to 15% of its net assets in illiquid securities. The Subadviser considers selling or reducing a stock position when, in the opinion of the portfolio manager, the stock has an unfavorable change in fundamentals; valuation is realized or exceeded; a relatively more attractive stock emerges; or the stock has experienced adverse price movement. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 29 For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O FOCUSED INVESTMENT RISK O VALUE STOCKS RISK O GROWTH STOCKS RISK O INITIAL PUBLIC OFFERINGS RISK O FREQUENT TRADING O FOREIGN RISK o CONVERTIBLE SECURITIES RISK O DERIVATIVES RISK O REAL ESTATE INVESTMENTS RISK O CREDIT RISK O INTEREST RATE RISK O LIQUIDITY RISK O ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking a stable share price - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking to invest in companies with strong capital O Investing emergency reserves appreciation potential - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Able to withstand volatility in the value of your O Looking primarily for income investment - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 30 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2006: 12.79%, 2007: 10.73%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q4, 2006) 6.18% Lowest (Q2, 2006) -3.18%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Jennison 20/20 Focus Fund 4/29/2005 10.73% 17.63% S&P 500 Index 5.49% 11.43% Russell 1000 Index 5.77% 7.56
The Fund's performance is compared to the Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index"), an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 31 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.77% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.12% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.12% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.70% on assets over $100 million through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $114 $356 $617 $1,363 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 32 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) JENNISON GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) JENNISON GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Jennison Growth Fund is long-term growth of capital. This means that the Subadviser seeks investments whose price will increase over the long term. The Fund normally invests at least 65% of its total assets in equity and equity-related securities of companies that exceed $1 billion in market capitalization at the time of investment and that the Subadviser believes have above-average growth prospects. These companies are generally considered medium- to large-capitalization companies. In deciding which stocks to buy, the Subadviser uses what is known as a "growth" investment style. This means that the Fund invests in stocks that the Subadviser believes could experience superior sales or earnings growth, or high returns on equity and assets. The Subadviser follows a highly disciplined investment selection and management process of identifying companies that show superior absolute and relative earnings growth and also are believed to be attractively valued. Earnings predictability and confidence in earnings forecasts are important parts of the selection process. Securities in which the Fund invests have historically been more volatile than the S&P 500(R) Index. Also, companies that have an earnings growth rate higher than that of the average S&P 500(R) company tend to reinvest their earnings rather than distribute them, so the Fund is not likely to receive significant dividend income on its portfolio securities. In addition to common stocks, non-convertible preferred stocks and convertible securities, equity-related securities in which the Fund invests include ADRs; warrants and rights that can be exercised to obtain stock; investments in various types of business ventures, including partnerships and joint ventures; REITs and similar securities. Convertible securities are securities - like bonds, corporate notes and preferred stocks - that can be converted into the company's common stock, cash value of common stock, or some other equity security. The Fund may also invest in securities of foreign and emerging markets. In addition, the Fund may engage in short sales and may invest in certain options and financial futures contracts ("derivatives"). The Fund may hold up to 15% of its net assets in illiquid securities. The Subadviser considers selling or reducing a stock position when, in the opinion of the Subadviser, the stock has experienced a fundamental disappointment in earnings; it has reached an intermediate-term price objective and its outlook no longer seems sufficiently promising; a relatively more attractive stock emerges; or the stock has experienced adverse price movement. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. The Fund may engage in frequent trading in order to achieve its investment objectives. For more information about Temporary Defensive Positions, see "More About the Funds." - ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O ISSUER RISK O GROWTH STOCKS RISK O FOREIGN RISK O EMERGING MARKETS RISK O SHORT SALE RISK O DERIVATIVES RISK O CONVERTIBLE SECURITIES RISK O LIQUIDITY RISK O REAL ESTATE INVESTMENTS RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 33
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking capital growth over the long term O Seeking safety of principal - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Investing for the short term or investing emergency reserves - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Can withstand volatility in the value of your investment O Looking primarily for regular income - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC: 2006: 1.57%, 2007: 10.92%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q3, 2007) 5.85% Lowest (Q2, 2006) -7.54%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Jennison Growth Fund 4/29/2005 10.92% 12.22% Russell 1000 Growth Index 11.81% 12.35%
The Fund's performance is compared to the Russell 1000 Growth Index, an unmanaged index that measures performance of individual securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 34 performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.80% Distribution (12b-1) Fees(1) 0.25% Other Expenses(2) 0.12% ----- Total Annual Fund Operating Expenses 1.17% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses((3)) 1.17% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) Other expenses have been restated to reflect current expenses. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $119 $372 $644 $1,420 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 35 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) LEGG MASON GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) LEGG MASON GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Legg Mason Growth Fund is maximum long-term capital appreciation with minimum long-term risk to principal. The Fund invests primarily in common stocks or securities convertible into or exchangeable for common stock. The Subadviser currently anticipates that the Fund will not invest more than 25% of its total assets in foreign securities. The Fund seeks to invest in companies that, in the Subadviser's opinion, are undervalued at the time of purchase. The selection of common stocks will be made through a process whereby companies are identified and selected as eligible investments by examining all fundamental quantitative and qualitative aspects of the company, its management and its financial position as compared to its stock price. This is a bottom up, fundamental method of analysis. The Subadviser's investment strategy is based on the principle that a shareholder's return from owning a stock is ultimately determined by the fundamental economics of the underlying business. The Subadviser believes that investors should focus on the long-term economic progress of the investment and disregard short-term nuances. The portfolio manager sells securities when they have realized what the portfolio manager believes is their potential value or when the Subadviser believes that they are not likely to achieve that value in a reasonable period of time. The Fund may engage in frequent trading in order to achieve its investment objectives. The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities of a limited number of issuers or it holds a large portion of its assets in a few issuers, the value of its shares will be more susceptible to any single economic, political or regulatory event affecting those issuers or their securities than shares of a diversified fund. For temporary defensive purposes, the Fund may invest up to 100% of its assets in short-term U.S. Government securities, bank certificates of deposit, prime commercial paper and other high quality short-term fixed-income securities and repurchase agreements with respect to those securities. In addition, the Fund may hold cash reserves, when necessary, for anticipated securities purchases, shareholder redemptions or temporarily during periods when the Subadviser believes prevailing market conditions call for a defensive posture. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O NON-DIVERSIFICATION RISK O MARKET RISK O SELECTION RISK O GROWTH STOCKS RISK O FOREIGN RISK O ISSUER RISK O CONVERTIBLE SECURITIES RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 36
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Needing current income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital O Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to accept the additional risk inherent in investing in a limited number of issuers - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2003: 36.48%, 2004: 8.08%, 2005: 11.06%, 2006: 0.70%, 2007: 15.02%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 19.45% Lowest (Q2, 2006) -8.43%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL Legg Mason Growth Fund 5/1/2002 15.02% 13.67% 6.72% Russell 1000 Growth Index 11.81% 12.11% 6.48%
The Fund's performance is compared to the Russell 1000 Growth Index, an unmanaged index that measures the performance of individual securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 37 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.85% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.21% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.21% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.80% through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.30% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waiver. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $123 $384 $665 $1,466 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 38 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) LEGG MASON VALUE FUND - -------------------------------------------------------------------------------- AZL(R) LEGG MASON VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Legg Mason Value Fund is long-term growth of capital. The Fund invests primarily in equity securities that, in the Subadviser's opinion, offer the potential for capital growth. The Subadviser follows a value discipline in selecting securities, and therefore seeks to purchase securities at large discounts to the Subadviser's assessment of their intrinsic value. Intrinsic value, according to the Subadviser, is the value of the company measured, to different extents depending on the type of company, on factors such as, but not limited to, the discounted value of its projected future free cash flows, the company's ability to earn returns on capital in excess of its cost of capital, private market values of similar companies and the costs to replicate the business. Qualitative factors, such as an assessment of the company's products, competitive positioning, strategy, industry economics and dynamics, regulatory frameworks and more, may also be considered. Securities may be undervalued due to, among other things, uncertainty arising from the limited availability of accurate information, economic growth and change, changes in competitive conditions, technological change, investor overreaction to negative news or events, and changes in government policy or geopolitical dynamics. The Subadviser takes a long-term approach to investing, generally characterized by long holding periods and low turnover. The Fund generally invests in companies with market capitalizations greater than $5 billion, but may invest in companies of any size. The Fund may also invest in securities of foreign issuers. The Subadviser may decide to sell securities given a variety of circumstances, such as when a security no longer appears to the Subadviser to offer the potential for long-term growth of capital, when an investment opportunity arises that the Subadviser believes is more compelling, or to realize gains or limit potential losses. The Fund may invest in debt securities of companies having one or more of the above characteristics. The Fund may invest up to 25% of its total assets in long-term debt securities. Up to 10% of its total assets may be invested in debt securities rated below investment grade, commonly known as "junk bonds". A bond issuer may suffer adverse changes in financial condition that could result in the bond becoming illiquid. Lower rated bonds may be less liquid than higher-rated bonds, which means that the Fund may have difficulty selling them at times. The Fund may also invest in convertible securities. The Fund may invest in futures contracts or related options and repurchase agreements. The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities of a limited number of issuers or it holds a large portion of its assets in a few issuers, the value of its shares will be more susceptible to any single economic, political or regulatory event affecting those issuers or their securities than shares of a diversified fund. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 39 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus:
O NON-DIVERSIFICATION RISK O FOREIGN RISK O CALL RISK O MARKET RISK O CREDIT RISK O CONVERTIBLE SECURITIES RISK O SELECTION RISK O SECURITY QUALITY RISK O DERIVATIVE INSTRUMENTS RISK O VALUE STOCKS RISK O INTEREST RATE RISK O LIQUIDITY RISK O CAPITALIZATION RISK O ISSUER RISK
A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- --------------------------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Pursuing an aggressive high growth investment strategy - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking income and growth of capital O Seeking a stable share price - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Pursuing a balanced approach to investments in both O Investing emergency reserves growth-and income-producing securities and willing to accept the risks associated with investing in mid to large cap stocks - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 40 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years, and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -18.88%, 2003: 25.89%, 2004: 15.15%, 2005: 6.27%, 2006: 6.71%, 2007: -6.19%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q4, 2004) 15.90% Lowest (Q3, 2002) -14.41%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL Legg Mason Value Fund 11/5/2001 -6.19% 9.05% 3.98% S&P 500(R) Index 5.49% 12.83% 6.94% Russell 1000 Index 5.77% 13.43% 7.56%
The Fund's performance is compared to the Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index") and the Russell 1000 Index. The S&P 500(R) Index consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The Russell 1000 Index measures the performance of 1000 largest companies found in the Russell universe, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The indices are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 41 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.75% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 1.09% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.09% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $111 $347 $601 $1,329 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 42 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) LMP LARGE CAP GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) LMP LARGE CAP GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL LMP Large Cap Growth Fund is long-term growth of capital. The Fund invests primarily in equity securities of U.S. large capitalization issuers. Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in these securities and related investments. The Fund will provide notice to shareholders at least 60 days prior to any changes in this policy. The Fund considers large capitalization issuers to be issuers that, at the time of purchase, have market capitalizations similar to companies in the Russell 1000 Index. Securities of companies whose market capitalizations no longer meet this definition after purchase by the Fund still will be considered securities of large capitalization companies for purposes of the Fund's 80% investment policy. The Fund's equity securities consist primarily of common stocks. The Fund may also invest in preferred stocks, warrants, and rights relating to equity securities and securities convertible into common stocks. The Fund may invest up to 15% of its assets in securities of foreign issuers. The Subadviser emphasizes individual security selection while diversifying the Fund's investments across industries, which may help to reduce risk. The Subadviser attempts to identify established large capitalization companies with the highest growth potential. The portfolio manager then analyzes each company in detail, ranking its management, strategy and competitive market position. Finally, the Subadviser attempts to identify the best values available among the growth companies identified. In selecting individual companies for investment, the Subadviser considers: o Favorable earnings prospects o Technological innovation o Industry dominance o Competitive products and services o Global scope o Long-term operating history o Consistent and sustainable long-term growth in dividends and earnings per share o Strong cash flow o High return on equity o Strong financial condition o Experienced and effective management For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O GROWTH STOCKS RISK O FOREIGN RISK O EMERGING MARKETS RISK O CREDIT RISK O INTEREST RATE RISK O CONVERTIBLE SECURITIES RISK O ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 43
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking capital growth over the long term O Seeking safety of principal - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Looking for potentially greater return but higher risk O Investing primarily for the short term or investing than fixed income investments emergency reserves - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2003: 24.39%, 2004: 4.37%, 2005: 9.70%, 2006: 4.23%, 2007: 4.70%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 12.34% Lowest (Q2, 2006) -6.62%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL LMP Large Cap Growth Fund 5/1/2002 4.70% 9.22% 4.13% Russell 1000 Growth Index 11.81% 12.11% 6.48%
The Fund's performance is compared to the Russell 1000 Growth Index, an unmanaged index that measures the performance of individual securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 44 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.80% Distribution (12b-1) Fees((2)) 0.25% Other Expenses(3) 0.08% ----- Total Annual Fund Operating Expenses 1.13% Fee Waiver((4)) 0.00% ----- Net Annual Fund Operating Expenses(1)((4)) 1.13% ===== (1) Effective December 1, 2007, the Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.80% on the first $100 million, 0.75% on the next $100 million, and 0.70% thereafter through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) Other expenses have been restated to reflect current expenses. (4) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $115 $359 $622 $1,375 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 45 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) MONEY MARKET FUND - -------------------------------------------------------------------------------- AZL(R) MONEY MARKET FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Money Market Fund is current income consistent with stability of principal, which may not be changed without shareholder approval. In pursuit of its goal, the Fund invests in a broad range of short-term, high-quality U.S. dollar-denominated money market instruments, including government, U.S. and foreign bank, commercial and other obligations. Under normal market conditions, at least 25% of the Fund's total assets will be invested in obligations of issuers in the financial services industry or in obligations, such as repurchase agreements, secured by such obligations. Specifically, the Fund may invest in: 1) U.S. dollar-denominated obligations issued or supported by the credit of U.S. or foreign banks or savings institutions with total assets of more than $1 billion (including obligations of foreign branches of such banks). 2) High quality commercial paper and other obligations issued or guaranteed by U.S. and foreign corporations and other issuers rated (at the time of purchase) A-2 or higher by Standard and Poor's, Prime-2 or higher by Moody's or F-2 or higher by Fitch, as well as high quality corporate bonds rated A or higher at the time of purchase by those rating agencies. 3) Unrated notes, paper and other instruments that are determined by the Subadviser to be of comparable quality to the instruments described above. 4) Asset-backed securities (including interests in pools of assets such as mortgages, installment purchase obligations and credit card receivables). 5) Securities issued or guaranteed by the U.S. Government or by its agencies or authorities. 6) Dollar-denominated securities issued or guaranteed by foreign governments or their political subdivisions, agencies or authorities. 7) Repurchase agreements relating to the above instruments. 8) Funding agreements, state and local debt issues, and municipal securities guaranteed by the U.S. government. The Fund is subject to the quality, diversification and other requirements of Rule 2a-7 under the 1940 Act, including the requirement to invest at least 95% of its total assets in the securities of issuers with the highest credit rating, with the remainder invested in securities with the second-highest credit rating. The Fund is subject to certain federal rules which require it to: O maintain an average dollar-weighted portfolio maturity of 90 days or less O buy individual securities that have remaining maturities of 397 days or less O invest only in high-quality, dollar-denominated, short-term obligations. The Fund seeks to maintain a net asset value of $1.00 per share. During extended periods of low interest rates, and due in part to contract fees and expenses, the yield of the Fund may become extremely low and possibly negative. - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O INCOME RISK O FOREIGN RISK O INTEREST RATE RISK O INDUSTRY SECTOR RISK O LIQUIDITY RISK O CREDIT RISK O ISSUER RISK O MARKET RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 46
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Are seeking preservation of capital O Seeking high total returns - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Have a low risk tolerance O Pursuing a long-term goal or investing for retirement - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Have a short term investing horizon or goal - --------------------------------------------------------------- ------------------------------------------------------------
- ------------------------------------------------------------------------------- PERFORMANCE INFORMATION* The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. During extended periods of low interest rates, and due in part to Contract fees and expenses, the yield of the Money Market Fund may also become extremely low and possibly negative. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2001: 3.27%, 2002: 0.84%, 2003: 0.34%, 2004: 0.67%, 2005:2.57%, 2006: 4.43%, 2007: 4.79%] * Prior to December 10, 2007, this Fund was subadvised by Prudential Investment Management, Inc. HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2001) 1.24% Lowest (Q1, 2004) 0.07% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 47
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED 5 YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Money Market Fund 2/1/2000 4.79% 2.55% 2.78% Three Month U.S. Treasury Bill Index 4.40% 2.90% 3.16%
The seven-day yield for the period ended December 31, 2007 was 4.35%. For the Fund's current 7-day yield, telephone 877-833-7113 toll-free The Fund's performance is compared to the three-month U.S. Treasury Bill Index. The Index is unmanaged and does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.35% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.69% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 0.69% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.87% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $70 $221 $384 $859 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 48 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) NACM INTERNATIONAL FUND - -------------------------------------------------------------------------------- AZL(R) NACM INTERNATIONAL FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL NACM International Fund seeks maximum long-term capital appreciation. The Fund seeks to achieve its investment objective by investing primarily in companies located in the developed countries represented in the Fund's benchmark, the Morgan Stanley Capital International Europe Australasia Far East ("MSCI EAFE") Index. In pursuit of the Fund's goal, the Subadviser normally invests at least 75% of the Fund's net assets in equity securities. The Fund spreads its investments among countries, with at least 80% of its net assets invested in the securities of companies that are located outside the U.S. The Fund will provide shareholders with at least 60 days' prior notice of any change in this investment policy. The Fund may invest up to 20% of its assets in U.S. companies. The Subadviser's "international systematic" investment approach uses a quantitative process to make individual security, industry sector, country, and currency selection decisions, and to integrate those decisions. The Fund's portfolio managers aim to exceed the returns of the benchmark through a strategy that combines dynamic quantitative factors with an actively managed stock selection process. The portfolio managers believe that their investment process results in a clearly defined buy and sell discipline that will continually drive the Fund's portfolio toward new excess return opportunities. The Fund may engage in frequent trading in order to achieve its investment objectives. The Fund may utilize foreign currency exchange contracts, option, stock index futures contracts, and other derivative instruments. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in the value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces primarily the following risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o SELECTION RISK o FOREIGN RISK o ISSUER RISK o CURRENCY RISK o DERIVATIVES RISK o LIQUIDITY RISK o CAPITALIZATION RISK o FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 49
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking to add an international stock investment to your o Seeking a stable share price portfolio - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking capital appreciation and are willing to accept o Investing emergency reserves the higher volatility associated with investing in foreign stocks - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007 and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.85% Distribution (12b-1) Fees(1) 0.25% Other Expenses(2) 0.35% ----- Total Annual Fund Operating Expenses 1.45% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses((3)) 1.45% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) Other expenses have been restated to reflect current expenses. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.45% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $148 $459 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 50 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) NEUBERGER BERMAN REGENCY FUND - -------------------------------------------------------------------------------- AZL(R) NEUBERGER BERMAN REGENCY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Neuberger Berman Regency Fund is long-term growth of capital. The Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization within the range of the Russell MidCap Index. At December 13, 2007, the market capitalization of companies in the Index ranged from $479 million to $42 billion. The Fund seeks to reduce risk by diversifying among many companies, sectors, and industries, but may invest more heavily in certain sectors depending on market conditions. The Subadviser looks for undervalued companies with high-quality businesses. Factors in identifying these firms may include historical low valuation, above-average returns on invested capital, and solid balance sheets. This approach is designed to let the Fund benefit from potential increases in stock prices while limiting the risks typically associated with stocks. At times, the Subadviser may emphasize certain sectors that it believes will benefit from market or economic trends. The Subadviser follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may be unable to pursue its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O CAPITALIZATION RISK O INDUSTRY SECTOR RISK O VALUE STOCKS RISK O SELECTION RISK O FOREIGN RISK O CURRENCY RISK O ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking to add a mid-cap value stock component to your O Seeking safety of principal portfolio - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Able to withstand the risks associated with investing in O Seeking a short-term investment or investing emergency mid-cap value stocks reserves - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Looking for a fund that emphasizes the value style of O Looking primarily for regular income investing - --------------------------------------------------------------- ------------------------------------------------------------
- ------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 51 Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2007: 3.85%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2007) 5.91% Lowest (Q3, 2007) -4.22%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Neuberger Berman Regency Fund 5/1/2006 3.85% 3.34% Russell Midcap Value(R) Index -1.42% 5.34%
The Fund's performance is compared to the Russell Midcap(R) Value Index, an unmanaged index that represents the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 52 Management Fee 0.75% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.10% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.10% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.30% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $112 $350 $606 $1,340 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 53 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) OCC OPPORTUNITY FUND - -------------------------------------------------------------------------------- AZL(R) OCC OPPORTUNITY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL OCC Opportunity Fund is capital appreciation. The Fund seeks to achieve its investment objective by normally investing at least 65% of its assets in common stocks of "growth" companies with market capitalizations of less than $2 billion at the time of investment. The portfolio manager's investment process focuses on bottom-up, fundamental analysis. The portfolio manager seeks companies with strong earnings growth, with a particular focus on companies that may deliver surprisingly strong growth. Through extensive, in-depth proprietary research, the portfolio manager searches for non-consensus information regarding the growth prospects for small-capitalization companies. The investment process includes both quantitative and qualitative analysis aimed at identifying candidate securities. The portfolio manager generates investment ideas from numerous sources, including proprietary research, Wall Street research, investment publications, and quantitative data. Once a potential investment is identified, the portfolio manager conducts a quantitative analysis to determine if the stock is reasonably priced with respect to its peer group on a historical and current basis. Then fundamental research is conducted, focusing on a review of financial statements and third-party research. The portfolio manager may interview company management, competitors and other industry experts to gauge the company's business model, future prospects, and financial outlook. For new investments, the portfolio manager generally begins with making a relatively small investment in a company, which may be increased based upon potential upside performance and conviction in the company. Industry weightings are periodically evaluated versus the benchmark; the portfolio manager may trim positions in industries with a 50% overweight relative to the Fund's benchmark. The portfolio manager seeks to diversify the portfolio among different industries. The Fund may invest to a limited degree in other kinds of equity securities, including preferred stocks and convertible securities. The Fund may invest up to 15% of its assets in foreign securities, except that it may invest without limit in American Depository Receipts (ADRs). The Fund may invest a substantial portion of its assets in securities issued in initial public offerings (IPOs). The Fund has in the past invested a significant portion of its assets in technology or technology-related companies, although there is no assurance that it will continue to do so in the future. The Fund may utilize foreign currency exchange contracts, options, and other derivative instruments (for example, forward currency exchange contracts and stock index future contracts). The Fund may engage in frequent trading in order to achieve its investment objectives. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may be unable to pursue its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o ISSUER RISK o SELECTION RISK o GROWTH STOCKS RISK o CAPITALIZATION RISK o INITIAL PUBLIC OFFERINGS RISK o LIQUIDITY RISK o FOREIGN RISK o CURRENCY RISK o INDUSTRY SECTOR RISK o CREDIT RISK O DERIVATIVES RISK O CONVERTIBLE SECURITIES RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 54
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking to add an aggressive growth component to your O Investing for the short-term or investing emergency portfolio reserves - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking capital appreciation and are willing to accept O Looking primarily for regular income the higher volatility associated with investing in small- and micro-cap growth stocks - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2003: 62.03%, 2004: 7.76%, 2005: 5.08%, 2006: 11.68%, 2007: 8.89%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 32.47% Lowest (Q3, 2006) -8.26% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 55
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED SINCE INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 INCEPTION AZL OCC Opportunity Fund 5/1/2002 8.89% 17.41% 10.98% Russell 2000 Growth Index 7.05% 16.50% 8.16%
The Fund's performance is compared to the Russell 2000 Growth Index, an unmanaged index that represents the performance of certain securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.85% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.21% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.21% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.35% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $123 $384 $665 $1,466 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 56 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) OCC VALUE FUND - -------------------------------------------------------------------------------- AZL(R) OCC VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL OCC Value Fund is long-term growth of capital and income. The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its total assets in common stocks of companies with market capitalizations of more than $5 billion at the time of investment and prices below the Subadviser's estimate of intrinsic value. Intrinsic value refers to the value placed on a company by the Subadviser consistent with its expectation of longer term economic earnings and cash flows. To achieve income, the Fund may invest a portion of its assets in income producing (e.g., dividend paying) common stocks. Depending upon market conditions, the Fund may invest more heavily in certain sectors. The Subadviser selects stocks for the Fund using a "value" style. The Subadviser determines valuation based on characteristics such as price-to-earnings, price-to-book, and price-to-cash flow ratios. The Subadviser analyzes stocks and seeks to identify the key drivers of financial results and catalysts for change, such as new management and new or improved products, that indicate a company may demonstrate improving fundamentals in the future. The Subadviser looks to sell a stock when it believes that the company's business fundamentals are weakening, when the stock's valuation has become excessive or when an alternative investment opportunity is deemed more attractive. The Fund may also invest to a limited degree in other kinds of equity securities, including preferred stocks and convertible securities. The Fund may invest up to 15% of its total assets in foreign securities, except that it may invest without limit in ADRs. The Fund may utilize foreign currency exchange contracts, options, or other derivative instruments. The fund may engage in frequent trading in order to achieve its investment objectives. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O VALUE STOCKS RISK O CAPITALIZATION RISK O FOREIGN RISK O CURRENCY RISK O INDUSTRY SECTOR RISK O DERIVATIVES RISK O CREDIT RISK O DIVIDEND RISK O CONVERTIBLE SECURITIES RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 57
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking to add a mid to large cap, value component to O Investing for the short-term or investing emergency your portfolio reserves - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital and income and are O Looking primarily for regular income willing to accept the risks associated with investing in mid to large cap value stocks - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -24.90%, 2003: 45.21%, 2004: 16.52%, 2005: 2.67%, 2006: 20.11%, 2007: -5.77%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 27.02% Lowest (Q3, 2002) -28.05% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 58 AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL OCC Value Fund 11/5/2001 -5.77% 14.48% 8.14% Russell 1000 Value Index -0.17% 14.63% 9.80%
The Fund's performance is compared to the Russell 1000 Value Index, an unmanaged index that measures performance of the certain securities found in the Russell universe with less-than-average growth orientation and low price-to-book and earnings ratios. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.75% Distribution (12b-1) Fees((2)) 0.25% Other Expenses((3)) 0.16% ----- Total Annual Fund Operating Expenses 1.16% Fee Waiver((4)) 0.00% ----- Net Annual Fund Operating Expenses(1)((4)) 1.16% ===== (1) The Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.75% on the first $250 million, 0.70% on the next $250 million, and 0.65% thereafter through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) Other expenses have been restated to reflect current expenses. (4) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $118 $368 $638 $1,409 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 59 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) OPPENHEIMER GLOBAL FUND - -------------------------------------------------------------------------------- AZL(R) OPPENHEIMER GLOBAL FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Oppenheimer Global Fund is capital appreciation. The Fund invests mainly in common stocks of companies in the U.S. and foreign countries. The Fund can invest without limit in foreign securities and can invest in any country, including countries with developed or emerging markets. However, the Fund currently emphasizes investments in developed markets such as the United States, Western European countries and Japan. The Fund does not limit its investments to companies in a particular capitalization range, but currently focuses its investments in mid- and large-cap companies. The Fund is not required to allocate its investments in any set percentages in any particular countries. As a fundamental policy, the Fund normally will invest in at least three countries (one of which may be the United States). Typically the Fund invests in a number of different countries. In selecting securities for the Fund, the Subadviser looks primarily for foreign and U.S. companies with high growth potential. The Subadviser uses fundamental analysis of a company's financial statements, management structure, operations and product development, and considers factors affecting the industry of which the issuer is part. The Subadviser considers overall and relative economic conditions in the U.S. and foreign markets, and seeks broad portfolio diversification in different countries to help moderate the special risks of foreign investing. The Subadviser currently focuses on the factors below (which may vary in particular cases and may change over time), looking for: O Stocks of small, medium and large-cap growth-oriented companies worldwide; O Companies that stand to benefit from global growth trends; O Businesses with strong competitive positions and high demand for their products or services; O Cyclical opportunities in the business cycle and sectors or industries that may benefit from those opportunities. In applying these and other selection criteria, the Subadviser considers the effect of worldwide trends on the growth of various business sectors. The trends currently considered include development of new technologies, corporate restructuring, the growth of mass affluence and demographic changes. Depending upon market conditions, the Fund may invest more heavily in certain sectors. The Fund may invest in derivative instruments. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O GROWTH STOCKS RISK O CAPITALIZATION RISK O CYCLICAL OPPORTUNITIES RISK O FOREIGN RISK O EMERGING MARKETS RISK O SPECIAL SITUATIONS RISK O DERIVATIVES RISK O INDUSTRY SECTOR RISK O ISSUER RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 60
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term capital growth from U.S. and foreign O Seeking safety of principal investments - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to assume the risks of short-term share price fluctuations - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION Performance information is presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE (CLASS 2 SHARES) [BAR CHART GRAPHIC - 2005: 12.62%, 2006: 16.29%, 2007: 5.76%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q3, 2005) 9.07% Lowest (Q4, 2007) -4.44% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 61
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Oppenheimer Global Fund (Class 2) 5/3/2004 5.76% 13.77% MSCI World Index 9.04% 14.36%
The performance of Class 2 shares of the Fund is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged market capitalization-weighted equity index which monitors the performance of stocks from around the world. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES Fees and Expenses are presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 2 Management Fee(1) 0.90% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.15% ----- Total Annual Fund Operating Expenses 1.30% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.30% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.80% through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 2 shares to 1.39% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS 2 $132 $412 $713 $1,568 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 62 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) OPPENHEIMER INTERNATIONAL GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) OPPENHEIMER INTERNATIONAL GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Oppenheimer International Growth Fund is long-term capital appreciation. It emphasizes investments in common stocks of foreign companies. The Fund currently invests mainly in common stocks of growth companies that are domiciled outside the U.S. or have their primary operations outside the U.S. The Fund does not limit its investments to issuers within a specific market capitalization range. At times the Fund may invest a substantial portion of its assets in a particular capitalization range. For example, the Fund currently invests a substantial portion of its assets in stocks issued by small- to mid-sized companies. The Fund can invest in emerging markets as well as developed markets throughout the world, although it may place greater emphasis on investing in one or more particular regions from time to time, such as Asia, Europe or Latin America. It can invest 100% of its assets in foreign securities. Under normal market conditions: O As a fundamental policy, the Fund will invest at least 65% of its total assets in foreign common and preferred stock of issuers in at least three different countries outside the U.S. O The Fund will emphasize investments in common stocks of issuers that the Manager considers to be "growth" companies. The Fund may buy securities convertible into common stock and other securities having equity features. The Fund also can use hedging instruments and certain derivative investments to seek capital appreciation or to try to manage investment risks. In selecting securities for the Fund, the Subadviser evaluates investment opportunities on a company-by-company basis. The Subadviser looks primarily for foreign companies with high growth potential using a "bottom up" investment approach that is, looking at the investment performance of individual stocks before considering the impact of general or industry economic trends. This approach includes fundamental analysis of a company's financial statements and management structure and analysis of the company's operations and product development, as well as the industry of which the issuer is part. In seeking diversification of the Fund's portfolio, the Subadviser currently focuses on the factors below, which may vary in particular cases and may change over time. The Subadviser currently searches for: O Companies that enjoy a strong competitive position and high demand for their products or services. O Companies with accelerating earnings growth and cash flow. O Diversification to help reduce risks of foreign investing, such as currency fluctuations and stock market volatility. In applying these and other selection criteria, the Subadviser considers the effect of worldwide trends on the growth of particular business sectors and looks for companies that may benefit from global trends. The trends currently considered include telecommunications/media expansion, emerging consumer markets, infrastructure development, natural resources, corporate restructuring, capital market development, health care and biotechnology, and efficiency enhancing technologies and services. The Subadviser does not invest a fixed amount of the Fund's assets according to these trends and this strategy and the trends that are considered may change over time. The Subadviser monitors individual issuers for changes in the factors above and these changes may trigger a decision to sell a security. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 63 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus:
O MARKET RISK O GROWTH STOCKS RISK O SELECTION RISK O FOREIGN RISK O CAPITALIZATION RISK O CONVERTIBLE SECURITIES RISK O EMERGING MARKETS RISK O DERIVATIVE INSTRUMENTS RISK O LIQUIDITY RISK O CURRENCY RISK O ISSUER RISK
A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ------------------------------------------------------------------ --------------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Investing for long-term goals, such as retirement O Looking primarily for regular income - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Seeking long-term capital growth from foreign investments O Seeking safety of principal - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Willing to assume the greater risks of share price fluctuations that are typical of an aggressive fund focusing on growth stock instruments - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Willing to assume the risks of investing in both emerging and developed foreign countries - ------------------------------------------------------------------ ---------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 64 PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -13.90%, 2003: 33.77%, 2004: 14.48%, 2005: 14.18%, 2006: 28.98%, 2007: 12.29%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 18.39% Lowest (Q3, 2002) -19.38%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Oppenheimer International Growth Fund 11/5/2001 12.29% 20.42% 13.96% MSCI EAFE Index 11.17% 21.59% 14.30%
The Fund's performance is compared to the Morgan Stanley Capital International, Europe, Australasia and Far East (MSCI EAFE) Index, an unmanaged market capitalization-weighted equity index comprising 20 of the 48 countries in the MSCI universe and representing the developed world outside of North America. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 65 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.73% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.21% ----- Total Annual Fund Operating Expenses 1.19% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.19% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.45% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $121 $378 $654 $1,443 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 66 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) OPPENHEIMER MAIN STREET FUND - -------------------------------------------------------------------------------- AZL(R) OPPENHEIMER MAIN STREET FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Oppenheimer Main Street Fund is a high total return. The Fund invests mainly in common stocks of U.S. companies of different capitalization ranges, currently focusing on large-capitalization issuers. It also can buy debt securities, such as bonds and debentures, but does not currently emphasize these investments. In selecting securities to buy or sell for the Fund, the portfolio managers use an investment process that uses multi-factor quantitative models to rank more than 3,000 stocks on a daily basis. While the process may change over time or vary in particular cases, in general the selection process currently uses: MULTI-FACTOR QUANTITATIVE MODELS: The Fund uses both "top down" and "bottom up" quantitative models. o The "TOP DOWN" market capitalization model seeks to predict the future market direction of the capitalization environment. The portfolio managers divide the domestic equity market into five market-capitalization segments and market capitalization exposure is managed using proprietary modeling that incorporates factors such as relative price momentum and reversals, relative valuations and measures of investors risk tolerance. o The "BOTTOM UP" stock selection models seek to rank securities within each capitalization range in order of attractiveness. Over a hundred company-specific factors are analyzed in constructing the "bottom up" models, including valuation, profitability, quality, momentum, volatility and special effects. Different models are used for each of the different market capitalization segments. The Fund also uses two seasonal models to capture seasonal effects. PORTFOLIO CONSTRUCTION: The portfolio is then constructed and continuously monitored based on the quantitative investment models. Security weightings are determined according to capitalization outlook, stock ranking and benchmark weighting. The Fund aims to maintain a broadly diversified portfolio that limits idiosyncratic company-specific risks and is scalable, efficient and adaptable. The Fund may engage in frequent trading in order to achieve its investment objective. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O CREDIT RISK O INTEREST RATE RISK O SECURITY QUALITY RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 67
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to assume the risks of short-term share price O Seeking safety of principal fluctuations - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION Performance information is presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE (CLASS 2 SHARES) [BAR CHART GRAPHIC - 2005: 5.45%, 2006: 14.59%, 2007:3.80%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q4, 2006) 6.47% Lowest (Q4, 2007) -5.34%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Oppenheimer Main Street Fund (Class 2) 5/3/2004 3.80% 8.80% S&P 500(R) Index 5.49% 10.02% Russell 1000 Index 5.77% 7.56%
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 68 The performance of Class 2 shares of the Fund is compared to the Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index"), an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES Fees and expenses are presented for Class 2 shares only because Class 1 shares had not commenced operations as of December 31, 2007. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 2 Management Fee(1) 0.80% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.15% ----- Total Annual Fund Operating Expenses 1.20% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.20% ===== (1) The Manager and the Fund Have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.75% through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 2 shares to 1.20% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS 2 $122 $381 $660 $1,455 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 69 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND - -------------------------------------------------------------------------------- AZL(R) PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL PIMCO Fundamental IndexPLUS Total Return Fund is to exceed the total return of the FTSE RAFI(TM) 1000 Index (the "RAFI Index"). Pacific Investment Management Company LLC ("PIMCO"), Subadviser to the Fund, seeks to achieve the Fund's investment objective by investing, under normal circumstances, substantially all of its assets in derivative instruments based on Enhanced RAFI(TM) 1000, an enhanced, performance recalibrated version of the RAFI Index, backed by a portfolio of short and intermediate term Fixed Income Instruments (as defined below). The RAFI Index and the Enhanced RAFI(TM) 1000, which were developed by Research Affiliates, LLC, are described below. The Fund may invest in common stocks, options, futures, options on futures, and swaps, including derivatives based on the RAFI Index. The Fund uses Enhanced RAFI(TM) 1000 derivatives in addition to, or in place of, the stocks included in the Enhanced RAFI(TM) 1000 to attempt to equal or exceed the performance of the RAFI Index. The values of Enhanced RAFI(TM) 1000 derivatives closely track changes in the value of the Enhanced RAFI(TM) 1000. However, Enhanced RAFI(TM) 1000 derivatives may be purchased with a fraction of the assets that would be needed to purchase the equity securities directly; consequently, the remainder of the assets may be invested in Fixed Income Instruments. Research Affiliates, LLC, acting as a sub-subadviser to the Fund, provides investment advisory services in connection with the Fund's use of the Enhanced RAFI(TM) 1000 by, among other things, providing PIMCO, or counterparties designated by PIMCO, with a model portfolio reflecting the composition of the Enhanced RAFI(TM) 1000 for purposes of developing Enhanced RAFI(TM) 1000 derivatives. PIMCO actively manages the Fixed Income Instruments held by the Fund with a view toward enhancing the Fund's total return, subject to an overall portfolio duration which normally varies from one year minimum duration to a maximum of two years above the duration of the Lehman Brothers Aggregate Bond Index. As of December 31, 2007, the duration of the Lehman Brothers Aggregate Bond Index was approximately 4.4 years. The Lehman Brothers Aggregate Bond Index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The RAFI Index is composed of the 1000 largest publicly traded U.S. companies by fundamental accounting value, which includes accounting data found in a company's annual report, selected from the constituents of the FTSE US All Cap Index. Unlike other indexes, which are frequently comprised of stocks weighted according to their market capitalization, the RAFI Index is weighted by a combination of fundamental factors, including sales, cash flow, book values, and, if applicable, dividends. Sales, cash flow, and dividends are averaged over the prior five years. Indexes based on market capitalization, such as the S&P 500(R) Index, generally overweight stocks that are overvalued, and underweight stocks that are undervalued. Indexes based on fundamental factors, such as the RAFI Index, seek to avoid this problem by weighting stocks based on variables that do not depend on the fluctuations of market valuation. The Enhanced RAFI(TM) 1000 is a performance recalibrated version of the RAFI Index that incorporates additional factors, such as the quality of corporate earnings and the risk of financial distress, and recalibrates existing factors utilized in the RAFI Index that affect a company's fundamental drivers of value. The Enhanced RAFI(TM) 1000 may also be rebalanced more frequently than the RAFI Index. The Fund seeks to remain invested in Enhanced RAFI(TM) 1000 derivatives or stocks included in the Enhanced RAFI(TM) 1000 even when the Enhanced RAFI(TM) 1000 is declining. For purposes of the Fund, "Fixed Income Instruments" includes: o Securities issued or guaranteed by the U.S. government, and by its agencies or government-sponsored enterprises, some of which may not be guaranteed by the U.S. Treasury; o Corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; o Mortgage-backed and other asset-backed securities; o Inflation-indexed bonds issued both by governments and corporations; o Structured notes, including hybrid or "indexed" securities, and event-linked bonds; o Loan participations and assignments; o Delayed funding loans and revolving credit facilities; o Bank certificates of deposit, fixed time deposits, and bankers' acceptances; - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 70 o Repurchase agreements and reverse repurchase agreements; o Debt securities issued by states or local governments and their agencies, authorities, and other government-sponsored enterprises; o Obligations of non-U.S. governments or their subdivisions, agencies, and government-sponsored enterprises; o Obligations of international agencies or supranational entities; and o Derivatives. The Fund typically seeks to gain exposure to the Enhanced RAFI(TM) 1000 by investing in total return index swap agreements. In a typical swap agreement, the Fund receives the price appreciation (or depreciation) on the Enhanced RAFI(TM) 1000 from the counterparty to the swap agreement in exchange for paying the counterparty an agreed upon fee. Research Affiliates facilitates the Fund's use of the Enhanced RAFI(TM) 1000 by providing model portfolios of the constituent securities of the Enhanced RAFI(TM) 1000 to the Fund's swap counterparties in order that the counterparties can provide total return swaps based on the Enhanced RAFI(TM) 1000 to the Fund. Because the Enhanced RAFI(TM) 1000 is a proprietary index, there may be a limited number of counterparties willing or able to serve as counterparties to a swap agreement. If such swap agreements are not available, the Fund may invest in other derivative instruments, "baskets" of stocks, or individual securities to replicate the performance of the Enhanced RAFI(TM) 1000. Though the Fund does not normally invest directly in the Enhanced RAFI(TM) 1000's constituent securities, when Enhanced RAFI(TM) 1000 derivatives appear to be overvalued relative to the Enhanced RAFI(TM) 1000, the Fund may invest all of its assets in a "basket" of Enhanced RAFI(TM) 1000 stocks. Individual stocks are selected based on an analysis of the historical correlation between the return of every Enhanced RAFI(TM) 1000 stock and the return on the Enhanced RAFI(TM) 1000 itself. In such cases, PIMCO employs fundamental analysis of factors such as earnings and earnings growth, price to earnings ratio, dividend growth, and cash flows to choose among stocks that satisfy the correlation tests. The Fund also may invest in exchange traded funds. Assets not invested in equity securities or derivatives may be invested in Fixed Income Instruments. The Fund may invest up to 10% of its total assets in high yield securities ("junk bonds") rated B or higher by Moody's or S&P(R), or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 30% of its total assets in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund may invest up to 15% of its total assets in securities of issuers based in countries with developing ( or "emerging market") economies. The Fund will normally limit its exposure to foreign currency, from non-U.S. dollar-denominated securities or currencies, to 20% of its total assets. The Fund may engage in frequent trading in order to achieve its investment objective. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 71 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. Under certain conditions, generally in a market where the value of both Enhanced RAFI(TM) 1000 derivatives and fixed income securities are declining or in periods of heightened market volatility, the Fund may experience greater losses or lesser gains than would be the case if it invested directly in a portfolio of the Enhanced RAFI(TM) 1000's constituent stocks. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O INTEREST RATE RISK O CREDIT RISK O MARKET RISK O ISSUER RISK O LIQUIDITY RISK O DERIVATIVES RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK O FOREIGN RISK O CURRENCY RISK O EMERGING MARKETS RISK O LEVERAGING RISK O SECURITY QUALITY RISK O SELECTION RISK O SHORT SALE RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the Statement of Additional Information.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking to grow your capital over the long-term O Seeking a short-term investment - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking current income O Investing in emergency reserves - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Able to withstand volatility in the value of the shares of the Fund - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Looking for a fund that invests in income-producing equity instruments and debt securities and seeks to outperform broad market indexes - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 72 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2007: 6.66%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2007) 3.02% Lowest (Q4, 2007) -0.66%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL PIMCO Fundamental IndexPLUS Total Return Fund 5/1/2006 6.66% 11.16% FTSE RAFI(TM) U.S. 1000 Index 3.05% 8.96% S&P 500 Stock Index 5.49% 9.41%
The Fund's performance is compared to FTSE RAFI(TM) U.S. 1000 Index and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500(R) Index") The FTSE RAFI U.S. 1000 Index is part of the FTSE RFI Index Series, launched in association with Research Affiliates. As part of FTSE Group's range of nonmarket cap weighted indices, the FTSE RAFI Index Series weights index constituents using four fundamental factors, rather than market capitalization. These factors include dividends, cash flow, sales and book value. The FTSE RAFI U.S. 1000 Index comprises the largest 1000 U.S.-listed companies by fundamental value, selected from the constituents of the FTSE USA All Cap Index, part of the FTSE Global Equity Index Series (GEIS). The S&P 500(R) Index is an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 73 reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.75% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.21% ----- Total Annual Fund Operating Expenses 1.21% Fee Waiver((2)) 0.01% ----- Net Annual Fund Operating Expenses((2)) 1.20% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $122 $383 $664 $1,465 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 74 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) S&P 500 INDEX FUND - -------------------------------------------------------------------------------- AZL(R) S&P 500 INDEX FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL S&P 500 Index Fund seeks to match the total return of the Standard & Poor's 500 Composite Stock Price Index (S&P 500(R)). The Subadviser normally invests in all 500 stocks in the S&P 500(R) in proportion to their weighting in the index. The Subadviser attempts to have a correlation between the Fund's performance and that of the S&P 500(R) Index of at least 0.95 before expenses. A correlation of 1.00 would mean that the Fund and the index were perfectly correlated. The S&P 500(R) is an unmanaged index of 500 common stocks chosen to reflect the industries of the U.S. economy and is often considered a proxy for the stock market in general. S&P(R) adjusts each company's stock weighting in the index by the number of available float shares (those shares available to public investors) divided by the company's total shares outstanding, which means larger companies with more available float shares have greater representation in the index than smaller ones. In seeking to match the performance of the index, the Subadviser uses a passive management approach and purchases all or a representative sample of the stocks comprising the benchmark index. The Subadviser also may use stock index futures as a substitute for the sale or purchase of securities. Because the Fund has expenses, performance will tend to be slightly lower than that of the target benchmark. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500(R)," and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed by the Manager for use by the Fund. The Fund is not sponsored, endorsed, sold, or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the Fund. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The value of an investment in the Fund will fluctuate, sometimes dramatically. You may lose money by investing in the Fund. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o INDEXING STRATEGY RISK o ISSUER RISK o DERIVATIVES RISK o LICENSE TERMINATION RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking long-term growth of capital through broad o Seeking to avoid the risk of market fluctuations exposure to better established U.S. companies - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 75 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007 and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 1 CLASS 2 Management Fee 0.17% 0.17% Distribution (12b-1) Fees(1) 0.00% 0.25% Other Expenses 0.31% 0.31% ----- ----- Total Annual Fund Operating Expenses 0.48% 0.73% Fee Waiver((2)) 0.24% 0.24% ----- ----- Net Annual Fund Operating Expenses((2)) 0.24% 0.49% ===== ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 1 shares to 0.24% and Class 2 shares to 0.49% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS CLASS 1 $25 $130 CLASS 2 $50 $209 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 76 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) SCHRODER EMERGING MARKETS EQUITY FUND - -------------------------------------------------------------------------------- AZL(R) SCHRODER EMERGING MARKETS EQUITY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Schroder Emerging Markets Equity Fund is capital appreciation. Under normal circumstances, 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. The Fund will provide notice to shareholders at least 60 days prior to any change to this policy. The Fund may use derivatives for purposes of complying with this policy. The Fund may invest the remainder of its assets in securities of issuers located anywhere in the world. The Fund may invest in common and preferred stocks, securities convertible into common and preferred stocks, warrants to purchase common and preferred stocks, and index-linked warrants. The Fund may also invest in sponsored or unsponsored American Depositary Receipts ("ADRs"), Global Depository Receipts ("GDRs"), European Depository Receipts ("EDRs") or other similar securities representing ownership of foreign securities (collectively, "Depositary Receipts"). The Fund may also invest in securities of closed-end investment companies and exchange-traded funds (open-end investment companies whose shares may be bought or sold by investors in transactions on major stock exchanges) ("ETFs"), including securities of emerging market issuers. An investment in a domestic closed-end fund or ETF that has a policy that it will normally invest at least 80% of its net assets in equity securities of emerging market issuers, and has "emerging market" or the equivalent in its name, or foreign funds with similar investment policies, will be treated as an investment in equity securities of emerging market issuers for purposes of determining if the Fund has invested at least 80% of its net assets in such securities. The Fund invests in equity securities of issuers domiciled or doing business in "emerging market" countries in regions such as Asia, Latin America, Eastern Europe, the Middle East and Africa. The Fund's Subadviser currently considers "emerging market" issuers to be issuers domiciled in or deriving a substantial portion of their revenues from countries not included at the time of investment in the Morgan Stanley Capital World Index. Countries currently in this Index include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong SAR, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. At times, the Fund's Subadviser may determine based on its own analysis that an economy included in the Index should nonetheless be considered an emerging market country, in which case that country would constitute an emerging market country for purposes of the Fund's investments. The Fund's Subadviser has determined that Chinese companies listed in Hong Kong will be considered emerging market issuers for this purpose. There is no limit on the amount of the Fund's assets that may be invested in securities of issuers domiciled in any one emerging market country, although the Fund will typically seek to allocate its investments among a number of different emerging market countries. The Fund invests in issuers and countries that its Subadviser believes offer the potential for capital growth. In identifying investments for the Fund, the Fund's Subadviser considers a variety of factors, including the issuer's likelihood of above average earnings growth, the securities' attractive relative valuation, and whether the issuer enjoys proprietary advantages. The Fund may invest in securities of companies of any size, including companies with large, medium, and small market capitalizations, including micro-cap companies. The Fund may also purchase securities issued in initial public offerings. In addition, the Fund's Subadviser considers the risk of local political and/or economic instability associated with particular countries and regions and the liquidity of local markets. The Fund generally sells securities when the Fund's Subadviser believes they are fully priced or to take advantage of other investments the Fund's Subadviser considers more attractive. The Fund may purchase or sell structured notes, or enter into swap transactions, for hedging or as an alternative to purchasing or selling securities. The Fund's Subadviser may hedge some of the Fund's foreign currency exposure back into the U.S. dollar, although it does not normally expect to do so. The Fund may also purchase or sell futures on indices, including country specific or overall emerging market indices. The Fund may use derivatives to gain long or short exposure to securities or market sectors as a substitute for cash investments (not for leverage) or pending the sale of securities by the Fund and reinvestment of the proceeds. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 77 The Fund may engage in frequent trading in order to achieve its investment objective. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O CAPITALIZATION RISK O FOREIGN RISK O EMERGING MARKETS RISK O CURRENCY RISK O DERIVATIVES RISK O CONVERTIBLE SECURITIES RISK O INVESTMENTS IN POOLED VEHICLES RISK O LIQUIDITY RISK O INITIAL PUBLIC OFFERINGS RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term capital growth from foreign investments O Seeking to avoid market risk and volatility - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to assume the greater risks of share price O Seeking safety of principal fluctuations and losses that are typical of an aggressive fund focusing on growth stock instruments - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Willing to assume the risks of investing in emerging foreign countries - --------------------------------------------------------------- ------------------------------------------------------------
The Fund is designed primarily for aggressive investors seeking capital growth over the long term. Those investors should be willing to assume the substantial risks of short-term share price fluctuations and losses that are typical for an aggressive growth fund focusing on stock investment in developing and emerging markets. The Fund does not seek current income and the income from its investments will likely be small, so it is not designed for investors needing income. Because of its focus on long-term growth, the Fund may be appropriate for some portion of a retirement plan investment for investors with a high risk tolerance. However, the Fund is not a complete investment program. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 78 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION* The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE (CLASS 2 SHARES) Performance information is presented for Class 2 shares only because Class 1 shares commenced operations on May 6, 2007, and had not had a full year of operations as of December 31, 2007. [BAR CHART GRAPHIC: 2007: 30.32%] * Prior to December 10, 2007, this Fund was subadvised by OppenheimerFunds, Inc. and was known as AZL Oppenheimer Developing Markets Fund. HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2007) 14.02% Lowest (Q4, 2007) 1.78%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Schroder Emerging Markets Equity Fund (Class 1 Shares) 5/6/2007 N/A 19.23% AZL Schroder Emerging Markets Equity Fund (Class 2 Shares) 5/1/2006 30.32% 21.16% MSCI Emerging Markets Index 39.78% 29.72%
The Fund's performance is compared to the MSCI Emerging Markets Index, an unmanaged market capitalization weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 79 for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. CLASS 1 CLASS 2 Management Fee(1) 1.23% 1.23% Distribution (12b-1) Fees(2) 0.00% 0.25% Other Expenses 0.48% 0.48% ----- ----- Total Annual Fund Operating Expenses 1.71% 1.96% Fee Waiver((3)) 0.31% 0.31% ----- ----- Net Annual Fund Operating Expenses((3)) 1.40% 1.65% ===== ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.95% through April 30, 2009. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets attributable to Class 2 shares as payment for distributing its Class 2 shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses of Class 1 shares to 1.40% and Class 2 shares to 1.65% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS 1 $143 $509 $899 $1,994 CLASS 2 $168 $585 $1,029 $2,260 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 80 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) SCHRODER INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- AZL(R) SCHRODER INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL Schroder International Small Cap Fund seeks to provide long-term capital appreciation. The Fund invests primarily in the equity securities of smaller companies located outside the United States. The Subadviser normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in small-capitalization companies (generally those with market capitalizations, based on the number of shares readily available in the market, of $3.5 billion or less at the time of investment) that it believes offer the potential for capital appreciation. The Fund will provide notice to shareholders at least 60 days prior to any change to this policy. The Subadviser employs a fundamental investment approach that considers macroeconomic factors while focusing primarily on company-specific factors. These company-specific factors include the company's potential for long-term growth, financial condition, quality of management, and sensitivity to cyclical factors, as well as the relative value of the company's securities compared with those of other companies and the market as a whole. In selecting investments for the Fund, the Subadviser considers, among other things, whether a company is likely to have above-average earnings growth, whether its securities are attractively valued, and whether the company has any proprietary advantages. The Subadviser generally sells a security when its market price approaches the Subadviser's estimate of fair value or when the Subadviser identifies a significantly more attractive investment candidate. The Fund generally emphasizes developed markets in Europe and the Pacific, with a limited allocation to emerging markets. Stocks of emerging-markets countries can be substantially more volatile and substantially less liquid than those of both U.S. and more developed foreign markets. The Fund invests in companies that are smaller and less well-known than larger, more widely held companies. Small companies tend to be more vulnerable to adverse developments than larger companies. Small companies may have limited product lines, markets, or financial resources, or they may depend on a limited management group. Their securities may trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies. Also, there may be less publicly available information about small companies or less market interest in their securities as compared with larger companies, and it may take longer for the prices of these securities to reflect the full value of their issuers' earnings potential or assets. It is important to note that market capitalization ranges change over time, and interpretations of size vary. Therefore, there is no standard definition of "small-cap" and definitions may change over time and differ among different fund offerings. Besides investing in stocks of foreign companies, the Fund may make other kinds of investments to achieve its objective. The Fund may invest in preferred stocks and closed-end investment companies that invest primarily in foreign securities. With preferred stocks, holders receive set dividends from the issuer; their claim on the issuer's income and assets ranks before that of common-stock holders, but after that of bondholders. The Fund may also invest in convertible securities and warrants. Convertible securities are corporate debt securities that may be converted at either a stated price or a stated rate into underlying shares of common stock. Warrants are securities that permit their owners to purchase a specific number of stock shares at a predetermined price in the future. The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a traditional security (such as a stock or bond), an asset (such as a commodity like gold), or a market index (such as the S&P 500(R) Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging, or magnifying, investment returns. The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative contracts. A forward foreign currency exchange contract is an agreement to buy or sell a country's currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities use these contracts to guard against sudden, unfavorable - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 81 changes in the U.S. dollar/foreign currency exchange rates. These contracts, however, will not prevent the Fund's securities from falling in value during foreign market downswings. The Fund may temporarily depart from its normal investment policies, for instance, by allocating substantial assets to cash investments in response to extraordinary market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses, but may otherwise fail to achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in the value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o FOREIGN RISK o EMERGING MARKETS RISK o CAPITALIZATION RISK o COUNTRY/REGIONAL RISK o CURRENCY RISK o LIQUIDITY RISK o ISSUER RISK o DERIVATIVES RISK o CONVERTIBLE SECURITIES RISK o SELECTION RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking long-term capital growth from investments in o Seeking safety of principal foreign investments in smaller companies - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Willing to assume the risk of investing in securities of o Seeking to avoid risks associated with smaller foreign companies and exposure to emerging markets companies of foreign countries - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007, and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 1.00% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.27% ----- Total Annual Fund Operating Expenses 1.52% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.52% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 82 (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.65% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $155 $480 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 83 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) SMALL CAP STOCK INDEX FUND - -------------------------------------------------------------------------------- AZL(R) SMALL CAP STOCK INDEX FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL Small Cap Stock Index Fund seeks to match the performance of the Standard & Poor's (S&P) SmallCap 600 Index(R). The Subadviser invests in a representative sample of stocks included in the S&P SmallCap 600 Index(R) and in futures whose performance is related to the index, rather than attempting to replicate the index. The Subadviser attempts to have a correlation between the Fund's performance and that of the index of at least 0.95 before expenses. A correlation of 1.00 would mean that the Fund and the index were perfectly correlated. The Subadviser selects the Fund's investments using a "sampling" process based on market capitalization, industry representation, and other means. Using this sampling process, the Fund typically will not invest in all 600 stocks in the S&P SmallCap 600 Index(R). However, at times, the Fund may be fully invested in all the stocks that comprise the index. Under these circumstances, the Fund maintains approximately the same weighting for each stock as the index does. The S&P SmallCap 600 Index(R) is composed of 600 domestic stocks with market capitalizations ranging between approximately $300 million and $2.0 billion, depending on index composition. S&P(R) adjusts each company's stock weighting in the index by the number of available float shares (those shares available to public investors) divided by the total shares outstanding of the company, which means larger companies with more available float shares have greater representation in the index than smaller ones. Small cap companies are generally new and often entrepreneurial companies. Small cap companies tend to grow faster than large cap companies, but frequently are more volatile, are more vulnerable to major setbacks, and fail more often than larger companies. In seeking to match the performance of the index, the Subadviser uses a passive management approach and purchases all or a representative sample of the stocks comprising the benchmark index. The Subadviser also may use stock index futures as a substitute for the sale or purchase of securities. Because the Fund has expenses, performance will tend to be slightly lower than that of the target benchmark. "Standard & Poor's(R)," "S&P(R)," and "Standard & Poor's SmallCap 600 Index(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Fund. The Fund is not sponsored, endorsed, sold, or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the Fund. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The value of an investment in the Fund will fluctuate, sometimes dramatically. You may lose money by investing in the Fund. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK o INDEXING STRATEGY RISK O CAPITALIZATION RISK o ISSUER RISK o DERIVATIVES RISK o LICENSE TERMINATION RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Seeking to avoid market fluctuations - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking long term growth of capital from broad exposure o Looking primarily for regular income to equities of smaller companies - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Willing to accept the risk associated with securities of o More comfortable investing in larger, better smaller, less-established companies established companies - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 84 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007, and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.26% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.36% ----- Total Annual Fund Operating Expenses 0.87% Fee Waiver((2)) 0.29% ----- Net Annual Fund Operating Expenses((2)) 0.58% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.58% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $59 $249 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 85 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL TARGETPLUS(SM) BALANCED FUND - -------------------------------------------------------------------------------- AZL TARGETPLUSSM BALANCED FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL TargetPLUS Balanced Fund seeks to provide long-term capital appreciation with preservation of capital as an important consideration. The Fund seeks to achieve its goal by investing primarily in a diversified portfolio of equity and fixed income securities. The Fund may invest a significant portion of its total assets in securities of non-U.S. companies. In seeking to achieve the Fund's investment objective, the Manager allocates the Fund's assets between the Fund's equity portfolio (the "Equity Portfolio") and the Fund's fixed income portfolio (the "Fixed Income Portfolio") in pursuit of a balanced investment program. Under normal market conditions, the Manager will allocate 45% to 55% of the Fund's assets to the Equity Portfolio and the remaining balance of the Fund's assets to the Fixed Income Portfolio. This does not, however, restrict the Manager's ability to go above or below this range where the Manager considers it appropriate. First Trust Advisors L.P. ("First Trust") serves as the Subadviser for the Equity Portfolio and Pacific Investment Management Company LLC ("PIMCO") serves as the Subadviser for the Fixed Income Portfolio. In the short term, allocations may vary from the Fund's target asset allocation. The Manager may change the asset allocation between the Fund's two portfolios from time to time if it believes that doing so will increase the Fund's ability to achieve its investment objective. EQUITY PORTFOLIO The Fund's Equity Portfolio invests in the common stocks of companies that are identified by a model based on five separate strategies. o 20% in The Dow(R) Target Dividend Strategy, o 20% in the Value Line(R) Target 25 Strategy, o 20% in the Target Small-Cap 15 Strategy, o 20% in the Global Dividend Target 15 Strategy, and o 20% in the NYSE(R) International Target 25 Strategy The securities for each strategy are selected annually on or about the last business day before each Stock Selection Date. The "Stock Selection Date" will be on or about December 1 of each year. For all of the strategies, First Trust generally follows a buy and hold strategy, trading as soon as practicable to the Stock Selection Date and/or when required by cash flow activity in the Equity Portfolio. First Trust may also trade because of mergers and acquisitions if the original stock is not the surviving company and to reinvest dividends. Between Stock Selection Dates, when cash inflows and outflows require, First Trust purchases and sells common stocks for each of the strategies according to the approximate current percentage relationship among the shares of the stocks. Certain provisions of the 1940 Act, as amended, limit the ability of the Fund to invest more than 5% of the Fund's total assets in the stock of any company that derives more than 15% of its gross revenues from securities related activities ("Securities Related Companies"). If a Securities Related Company is selected by the strategy described above, First Trust may depart from the investment strategy for the Fund's Equity Portfolio only to the extent necessary to maintain compliance with these provisions. Any amount that cannot be allocated to a Securities Related Company because of the 5% limit will be allocated among the remaining portfolio securities in proportion to the percentage relationships determined by the strategy. THE DOW(R) TARGET DIVIDEND STRATEGY This investment strategy looks for common stocks issued by companies that are expected to provide income and have the potential for capital appreciation. The Dow(R) Target Dividend Strategy seeks to achieve its objective by investing approximately equal amounts in the common stock of the 20 companies included in the Dow Jones Select Dividend IndexSM that have the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 86 First Trust selects the common stocks of the 20 companies in the following manner: o Starting with the 100 stocks in the Dow Jones Select Dividend IndexSM, First Trust ranks the stocks from best (1) to worst (100) based on two factors: o Greatest change in return on assets over the last 12 months. An increase in return on assets generally indicates improving business fundamentals. o Price-to-book ratio. A lower, but positive, price-to-book ratio is generally used as an indication of value. o First Trust then selects an approximately equally-weighted portfolio of the 20 stocks with the best overall ranking on the two factors. VALUE LINE(R) TARGET 25 STRATEGY The Value Line(R) Target 25 Strategy seeks to achieve its objective by investing in 25 of the 100 stocks to which Value Line(R) gives a #1 ranking for "Timeliness(TM)" based on the Value Line Investment Survey(R). The 25 stocks are selected on the basis of certain positive financial attributes. Value Line(R) ranks approximately 1,700 stocks, representing approximately 94% of the trading volume on all U.S. stock exchanges. Of these approximately 1,700 stocks, only 100 are given their #1 ranking for TimelinessTM, which reflects Value Line's view of their probable price performance during the next six to 12 months relative to the others. Value Line(R) bases its rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. The 25 stocks are selected annually from the 100 stocks with the #1 ranking on or about the last business day before each Stock Selection Date. Companies that, as of the Stock Selection Date, Value Line(R) has announced will be removed from Value Line's #1 ranking for TimelinessTM will be removed from the universe of securities from which stocks are selected for the Fund. First Trust selects the common stocks of the 25 companies in the following manner: o Starting with the 100 stocks to which Value Line(R) gives the #1 ranking for TimelinessTM, First Trust removes from consideration the stocks of companies considered to be financial companies and the stocks of companies whose shares are not listed on a U.S. securities exchange. o First Trust then ranks the remaining stocks from the best (1) to worst (100) on the following four factors: o 6-month price appreciation, and o 12-month price appreciation, and o Return on assets, and o Price to cash flow. o First Trust adds up the numerical ranks achieved by each company in the above steps and selects the 25 stocks with the lowest sums. The selected stocks are weighted by market capitalization subject to the restriction that no stock will comprise less than approximately 1% or more than 7.5% of the Value Line(R) Target 25 Strategy portion of the portfolio on or about the Stock Selection Date. The securities will be adjusted on a proportional basis to accommodate this constraint. TARGET SMALL-CAP 15 STRATEGY The Target Small-Cap Strategy seeks to achieve its objective by investing in the stocks of 15 small-capitalization companies that have recently exhibited certain positive financial attributes. First Trust selects the stocks of the 15 companies for this strategy in the following manner: o First Trust begins with the stocks of all U.S. corporations that trade on the New York Stock Exchange (NYSE(R)), the American Stock Exchange (AMEX), or the Nasdaq Stock market (Nasdaq) (excluding limited partnerships, American Depositary Receipts, and mineral and oil royalty trusts) on or about the Stock Selection Date. o First Trust then selects companies that have a market capitalization between $500 million and $2.5 billion and whose stock has an average daily trading volume of at least $1 million. o First Trust then selects those stocks with positive three-year sales growth. o From those stocks, First Trust selects the stocks whose most recent 12 month's earnings are positive. o First Trust eliminates any stock whose price has appreciated by more than 75% in the preceding 12 months. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 87 o Finally, First Trust selects the 15 stocks with the greatest price appreciation in the previous 12 months. Each of the stock's weighting in the portfolio is based on its relative market capitalization (highest to lowest). GLOBAL DIVIDEND TARGET 15 STRATEGY The Global Dividend Target 15 Strategy seeks to achieve its objective by investing in the common stocks of certain companies included in the Dow Jones Industrial AverageSM (DJIASM), the Financial Times Ordinary Index (FT30 Index or Financial Times 30 Index), and the Hang Seng IndexSM. This strategy invests in the common stocks of the five companies with the lowest per share stock price of the ten companies in each of the DJIASM, the FT30 Index and the Hang Seng Index, respectively that have the highest indicated annual dividend yields ("Dividend Yields") in their respective index. First Trust selects the common stocks for this strategy in the following manner: o First Trust determines the Dividend Yield on each common stock in the DJIASM, the FT30 Index and the Hang Seng Index; o First Trust determines the ten companies in each of the DJIASM, the FT30 Index, and the Hang Seng Index that have the highest Dividend Yield in the respective index; and o From those companies, First Trust then selects an approximately equally weighted portfolio of the common stocks of the 5 companies in each index with the lowest price per share. NYSE(R) INTERNATIONAL TARGET 25 STRATEGY This strategy invests in the common stocks of 25 companies selected from the stocks included in the NYSE International 100 Index(R). The NYSE International 100 Index(R) consists of the 100 largest non-U.S. stocks trading on the New York Stock Exchange. First Trust selects the stocks of the 25 companies for this strategy in the following manner: o First Trust begins with the stocks included in the Index on or about the Stock Selection Date. o First Trust then screens for liquidity by eliminating companies with average daily trading volume for the prior three months below $300,000. o First Trust then ranks the remaining stocks based on two factors: o Price-to-book ratio, and o Price-to-cash flow ratio. Lower, but positive price-to-book ratios and price-to-cash flow ratios are generally used as an indication of value. o From those companies, First Trust then selects an approximately equally weighted portfolio of the 25 stocks with the best overall ranking based on the two factors. FIXED INCOME PORTFOLIO For the Fund's Fixed Income Portfolio, the Manager may allocate from 0% to 100% of the Fund's assets allocated to the Fixed Income Portfolio to either of two separate strategies: the Total Return Strategy and the Diversified Income Strategy. The Manager may change the allocation between the two Fixed Income strategies at any time if it believes that doing so will increase the Fund's ability to achieve its investment objective. For the Fixed Income Portfolio, "Fixed Income Instruments" include: o Securities issued or guaranteed by the U.S. government, and by its agencies or government-sponsored enterprises, some of which may not be guaranteed by the U.S. Treasury; o Corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; o Mortgage-backed and other asset-backed securities; o Inflation-indexed bonds issued both by governments and corporations; o Structured notes, including hybrid or "indexed" securities, and event-linked bonds; o Loan participations and assignments; o Delayed funding loans and revolving credit facilities; o Bank certificates of deposit, fixed time deposits, and bankers' acceptances; - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 88 o Repurchase agreements and reverse repurchase agreements; o Debt securities issued by states or local governments and their agencies, authorities, and other government-sponsored enterprises; o Obligations of non-U.S. governments or their subdivisions, agencies, and government-sponsored enterprises; and o Obligations of international agencies or supranational entities. TOTAL RETURN STRATEGY The Total Return Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of this strategy normally varies within two years (plus or minus) of the duration of the Lehman Brothers Aggregate Bond Index, which as of March 31, 2007 was 4.5 years. The Total Return Strategy invests primarily in investment grade debt securities, but may invest up to 10% of the total assets allocated to the strategy in high yield securities ("junk bonds") rated B or higher by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Total Return Strategy may invest up to 30% of the total assets allocated to it in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Total Return Strategy may invest up to 15% of its total assets in securities of issuers based in countries with developing (or "emerging market") economies. The Total Return Strategy will normally limit its foreign currency exposure (from non-U.S. dollar-denominated securities or currencies) to 20% of the total assets allocated to it. The Total Return Strategy may invest all of the assets allocated to it in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Total Return Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques, such as buy backs or dollar rolls. The "total return" sought by the strategy consists of income earned on the strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. DIVERSIFIED INCOME STRATEGY The Diversified Income Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of the Diversified Income Strategy normally varies within a three- to eight-year time frame based on PIMCO's forecast for interest rates. The Diversified Income Strategy may invest in a diversified pool of corporate fixed income securities of varying maturities. The Diversified Income Strategy may invest all of its assets in high yield securities ("junk bonds") subject to a maximum of 10% of its total assets in securities rated below B by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Diversified Income Strategy may invest in securities denominated in foreign currencies and U.S.-dollar-denominated securities of foreign issuers. The Diversified Income Strategy may have foreign currency exposure (from non-U.S. dollar denominated securities or currencies) up to 100% of its total assets. In addition, the Diversified Income Strategy may invest without limit in fixed income securities of issuers that are economically tied to emerging securities markets. The Diversified Income Strategy may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Diversified Income Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The total return sought by the Diversified Income Strategy consists of income earned on the Strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. The Fund may engage in frequent trading in order to achieve its investment objective. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 89 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investment held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund attempts to balance the goals of capital appreciation and preservation of capital by investing its assets at a targeted allocation of 45% to 55% in equity securities and 45% to 55% in fixed income securities. The allocation targets are intended to help moderate the impact of equity market volatility on the returns of the Fund by diversifying the Fund. Since the Fund invests relatively equally in equity and fixed income securities, the risks associated with investing in the Fund are more or less equalized among the types of risk associated with the Fund's two primary asset classes. The Fund invests a higher percentage of its assets in fixed income securities and a lower percentage in equity securities than either the AZL TargetPLUS Moderate Fund or the AZL TargetPLUS Growth Fund. The Fund faces the following principal risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O ALLOCATION RISK O LIMITED MANAGEMENT RISK O STRATEGY SELECTION RISK O INVESTMENT STRATEGY RISK O INTEREST RATE RISK O CREDIT RISK O SECURITY QUALITY RISK O LIQUIDITY RISK O DERIVATIVES RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK O LEVERAGING RISK O FOCUSED INVESTMENT RISK O CAPITALIZATION RISK O FOREIGN RISK O EMERGING MARKETS RISK O CURRENCY RISK O DIVIDEND RISK O LICENSE TERMINATION RISK O SHORT SALE RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Seeking a short-term investment - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking capital appreciation and are willing to accept o Investing in emergency reserves the higher volatility associated with investing in foreign stocks and bonds - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking income and growth of capital - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007, and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 90 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.52% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.53% ----- Total Annual Fund Operating Expenses 1.30% Fee Waiver((2)) 0.41% ----- Net Annual Fund Operating Expenses((2)) 0.89% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.89% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $91 $372 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 91 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL TARGETPLUSSM EQUITY FUND - -------------------------------------------------------------------------------- AZL TARGETPLUSSM EQUITY FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL TargetPLUS Equity Fund is total return. The Fund seeks to achieve its objective by investing at least 80% of its net assets, plus any borrowings for investment purposes, in the common stocks of companies that are identified by a model based on five separate strategies. o 20% in The Dow(R) Target Dividend Strategy, o 20% in the Value Line(R) Target 25 Strategy, o 20% in the Target Small-Cap 15 Strategy, o 20% in the Global Dividend Target 15 Strategy, and o 20% in the NYSE(R) International Target 25 Strategy The Fund will provide notice to shareholders at least 60 days prior to any change to this policy. The securities for each strategy are selected annually on or about the last business day before each Stock Selection Date. The "Stock Selection Date" will be on or about December 1 of each year. First Trust Advisors L.P. ("First Trust") serves as the Fund's Subadviser and generally follows a buy and hold strategy for each of the five investment strategies, trading as soon as practicable to the Stock Selection Date and/or when required by cash flow activity in the Fund. First Trust may also trade because of mergers and acquisitions if the original stock is not the surviving company and to reinvest dividends. Between Stock Selection Dates, when cash inflows and outflows require, the Fund purchases and sells common stocks for each of the strategies according to the approximate current percentage relationship among the shares of the stocks. Certain provisions of the 1940 Act, as amended, limit the ability of the Fund to invest more than 5% of the Fund's total assets in the stock of any company that derives more than 15% of its gross revenues from securities related activities ("Securities Related Companies"). If a Securities Related Company is selected by the strategy described above, First Trust may depart from the Fund's investment strategy only to the extent necessary to maintain compliance with these provisions. Any amount that cannot be allocated to a Securities Related Company because of the 5% limit will be allocated among the remaining portfolio securities in proportion to the percentage relationships determined by the strategy. The performance of the Fund will depend on First Trust's ability to effectively implement the investment strategies of the Fund and also on the performance of the stocks selected that meet the stock selection criteria. The SAI has more information about the Fund's authorized investments and strategies, as well as the risks and restrictions that may apply to them. THE DOW(R) TARGET DIVIDEND STRATEGY This investment strategy looks for common stocks issued by companies that are expected to provide income and have the potential for capital appreciation. The Dow(R) Target Dividend Strategy seeks to achieve its objective by investing approximately equal amounts in the common stock of the 20 companies included in the Dow Jones Select Dividend IndexSM that have the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio. First Trust selects the common stocks of the 20 companies in the following manner: o Starting with the 100 stocks in the Dow Jones Select Dividend IndexSM, First Trust ranks the stocks from best (1) to worst (100) based on two factors: o Greatest change in return on assets over the last 12 months. An increase in return on assets generally indicates improving business fundamentals. o Price-to-book ratio. A lower, but positive, price-to-book ratio is generally used as an indication of value. o First Trust then selects an approximately equally-weighted portfolio of the 20 stocks with the best overall ranking on the two factors. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 92 VALUE LINE(R) TARGET 25 STRATEGY The Value Line(R) Target 25 Strategy seeks to achieve its objective by investing in 25 of the 100 stocks to which Value Line(R) gives a #1 ranking for "Timeliness(TM)" based on the Value Line Investment Survey(R). The 25 stocks are selected on the basis of certain positive financial attributes. Value Line(R) ranks approximately 1,700 stocks, representing approximately 94% of the trading volume on all U.S. stock exchanges. Of these approximately 1,700 stocks, only 100 are given their #1 ranking for TimelinessTM, which reflects Value Line's view of their probable price performance during the next six to 12 months relative to the others. Value Line(R) bases its rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. The 25 stocks are selected annually from the 100 stocks with the #1 ranking on or about the last business day before each Stock Selection Date. Companies that, as of the Stock Selection Date, Value Line(R) has announced will be removed from Value Line's #1 ranking for TimelinessTM will be removed from the universe of securities from which stocks are selected for the Fund. First Trust selects the common stocks of the 25 companies in the following manner: o Starting with the 100 stocks to which Value Line(R) gives the #1 ranking for TimelinessTM, First Trust removes from consideration the stocks of companies considered to be financial companies and the stocks of companies whose shares are not listed on a U.S. securities exchange. o First Trust then ranks the remaining stocks from the best (1) to worst (100) on the following four factors: o 6-month price appreciation, and o 12-month price appreciation, and o Return on assets, and o Price to cash flow. o First Trust adds up the numerical ranks achieved by each company in the above steps and selects the 25 stocks with the lowest sums. The selected stocks are weighted by market capitalization subject to the restriction that no stock will comprise less than approximately 1% or more than 7.5% of the Value Line(R) Target 25 Strategy portion of the portfolio on or about the Stock Selection Date. The securities will be adjusted on a proportional basis to accommodate this constraint. TARGET SMALL-CAP 15 STRATEGY The Target Small-Cap Strategy seeks to achieve its objective by investing in the stocks of 15 small-capitalization companies that have recently exhibited certain positive financial attributes. First Trust selects the stocks of the 15 companies for this strategy in the following manner: o First Trust begins with the stocks of all U.S. corporations that trade on the New York Stock Exchange (NYSE(R)), the American Stock Exchange (AMEX), or the Nasdaq Stock market (Nasdaq) (excluding limited partnerships, ADRs, and mineral and oil royalty trusts) on or about the Stock Selection Date. o First Trust then selects companies that have a market capitalization between $500 million and $2.5 billion and whose stock has an average daily trading volume of at least $1 million. o First Trust then selects those stocks with positive three-year sales growth. o From those stocks, First Trust selects the stocks whose most recent 12 month's earnings are positive. o First Trust eliminates any stock whose price has appreciated by more than 75% in the preceding 12 months. o Finally, the Subadviser selects the 15 stocks with the greatest price appreciation in the previous 12 months. Each of the stock's weighting in the portfolio is based on its relative market capitalization (highest to lowest). GLOBAL DIVIDEND TARGET 15 STRATEGY The Global Dividend Target 15 Strategy seeks to achieve its objective by investing in the common stocks of certain companies included in the Dow Jones Industrial AverageSM (DJIASM), the Financial Times Ordinary Index (FT30 Index or Financial Times 30 Index), and the Hang Seng IndexSM. This strategy invests in the common stocks of the five companies with the lowest per share stock price of the ten companies in each of the DJIASM, the FT30 Index and the Hang Seng Index, respectively that have the highest indicated annual dividend yields ("Dividend Yields") in their respective index. First Trust selects the common stocks for this strategy in the following manner: - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 93 o First Trust determines the Dividend Yield on each common stock in the DJIASM, the FT30 Index and the Hang Seng Index; o First Trust determines the ten companies in each of the DJIASM, the FT30 Index, and the Hang Seng Index that have the highest Dividend Yield in the respective index; and o From those companies, First Trust then selects an approximately equally weighted portfolio of the common stocks of the 5 companies in each index with the lowest price per share. NYSE(R) INTERNATIONAL TARGET 25 STRATEGY This strategy invests in the common stocks of 25 companies selected from the stocks included in the NYSE International 100 Index(R). The NYSE International 100 Index(R) consists of the 100 largest non-U.S. stocks trading on the New York Stock Exchange. First Trust selects the stocks of the 25 companies for this strategy in the following manner: o First Trust begins with the stocks included in the Index on or about the Stock Selection Date. o First Trust then screens for liquidity by eliminating companies with average daily trading volume for the prior three months below $300,000. o First Trust then ranks the remaining stocks based on two factors: o Price-to-book ratio, and o Price-to-cash flow ratio. Lower, but positive price-to-book ratios and price-to-cash flow ratios are generally used as an indication of value. o From those companies, First Trust then selects an approximately equally weighted portfolio of the 25 stocks with the best overall ranking based on the two factors. The Fund may engage in frequent trading in order to achieve its investment objective. - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in the value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O INVESTMENT STRATEGY RISK O LIMITED MANAGEMENT RISK O FOREIGN RISK O EMERGING MARKETS RISK O CAPITALIZATION RISK O CURRENCY RISK O FOCUSED INVESTMENT RISK O DIVIDEND RISK O LICENSE TERMINATION RISK O ISSUER RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Looking primarily for regular income - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking long-term growth of capital o Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o More comfortable with established, well-known companies - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 94 Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC: 2007: 7.60%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2007) 6.96% Lowest (Q4, 2007) -4.52%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL TargetPLUS Equity Fund 12/27/2006 7.60% 6.67% Russell 3000(R) Index 5.14% 4.42% S&P 500 Index 5.49% 4.82%
The Fund's performance is compared to the Russell 3000(R) Index and the S&P 500 Index. The Russell 3000(R) Index, an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The S&P 500(R) Index is an unmanaged index that consists of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 95 reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.60% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.29% ----- Total Annual Fund Operating Expenses 1.14% Fee Waiver((3)) 0.35% ----- Net Annual Fund Operating Expenses((3)) 0.79% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.45% through April 30, 2009. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.79% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $328 $594 $1,355 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 96 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL TARGETPLUS(SM) GROWTH FUND - -------------------------------------------------------------------------------- AZL TARGETPLUSSM GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL TargetPLUS Growth Fund seeks to provide long-term capital appreciation. The Fund seeks to achieve its goal by investing primarily in a diversified portfolio of equity and fixed income securities. The Fund may invest a significant portion of its total assets in securities of non-U.S. companies. In seeking to achieve the Fund's investment objective, the Manager allocates the Fund's assets between the Fund's equity portfolio (the "Equity Portfolio") and the Fund's fixed income portfolio (the "Fixed Income Portfolio") in pursuit of a balanced investment program. Under normal market conditions, the Manager will allocate 75% to 85% of the Fund's assets to the Equity Portfolio and the remaining balance of the Fund's assets to the Fixed Income Portfolio. This does not, however, restrict the Manager's ability to go above or below this range where the Manager considers it appropriate. First Trust Advisors L.P. ("First Trust") serves as the Subadviser for the Equity Portfolio and Pacific Investment Management Company LLC ("PIMCO") serves as the Subadviser for the Fixed Income Portfolio. In the short term, allocations may vary from the Fund's target asset allocation. The Manager may change the asset allocation between the Fund's two portfolios from time to time if it believes that doing so will increase the Fund's ability to achieve its investment objective. EQUITY PORTFOLIO The Fund's Equity Portfolio invests in the common stocks of companies that are identified by a model based on five separate strategies. o 20% in The Dow(R) Target Dividend Strategy, o 20% in the Value Line(R) Target 25 Strategy, o 20% in the Target Small-Cap 15 Strategy, o 20% in the Global Dividend Target 15 Strategy, and o 20% in the NYSE(R) International Target 25 Strategy The securities for each strategy are selected annually on or about the last business day before each Stock Selection Date. The "Stock Selection Date" will be on or about December 1 of each year. For all of the strategies, First Trust generally follows a buy and hold strategy, trading as soon as practicable to the Stock Selection Date and/or when required by cash flow activity in the Equity Portfolio. First Trust may also trade because of mergers and acquisitions if the original stock is not the surviving company and to reinvest dividends. Between Stock Selection Dates, when cash inflows and outflows require, First Trust purchases and sells common stocks for each of the strategies according to the approximate current percentage relationship among the shares of the stocks. Certain provisions of the 1940 Act, as amended, limit the ability of the Fund to invest more than 5% of the Fund's total assets in the stock of any company that derives more than 15% of its gross revenues from securities related activities ("Securities Related Companies"). If a Securities Related Company is selected by the strategy described above, First Trust may depart from the investment strategy for the Fund's Equity Portfolio only to the extent necessary to maintain compliance with these provisions. Any amount that cannot be allocated to a Securities Related Company because of the 5% limit will be allocated among the remaining portfolio securities in proportion to the percentage relationships determined by the strategy. THE DOW(R) TARGET DIVIDEND STRATEGY This investment strategy looks for common stocks issued by companies that are expected to provide income and have the potential for capital appreciation. The Dow(R) Target Dividend Strategy seeks to achieve its objective by investing approximately equal amounts in the common stock of the 20 companies included in the Dow Jones Select Dividend IndexSM that have the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 97 First Trust selects the common stocks of the 20 companies in the following manner: o Starting with the 100 stocks in the Dow Jones Select Dividend IndexSM, First Trust ranks the stocks from best (1) to worst (100) based on two factors: o Greatest change in return on assets over the last 12 months. An increase in return on assets generally indicates improving business fundamentals. o Price-to-book ratio. A lower, but positive, price-to-book ratio is generally used as an indication of value. o First Trust then selects an approximately equally-weighted portfolio of the 20 stocks with the best overall ranking on the two factors. VALUE LINE(R) TARGET 25 STRATEGY The Value Line(R) Target 25 Strategy seeks to achieve its objective by investing in 25 of the 100 stocks to which Value Line(R) gives a #1 ranking for "Timeliness(TM)" based on the Value Line Investment Survey(R). The 25 stocks are selected on the basis of certain positive financial attributes. Value Line(R) ranks approximately 1,700 stocks, representing approximately 94% of the trading volume on all U.S. stock exchanges. Of these approximately 1,700 stocks, only 100 are given their #1 ranking for TimelinessTM, which reflects Value Line's view of their probable price performance during the next six to 12 months relative to the others. Value Line(R) bases its rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. The 25 stocks are selected annually from the 100 stocks with the #1 ranking on or about the last business day before each Stock Selection Date. Companies that, as of the Stock Selection Date, Value Line(R) has announced will be removed from Value Line's #1 ranking for TimelinessTM will be removed from the universe of securities from which stocks are selected for the Fund. First Trust selects the common stocks of the 25 companies in the following manner: o Starting with the 100 stocks to which Value Line(R) gives the #1 ranking for TimelinessTM, First Trust removes from consideration the stocks of companies considered to be financial companies and the stocks of companies whose shares are not listed on a U.S. securities exchange. o First Trust then ranks the remaining stocks from the best (1) to worst (100) on the following four factors: o 6-month price appreciation, and o 12-month price appreciation, and o Return on assets, and o Price to cash flow. o First Trust adds up the numerical ranks achieved by each company in the above steps and selects the 25 stocks with the lowest sums. The selected stocks are weighted by market capitalization subject to the restriction that no stock will comprise less than approximately 1% or more than 7.5% of the Value Line(R) Target 25 Strategy portion of the portfolio on or about the Stock Selection Date. The securities will be adjusted on a proportional basis to accommodate this constraint. TARGET SMALL-CAP 15 STRATEGY The Target Small-Cap Strategy seeks to achieve its objective by investing in the stocks of 15 small-capitalization companies that have recently exhibited certain positive financial attributes. First Trust selects the stocks of the 15 companies for this strategy in the following manner: o First Trust begins with the stocks of all U.S. corporations that trade on the New York Stock Exchange (NYSE(R)), the American Stock Exchange (AMEX), or the Nasdaq Stock market (Nasdaq) (excluding limited partnerships, American Depositary Receipts, and mineral and oil royalty trusts) on or about the Stock Selection Date. o First Trust then selects companies that have a market capitalization between $500 million and $2.5 billion and whose stock has an average daily trading volume of at least $1 million. o First Trust then selects those stocks with positive three-year sales growth. o From those stocks, First Trust selects the stocks whose most recent 12 month's earnings are positive. o First Trust eliminates any stock whose price has appreciated by more than 75% in the preceding 12 months. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 98 o Finally, First Trust selects the 15 stocks with the greatest price appreciation in the previous 12 months. Each of the stock's weighting in the portfolio is based on its relative market capitalization (highest to lowest). GLOBAL DIVIDEND TARGET 15 STRATEGY The Global Dividend Target 15 Strategy seeks to achieve its objective by investing in the common stocks of certain companies included in the Dow Jones Industrial AverageSM (DJIASM), the Financial Times Ordinary Index (FT30 Index or Financial Times 30 Index), and the Hang Seng IndexSM. This strategy invests in the common stocks of the five companies with the lowest per share stock price of the ten companies in each of the DJIASM, the FT30 Index and the Hang Seng Index, respectively that have the highest indicated annual dividend yields ("Dividend Yields") in their respective index. First Trust selects the common stocks for this strategy in the following manner: o First Trust determines the Dividend Yield on each common stock in the DJIASM, the FT30 Index and the Hang Seng Index; o First Trust determines the ten companies in each of the DJIASM, the FT30 Index, and the Hang Seng Index that have the highest Dividend Yield in the respective index; and o From those companies, First Trust then selects an approximately equally weighted portfolio of the common stocks of the 5 companies in each index with the lowest price per share. NYSE(R) INTERNATIONAL TARGET 25 STRATEGY This strategy invests in the common stocks of 25 companies selected from the stocks included in the NYSE International 100 Index(R). The NYSE International 100 Index(R) consists of the 100 largest non-U.S. stocks trading on the New York Stock Exchange. First Trust selects the stocks of the 25 companies for this strategy in the following manner: o First Trust begins with the stocks included in the Index on or about the Stock Selection Date. o First Trust then screens for liquidity by eliminating companies with average daily trading volume for the prior three months below $300,000. o First Trust then ranks the remaining stocks based on two factors: o Price-to-book ratio, and o Price-to-cash flow ratio. Lower, but positive price-to-book ratios and price-to-cash flow ratios are generally used as an indication of value. o From those companies, First Trust then selects an approximately equally weighted portfolio of the 25 stocks with the best overall ranking based on the two factors. FIXED INCOME PORTFOLIO For the Fund's Fixed Income Portfolio, the Manager may allocate from 0% to 100% of the Fund's assets allocated to the Fixed Income Portfolio to either of two separate strategies: the Total Return Strategy and the Diversified Income Strategy. The Manager may change the allocation between the two Fixed Income strategies at any time if it believes that doing so will increase the Fund's ability to achieve its investment objective. For Fixed Income Portfolio, "Fixed Income Instruments" include:
o Securities issued or guaranteed by the U.S. government, and by its agencies or government-sponsored enterprises, some of which may not be guaranteed by the U.S. Treasury; o Corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; o Mortgage-backed and other asset-backed securities; o Inflation-indexed bonds issued both by governments and corporations; o Structured notes, including hybrid or "indexed" securities, and event-linked bonds; o Loan participations and assignments; o Delayed funding loans and revolving credit facilities; o Bank certificates of deposit, fixed time deposits, and bankers' acceptances; o Repurchase agreements and reverse repurchase agreements; o Debt securities issued by states or local governments and their agencies, authorities, and other government-sponsored enterprises; o Obligations of non-U.S. governments or their subdivisions, agencies, and government-sponsored enterprises; and o Obligations of international agencies or supranational entities.
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 99 TOTAL RETURN STRATEGY The Total Return Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of this strategy normally varies within two years (plus or minus) of the duration of the Lehman Brothers Aggregate Bond Index, which as of March 31, 2007 was 4.5 years. The Total Return Strategy invests primarily in investment grade debt securities, but may invest up to 10% of the total assets allocated to the strategy in high yield securities ("junk bonds") rated B or higher by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Total Return Strategy may invest up to 30% of the total assets allocated to it in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Total Return Strategy may invest up to 15% of its total assets in securities of issuers based in countries with developing (or "emerging market") economies. The Total Return Strategy will normally limit its foreign currency exposure (from non-U.S. dollar-denominated securities or currencies) to 20% of the total assets allocated to it. The Total Return Strategy may invest all of the assets allocated to it in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Total Return Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques, such as buy backs or dollar rolls. The "total return" sought by the strategy consists of income earned on the strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. DIVERSIFIED INCOME STRATEGY The Diversified Income Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of the Diversified Income Strategy normally varies within a three- to eight-year time frame based on PIMCO's forecast for interest rates. The Diversified Income Strategy may invest in a diversified pool of corporate fixed income securities of varying maturities. The Diversified Income Strategy may invest all of its assets in high yield securities ("junk bonds") subject to a maximum of 10% of its total assets in securities rated below B by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Diversified Income Strategy may invest in securities denominated in foreign currencies and U.S.-dollar-denominated securities of foreign issuers. The Diversified Income Strategy may have foreign currency exposure (from non-U.S. dollar denominated securities or currencies) up to 100% of its total assets. In addition, the Diversified Income Strategy may invest without limit in fixed income securities of issuers that are economically tied to emerging securities markets. The Diversified Income Strategy may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Diversified Income Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The total return sought by the Diversified Income Strategy consists of income earned on the Strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. The Fund may engage in frequent trading in order to achieve its investment objective. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 100 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investment held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund attempts to balance the goals of capital appreciation and preservation of capital by investing its assets at a targeted allocation of 75% to 85% in equity securities and 15% to 25% in fixed income securities. The allocation targets are intended to help moderate the impact of equity market volatility on the returns of the Fund by diversifying the Fund. Since the Fund invests a higher proportion of its assets in equity securities and a lower proportion in fixed income securities than either the AZL TargetPLUS Balanced Fund or the AZL TargetPLUS Moderate Fund, the Fund is more subject to the risks associated with the Equity Portfolio and less subject to those associated with the Fixed Income Portfolio than either of the two other similar Funds. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus:: O MARKET RISK O ISSUER RISK O SELECTION RISK O ALLOCATION RISK O STRATEGY SELECTION RISK O INVESTMENT STRATEGY RISK O LIMITED MANAGEMENT RISK O CAPITALIZATION RISK O FOCUSED INVESTMENT RISK O FOREIGN RISK O EMERGING MARKETS RISK O CURRENCY RISK O DIVIDEND RISK O INTEREST RATE RISK O CREDIT RISK O SECURITY QUALITY RISK O LIQUIDITY RISK O DERIVATIVES RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK O LEVERAGING RISK O LICENSE TERMINATION RISK O SHORT SALE RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing for long-term goals, such as retirement o Seeking a short-term investment - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking capital appreciation and are willing to accept o Investing in emergency reserves the higher volatility associated with investing in foreign stocks and bonds - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking growth of capital o Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007, and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 101 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.52% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.29% ----- Total Annual Fund Operating Expenses 1.06% Fee Waiver((2)) 0.17% ----- Net Annual Fund Operating Expenses((2)) 0.89% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.89% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $91 $320 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 102 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL TARGETPLUS(SM) MODERATE FUND - -------------------------------------------------------------------------------- AZL TARGETPLUSSM MODERATE FUND - ------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The AZL TargetPLUS Moderate Fund seeks to provide long-term capital appreciation. The Fund seeks to achieve its goal by investing primarily in a diversified portfolio of equity and fixed income securities. The Fund may invest a significant portion of its total assets in securities of non-U.S. companies. In seeking to achieve the Fund's investment objective, the Manager allocates the Fund's assets between the Fund's equity portfolio (the "Equity Portfolio") and the Fund's fixed income portfolio (the "Fixed Income Portfolio") in pursuit of a balanced investment program. Under normal market conditions, the Manager will allocate 60% to 70% of the Fund's assets to the Equity Portfolio and the remaining balance of the Fund's assets to the Fixed Income Portfolio. This does not, however, restrict the Manager's ability to go above or below this range where the Manager considers it appropriate. First Trust Advisors L.P. ("First Trust") serves as the Subadviser for the Equity Portfolio and Pacific Investment Management Company LLC ("PIMCO") serves as the Subadviser for the Fixed Income Portfolio. In the short term, allocations may vary from the Fund's target asset allocation. The Manager may change the asset allocation between the Fund's two portfolios from time to time if it believes that doing so will increase the Fund's ability to achieve its investment objective. EQUITY PORTFOLIO The Fund's Equity Portfolio invests in the common stocks of companies that are identified by a model based on five separate strategies. o 20% in The Dow(R) Target Dividend Strategy, o 20% in the Value Line(R) Target 25 Strategy, o 20% in the Target Small-Cap 15 Strategy, o 20% in the Global Dividend Target 15 Strategy, and o 20% in the NYSE(R) International Target 25 Strategy The securities for each strategy are selected annually on or about the last business day before each Stock Selection Date. The "Stock Selection Date" will be on or about December 1 of each year. For all of the strategies, First Trust generally follows a buy and hold strategy, trading as soon as practicable to the Stock Selection Date and/or when required by cash flow activity in the Equity Portfolio. First Trust may also trade because of mergers and acquisitions if the original stock is not the surviving company and to reinvest dividends. Between Stock Selection Dates, when cash inflows and outflows require, First Trust purchases and sells common stocks for each of the strategies according to the approximate current percentage relationship among the shares of the stocks. Certain provisions of the 1940 Act, as amended, limit the ability of the Fund to invest more than 5% of the Fund's total assets in the stock of any company that derives more than 15% of its gross revenues from securities related activities ("Securities Related Companies"). If a Securities Related Company is selected by the strategy described above, First Trust may depart from the investment strategy for the Fund's Equity Portfolio only to the extent necessary to maintain compliance with these provisions. Any amount that cannot be allocated to a Securities Related Company because of the 5% limit will be allocated among the remaining portfolio securities in proportion to the percentage relationships determined by the strategy. THE DOW(R) TARGET DIVIDEND STRATEGY This investment strategy looks for common stocks issued by companies that are expected to provide income and have the potential for capital appreciation. The Dow(R) Target Dividend Strategy seeks to achieve its objective by investing approximately equal amounts in the common stock of the 20 companies included in the Dow Jones Select Dividend IndexSM that have the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 103 First Trust selects the common stocks of the 20 companies in the following manner: o Starting with the 100 stocks in the Dow Jones Select Dividend IndexSM, First Trust ranks the stocks from best (1) to worst (100) based on two factors: o Greatest change in return on assets over the last 12 months. An increase in return on assets generally indicates improving business fundamentals. o Price-to-book ratio. A lower, but positive, price-to-book ratio is generally used as an indication of value. o First Trust then selects an approximately equally-weighted portfolio of the 20 stocks with the best overall ranking on the two factors. VALUE LINE(R) TARGET 25 STRATEGY The Value Line(R) Target 25 Strategy seeks to achieve its objective by investing in 25 of the 100 stocks to which Value Line(R) gives a #1 ranking for "Timeliness(TM)" based on the Value Line Investment Survey(R). The 25 stocks are selected on the basis of certain positive financial attributes. Value Line(R) ranks approximately 1,700 stocks, representing approximately 94% of the trading volume on all U.S. stock exchanges. Of these approximately 1,700 stocks, only 100 are given their #1 ranking for TimelinessTM, which reflects Value Line's view of their probable price performance during the next six to 12 months relative to the others. Value Line(R) bases its rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. The 25 stocks are selected annually from the 100 stocks with the #1 ranking on or about the last business day before each Stock Selection Date. Companies that, as of the Stock Selection Date, Value Line(R) has announced will be removed from Value Line's #1 ranking for TimelinessTM will be removed from the universe of securities from which stocks are selected for the Fund. First Trust selects the common stocks of the 25 companies in the following manner: o Starting with the 100 stocks to which Value Line(R) gives the #1 ranking for TimelinessTM, First Trust removes from consideration the stocks of companies considered to be financial companies and the stocks of companies whose shares are not listed on a U.S. securities exchange. o First Trust then ranks the remaining stocks from the best (1) to worst (100) on the following four factors: o 6-month price appreciation, and o 12-month price appreciation, and o Return on assets, and o Price to cash flow. o First Trust adds up the numerical ranks achieved by each company in the above steps and selects the 25 stocks with the lowest sums. The selected stocks are weighted by market capitalization subject to the restriction that no stock will comprise less than approximately 1% or more than 7.5% of the Value Line(R) Target 25 Strategy portion of the portfolio on or about the Stock Selection Date. The securities will be adjusted on a proportional basis to accommodate this constraint. TARGET SMALL-CAP 15 STRATEGY The Target Small-Cap Strategy seeks to achieve its objective by investing in the stocks of 15 small-capitalization companies that have recently exhibited certain positive financial attributes. First Trust selects the stocks of the 15 companies for this strategy in the following manner: o First Trust begins with the stocks of all U.S. corporations that trade on the New York Stock Exchange (NYSE(R)), the American Stock Exchange (AMEX), or the Nasdaq Stock market (Nasdaq) (excluding limited partnerships, American Depositary Receipts, and mineral and oil royalty trusts) on or about the Stock Selection Date. o First Trust then selects companies that have a market capitalization between $500 million and $2.5 billion and whose stock has an average daily trading volume of at least $1 million. o First Trust then selects those stocks with positive three-year sales growth. o From those stocks, First Trust selects the stocks whose most recent 12 month's earnings are positive. o First Trust eliminates any stock whose price has appreciated by more than 75% in the preceding 12 months. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 104 o Finally, First Trust selects the 15 stocks with the greatest price appreciation in the previous 12 months. Each of the stock's weighting in the portfolio is based on its relative market capitalization (highest to lowest). GLOBAL DIVIDEND TARGET 15 STRATEGY The Global Dividend Target 15 Strategy seeks to achieve its objective by investing in the common stocks of certain companies included in the Dow Jones Industrial AverageSM (DJIASM), the Financial Times Ordinary Index (FT30 Index or Financial Times 30 Index), and the Hang Seng IndexSM. This strategy invests in the common stocks of the five companies with the lowest per share stock price of the ten companies in each of the DJIASM, the FT30 Index and the Hang Seng Index, respectively that have the highest indicated annual dividend yields ("Dividend Yields") in their respective index. First Trust selects the common stocks for this strategy in the following manner: o First Trust determines the Dividend Yield on each common stock in the DJIASM, the FT30 Index and the Hang Seng Index; o First Trust determines the ten companies in each of the DJIASM, the FT30 Index, and the Hang Seng Index that have the highest Dividend Yield in the respective index; and o From those companies, First Trust then selects an approximately equally weighted portfolio of the common stocks of the 5 companies in each index with the lowest price per share. NYSE(R) INTERNATIONAL TARGET 25 STRATEGY This strategy invests in the common stocks of 25 companies selected from the stocks included in the NYSE International 100 Index(R). The NYSE International 100 Index(R) consists of the 100 largest non-U.S. stocks trading on the New York Stock Exchange. First Trust selects the stocks of the 25 companies for this strategy in the following manner: o First Trust begins with the stocks included in the Index on or about the Stock Selection Date. o First Trust then screens for liquidity by eliminating companies with average daily trading volume for the prior three months below $300,000. o First Trust then ranks the remaining stocks based on two factors: o Price-to-book ratio, and o Price-to-cash flow ratio. Lower, but positive price-to-book ratios and price-to-cash flow ratios are generally used as an indication of value. o From those companies, First Trust then selects an approximately equally weighted portfolio of the 25 stocks with the best overall ranking based on the two factors. FIXED INCOME PORTFOLIO For the Fund's Fixed Income Portfolio, the Manager may allocate from 0% to 100% of the Fund's assets allocated to the Fixed Income Portfolio to either of two separate strategies: the Total Return Strategy and the Diversified Income Strategy. The Manager may change the allocation between the two Fixed Income strategies at any time if it believes that doing so will increase the Fund's ability to achieve its investment objective. For purposes of the Fixed Income Portfolio, "Fixed Income Instruments" include:
o Securities issued or guaranteed by the U.S. government, and by its agencies or government-sponsored enterprises, some of which may not be guaranteed by the U.S. Treasury; o Corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; o Mortgage-backed and other asset-backed securities; o Inflation-indexed bonds issued both by governments and corporations; o Structured notes, including hybrid or "indexed" securities, and event-linked bonds; o Loan participations and assignments; o Delayed funding loans and revolving credit facilities; o Bank certificates of deposit, fixed time deposits, and bankers' acceptances; o Repurchase agreements and reverse repurchase agreements; o Debt securities issued by states or local governments and their agencies, authorities, and other government-sponsored enterprises; o Obligations of non-U.S. governments or their subdivisions, agencies, and government-sponsored enterprises; and o Obligations of international agencies or supranational entities.
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 105 TOTAL RETURN STRATEGY The Total Return Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of this strategy normally varies within two years (plus or minus) of the duration of the Lehman Brothers Aggregate Bond Index, which as of March 31, 2007 was 4.5 years. The Total Return Strategy invests primarily in investment grade debt securities, but may invest up to 10% of the total assets allocated to the strategy in high yield securities ("junk bonds") rated B or higher by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Total Return Strategy may invest up to 30% of the total assets allocated to it in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Total Return Strategy may invest up to 15% of its total assets in securities of issuers based in countries with developing (or "emerging market") economies. The Total Return Strategy will normally limit its foreign currency exposure (from non-U.S. dollar-denominated securities or currencies) to 20% of the total assets allocated to it. The Total Return Strategy may invest all of the assets allocated to it in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Total Return Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques, such as buy backs or dollar rolls. The "total return" sought by the strategy consists of income earned on the strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. DIVERSIFIED INCOME STRATEGY The Diversified Income Strategy seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified pool of Fixed Income Instruments (as defined above) of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. The average portfolio duration of the Diversified Income Strategy normally varies within a three- to eight-year time frame based on PIMCO's forecast for interest rates. The Diversified Income Strategy may invest in a diversified pool of corporate fixed income securities of varying maturities. The Diversified Income Strategy may invest all of its assets in high yield securities ("junk bonds") subject to a maximum of 10% of its total assets in securities rated below B by Moody's or equivalently rated by S&P(R)or Fitch, or, if unrated, determined by PIMCO to be of comparable quality. The Diversified Income Strategy may invest in securities denominated in foreign currencies and U.S.-dollar-denominated securities of foreign issuers. The Diversified Income Strategy may have foreign currency exposure (from non-U.S. dollar denominated securities or currencies) up to 100% of its total assets. In addition, the Diversified Income Strategy may invest without limit in fixed income securities of issuers that are economically tied to emerging securities markets. The Diversified Income Strategy may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Diversified Income Strategy may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The total return sought by the Diversified Income Strategy consists of income earned on the Strategy's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security. The Fund may engage in frequent trading in order to achieve its investment objective. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 106 - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investment held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund attempts to balance the goals of capital appreciation and preservation of capital by investing its assets at a targeted allocation of 60% to 70% in equity securities and 30% to 40% in fixed income securities. The allocation targets are intended to help moderate the impact of equity market volatility on the returns of the Fund by diversifying the Fund. Since the Fund invests a higher proportion of its assets in equity securities and a lower proportion in fixed income securities than the AZL TargetPLUS Balanced Fund, the Fund is more subject to the risks associated with the Equity Portfolio and less subject to those associated with the Fixed Income Portfolio than the AZL TargetPLUS Balanced Fund. Conversely, the Fund is less subject to the risks associated with the Equity Portfolio and more subject to those associated with the Fixed Income Portfolio than the AZL TargetPLUS Growth Fund because the AZL TargetPLUS Growth Fund allocates a still higher percentage of its assets to equity investments. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O ALLOCATION RISK O LIMITED MANAGEMENT RISK O STRATEGY SELECTION RISK O INVESTMENT STRATEGY RISK O CAPITALIZATION RISK O FOCUSED INVESTMENT RISK O INTEREST RATE RISK O CREDIT RISK O SECURITY QUALITY RISK O LIQUIDITY RISK O DERIVATIVES RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK O LEVERAGING RISK O FOREIGN RISK O EMERGING MARKETS RISK O CURRENCY RISK O DIVIDEND RISK O LICENSE TERMINATION RISK O SHORT SALE RISK O FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Investing in long-term goals, such as retirement o Seeking a short-term investment - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking capital appreciation and are willing to accept o Investing in emergency reserves the higher volatility associated with investing in foreign stocks and bonds - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ o Seeking growth of capital o Seeking safety of principal - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The performance bar chart and table are not presented because the Fund commenced operations on May 1, 2007, and has not had a full calendar year of operations. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 107 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.52% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.37% ----- Total Annual Fund Operating Expenses 1.14% Fee Waiver((2)) 0.25% ----- Net Annual Fund Operating Expenses((2)) 0.89% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 0.89% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS $91 $337 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 108 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) TURNER QUANTITATIVE SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) TURNER QUANTITATIVE SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Turner Quantitative Small Cap Growth Fund is long-term growth of capital. Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in common stocks and other equity securities of U.S. companies with small market capitalizations. The Fund will provide notice to shareholders at least 60 days prior to any change to this policy. Small capitalization companies are defined for this purpose as companies with market capitalizations at the time of purchase in the range of the market capitalizations of companies included in the Russell 2000 Growth Index. These securities may be traded over the counter or listed on an exchange. The Subadviser selects securities for the Fund's portfolio that it believes, based on a quantitative model, have strong earnings growth potential. The Fund's investment strategy is to invest in companies that receive high rankings from the Subadviser's proprietary quantitative model. The model seeks to identify attractive small cap growth securities based on such growth characteristics as superior earnings prospects, reasonable valuations, and other fundamental characteristics believed to have predictive value. The Subadviser will seek to maintain sector weightings that approximate those of the Russell 2000 Growth Index, the Fund's benchmark. Generally, the Subadviser sells securities when a stock's ranking declines relative to its peers. The Fund may invest in foreign securities listed on U.S. exchanges and in initial public offerings. The Fund may engage in frequent trading to achieve its investment objective. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate, and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: o MARKET RISK O ISSUER RISK o MANAGEMENT RISK o CAPITALIZATION RISK o GROWTH STOCKS RISK o FOREIGN RISK o FREQUENT TRADING A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 109
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - -------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Seeking to avoid market risk and volatility - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Seeking long-term growth of capital O Unwilling to accept the greater risks associated with small capitalization companies - -------------------------------------------------------------- ------------------------------------------------------------ - -------------------------------------------------------------- ------------------------------------------------------------ O Willing to accept the risk of investing in smaller O Investing for the short-term or investing emergency capitalization stocks for the potential reward of reserves greater capital - -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION* The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2006: 11.31%, 2007: 6.07%] * Prior to June 26, 2007, this Fund was subadvised by ClearBridge Advisors, LLC and was known as the AZL LMP Small Cap Growth Fund. HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2006) 14.34% Lowest (Q2, 2006) -10.90% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 110
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Turner Quantitative Small Cap Growth Fund 4/29/2005 6.07% 11.13% Russell 2000 Growth Index 7.05% 14.89%
The Fund's performance is compared to the Russell 2000 Growth Index, an unmanaged index that represents the performance of certain securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.85% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 1.23% Fee Waiver((2)) 0.00% ----- Net Annual Fund Operating Expenses((2)) 1.23% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.35% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $125 $390 $676 $1,489 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 111 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN COMSTOCK FUND - -------------------------------------------------------------------------------- AZL(R) VAN KAMPEN COMSTOCK FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Comstock Fund is to seek capital growth and income through investing in equity securities, including common stocks, preferred stocks and convertible securities. In pursuit of its objective, the Fund normally invests at least 80% of its net assets plus any borrowings for investment purposes in common stocks. In selecting securities for investment, the Fund focuses primarily on the security's potential for capital growth and income. The Fund emphasizes a "value" style of investing in seeking well-established, undervalued companies. The Fund's Subadviser generally seeks to identify companies that are undervalued and have identifiable factors that might lead to improved valuations. This catalyst could come from within the company in the form of new management, operational enhancements, restructuring or reorganization. It could also be an external factor, such as an improvement in industry conditions or a regulatory change. The Fund may invest in issuers of small-, medium- or large-capitalization companies. The Fund may dispose of a security whenever, in the opinion of the Fund's Subadviser, factors indicate it is desirable to do so. Such factors include changes in economic or market factors in general or with respect to a particular industry, a change in the market trend or other factors affecting an individual security, change in the relative market performance or appreciation possibilities offered by individual securities and other circumstances bearing on the desirability of a given investment. The Fund may invest up to 25% of its total assets in securities of foreign issuers, including emerging market securities. The Fund may purchase or sell certain derivative instruments, such as options, futures and options on futures, for hedging and cash management purposes. The Fund may invest up to 10% of its total assets in real estate investment trusts (REITs). For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O VALUE STOCKS RISK O CAPITALIZATION RISK O FOREIGN RISK O EMERGING MARKETS RISK O REAL ESTATE INVESTMENTS RISK O ISSUER RISK O DERIVATIVES RISK O CONVERTIBLE SECURITIES RISK O DIVIDEND RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 112
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ----------------------------------------------------------------- ---------------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ----------------------------------------------------------------- ---------------------------------------------------------- - ----------------------------------------------------------------- ---------------------------------------------------------- O Seeking capital growth and income over the long term O Seeking safety of principal - ----------------------------------------------------------------- ---------------------------------------------------------- - ----------------------------------------------------------------- ---------------------------------------------------------- O Investing for long-term goals, such as retirement O Investing for the short-term or investing emergency reserves - ----------------------------------------------------------------- ---------------------------------------------------------- - ----------------------------------------------------------------- ---------------------------------------------------------- O Seeking to add a value stock component to your portfolio O Looking primarily for regular income - ----------------------------------------------------------------- ---------------------------------------------------------- - ----------------------------------------------------------------- ---------------------------------------------------------- O Can withstand volatility in the value of their investment - ----------------------------------------------------------------- ----------------------------------------------------------
- -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -19.87, 2003: 30.53%, 2004: 17.12%, 2005: 3.92%, 2006: 15.76%, 2007: -2.22%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 17.73% Lowest (Q3, 2002) -18.94%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Van Kampen Comstock Fund 5/1/2001 -2.22% 12.45% 4.72% Russell 1000 Value Index -0.17% 14.63% 7.29%
The Fund's performance is compared to the Russell 1000 Value Index, an unmanaged index that measures the performance of the certain securities found in the Russell universe with less-than-average growth orientation and low price-to-book and earnings ratios. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 113 Fund's performance reflects the deduction of fees for services provided by the Fund. Investors cannot invest directly in an index, although they can invest in its underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.72% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.08% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.08% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.75% on the first $100 million of assets, 0.70% on assets from $100 million to $500 million and 0.65% on assets over $500 million through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $110 $343 $595 $1,317 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 114 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- AZL(R) VAN KAMPEN EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Equity and Income Fund is to seek the highest possible income consistent with safety of principal, with long-term growth of capital as an important secondary objective. Under normal market conditions, the Fund invests at least 65% of its total assets in income-producing equity securities. The Subadviser seeks to achieve the Fund's investment objectives by investing primarily in income-producing equity instruments (including common stocks, preferred stocks and convertible securities) and investment grade quality debt securities. The Fund emphasizes a value style of investing, seeking well-established, undervalued companies that the Fund's Subadviser believes offer the potential for income with safety of principal and long-term growth of capital. At times, the Subadviser may emphasize certain sectors. Portfolio securities are typically sold when the assessments of the Fund's Subadviser of the income or growth potential of such securities materially change. The Fund may invest up to 15% of its total assets in REITs and up to 25% of its total assets in securities of foreign issuers, including emerging market securities. The Fund may purchase and sell certain derivative instruments, such as options, futures contracts and options on futures contracts, for various portfolio management purposes, including to earn income, facilitate portfolio management and mitigate risks. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O VALUE STOCKS RISK O FOREIGN RISK O EMERGING MARKETS RISK O CONVERTIBLE SECURITIES RISK O CREDIT RISK O DERIVATIVES RISK O MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK O INCOME RISK O CALL RISK O INDUSTRY SECTOR RISK O REAL ESTATE INVESTMENTS RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ---------------------------------------------------------------------- ----------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ---------------------------------------------------------------------- ----------------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------------- O Seeking a high level of income O Seeking a short-term investment - ---------------------------------------------------------------------- ----------------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------------- O Seeking to grow your capital over the long-term O Investing in emergency reserves - ---------------------------------------------------------------------- ----------------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------------- O Able to withstand volatility in the value of the shares of the Fund - ---------------------------------------------------------------------- ----------------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------------- O Looking for a fund that emphasizes a value style of investing and invests primarily in income-producing equity instruments and debt securities - ---------------------------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 115 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2005: 6.75%, 2006: 12.52%, 2007: 3.07%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2007) 5.42% Lowest (Q4, 2007) -2.03%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Van Kampen Equity and Income Fund 5/3/2004 3.07% 8.56% S&P 500 Index 5.49% 10.02% Lehman Brothers U.S. Aggregate Bond Index 6.97% 4.93%
Based upon the recommendation of the Manager, the Fund has changed its comparative market index from the Russell 1000(R) Value Index to the S&P 500(R) Index and added the Lehman Brothers U.S. Aggregate Bond Index to provide a more appropriate market comparison. The Russell 1000(R) Value Index will be shown in the comparison of the Fund's performance during the first year following the change. However, after that, the Fund will compare its performance only to the S&P 500(R) Index while also showing the performance of the Lehman Brothers U.S. Aggregate Bond Index. The Fund's performance is compared to the S&P 500(R) Index and the Lehman Brothers U.S. Aggregate Bond Index. The S&P 500(R) Index is a measure of the U.S. Stock market as a whole. The Lehman Brothers U.S. Aggregate Bond Index is a market-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The indices are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 116 the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in its underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.75% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.11% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.11% ===== (1) Effective December 1, 2007, the Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.70% on the first $100 million, 0.675% on the next $100 million, and 0.65% thereafter through April 30, 2009 If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $113 $353 $612 $1,352 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 117 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN GLOBAL FRANCHISE FUND - -------------------------------------------------------------------------------- AZL(R) VAN KAMPEN GLOBAL FRANCHISE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Global Franchise Fund is long-term capital appreciation. The Fund seeks to achieve its investment objective by investing primarily in a portfolio of equity securities of issuers located throughout the world that it believes have, among other things, resilient business franchises and growth potential. The Fund's Subadviser emphasizes individual stock selection and seeks to identify undervalued securities of issuers located throughout the world, including both developed and emerging market countries, that meet its investment criteria. Under normal market conditions, the Subadviser invests at least 65% of its total assets in securities of issuers from at least three different countries, which may include the United States. The Subadviser seeks to invest in companies that it believes have resilient business franchises, strong cash flows, modest capital requirements, capable management, and growth potential. Securities are selected on a global basis with a strong bias towards value. The franchise focus of the Fund is based on the Subadviser's belief that the intangible assets underlying a strong business franchise (such as patents, copyrights, brand names, licenses or distribution methods) are difficult to create or to replicate and that carefully selected franchise companies can yield above-average potential for long-term capital appreciation. The Subadviser relies on its research capabilities, analytical resources and judgment to identify and monitor franchise businesses meeting its investment criteria. The Subadviser believes that the number of issuers with strong business franchises meeting its criteria may be limited, and accordingly, the Fund may concentrate its holdings in a relatively small number of companies but may invest up to 25% in a single issuer. The Subadviser generally considers selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria or that replacing the holding with another investment may improve the Fund's valuation and/or quality. The Subadviser may invest in certain derivative instruments, such as options, futures, options on futures and currency related transactions, and may use certain techniques, such as hedging, to manage the risks of investing in foreign and emerging markets. However, the Subadviser cannot guarantee that it will be practical to hedge these risks in certain markets or under particular conditions or that it will succeed in doing so. The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities of a limited number of issuers or it holds a large portion of its assets in a few issuers, the value of its shares will be more susceptible to any single economic, political or regulatory event affecting those issuers or their securities than shares of a diversified fund. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O SELECTION RISK O FOREIGN RISK O EMERGING MARKETS RISK O VALUE STOCKS RISK O CAPITALIZATION RISK O FOCUSED INVESTMENT RISK O ISSUER RISK O DERIVATIVES RISK O CURRENCY RISK O NON-DIVERSIFICATION RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 118
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ------------------------------------------------------------------ --------------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Seeking capital appreciation over the long-term O Seeking safety of principal - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Are not seeking current income from your investment O Investing for the short-term or investing emergency reserves - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Are willing to accept the risks and uncertainties of O Looking primarily for regular income investing in a portfolio of equity securities of issuers throughout the world, including emerging market countries - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Can withstand the volatility in the value of your shares in the Fund - ------------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------------ --------------------------------------------------------- O Investing for long-term goals, such as retirement - ------------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2004: 12.21%, 2005: 11.64%, 2006: 21.25%, 2007: 9.82%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q4, 2004) 12.03% Lowest (Q3, 2004) -4.77% - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 119
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED DECEMBER INCEPTION 31, 2007 SINCE INCEPTION AZL Van Kampen Global Franchise Fund 5/1/2003 9.82% 16.83% MSCI World Index 9.04% 17.44%
The Fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged market capitalization-weighted equity index which monitors the performance of stocks from around the world. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.95% Distribution (12b-1) Fees((2)) 0.25% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.32% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.32% ===== (1) Effective December 1, 2007, the Manager and the Fund entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.95% on the first $100 million, 0.90% on the next $100 million, and 0.85% thereafter through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.39% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $134 $418 $723 $1,590 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 120 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN GLOBAL REAL ESTATE FUND - -------------------------------------------------------------------------------- AZL(R) VAN KAMPEN GLOBAL REAL ESTATE FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Global Real Estate Fund is to provide income and capital appreciation. The Subadviser seeks a combination of current income and capital appreciation by investing primarily in equity securities of companies in the real estate industry located throughout the world, including real estate operating companies (REOCs), REITs and similar entities established outside the United States (foreign real estate companies). The Fund will invest primarily in companies located in the developed countries of North America, Europe and Asia, but may also invest in emerging markets. The Subadviser's approach emphasizes a bottom-up driven investment strategy with a global top-down country allocation. The Subadviser actively manages the Fund using a combination of top-down and bottom-up methodologies. The top-down asset allocation overlay involves the overweighting and underweighting of each of the regions contained in the FTSE/NAREIT Global Real Estate Index by focusing on key regional criteria, which include demographic and macroeconomic considerations (for example, population, employment, household information and income). The Subadviser employs a value-driven approach to bottom-up security selection, which emphasizes underlying asset values, values per square foot and property yields. In seeking an optimal matrix of regional and property market exposure, the Subadviser considers broad demographic and macroeconomic factors as well as criteria such as space demand, new construction and rental patterns. The Subadviser generally considers selling a portfolio holding when it determines that the holding is less attractive based on a number of factors, including changes in the holding's share price, earnings prospects relative to its peers and/or business prospects. Under normal circumstances, at least 80% of the Fund's assets will be invested in equity securities of companies in the real estate industry, including REOCs, REITs, and foreign real estate companies. The Fund will provide notice to shareholders at least 60 days prior to any change in this policy. The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities of a limited number of issuers or it holds a large portion of its assets in a few issuers, the value of its shares will be more susceptible to any single economic, political or regulatory event affecting those issuers or their securities than shares of a diversified fund. A company is considered to be in the real estate industry if it (i) derives at least 50% of its revenues or profits from the ownership, construction, management, financing or sale of residential, commercial or industrial real estate or (ii) has at least 50% of the fair market value of its assets invested in residential, commercial or industrial real estate. For more information about Temporary Defensive Positions, see "More About the Funds." - ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O REAL ESTATE INVESTMENT RISK O FOREIGN RISK O EMERGING MARKETS RISK O NON-DIVERSIFICATION RISK O ISSUER RISK O SELECTION RISK O CURRENCY RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 121 - -------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? In light of the Fund's investment objectives and principal investment strategies, the Fund may be appropriate for investors who: O Seek to grow their capital over the long-term O Are willing to take on the increased risks of an investment concentrated in securities of companies that operate within the same industry O Can withstand volatility in the value of their shares of the Fund O Wish to add to their investment portfolio a fund that invests primarily in companies operating in the real estate industry. An investment in the Fund is not a deposit of any bank or other insured depository institution. An investment in the Fund is not insured or guaranteed by the FDIC or any other government agency. An investment in the Fund may not be appropriate for all investors. The Fund is not intended to be a complete investment program, and investors should consider their long-term investment goals and financial needs when making an investment decision about the Fund. An investment in the Fund is intended to be a long-term investment, and the Fund should not be used as a trading vehicle. - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC: 2007: -8.68%] - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 122 HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q1, 2007) 7.12% Lowest (Q4, 2007) -11.43%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED SINCE INCEPTION DECEMBER 31, 2007 INCEPTION AZL Van Kampen Global Real Estate Fund 5/1/2006 -8.68% 6.51% FTSE EPRA/NAREIT Global Real Estate Index -6.96% 9.74%
The Fund's performance is compared to the Financial Times London Stock Exchange "FTSE" European Public Real Estate Association "EPRA"/ National Association of Real Estate Investment Trusts "NAREIT" Global Real Estate Index, an unmanaged index that is designed to represent general trends in eligible real estate stocks worldwide. Relevant real estate activities are defined as the ownership, disposure and development of income producing real estate. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee 0.90% Distribution (12b-1) Fees(1) 0.25% Other Expenses 0.22% ----- Total Annual Fund Operating Expenses 1.37% Fee Waiver((2)) 0.02% ----- Net Annual Fund Operating Expenses((2)) 1.35% ===== (1) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (2) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.35% through April 30, 2009 The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5YEARS 10 YEARS $137 $432 $748 $1,645 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 123 - ------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN GROWTH AND INCOME FUND - ------------------------------------------------------------------------------- AZL(R) VAN KAMPEN GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Growth and Income Fund is income and long-term growth of capital. The Fund normally invests at least 65% of its total assets in income-producing equity securities, including common stocks and convertible securities although investments are also made in non-convertible preferred stocks and debt securities rated "investment grade," which are securities rated within the four highest grades assigned by S&P(R) or by Moody's. In selecting securities for investment the Fund will focus primarily on the security's potential for income and capital growth. The Fund's Subadviser may focus on larger capitalization companies which it believes possess characteristics for improved valuation. The Fund's Subadviser looks for catalysts for change that may positively impact a company, such as new management, industry development or regulatory change. The aim is to uncover these catalysts for change, and then benefit from potential stock price appreciation of the change taking place at the company. Although focusing on larger capitalization companies, the Fund may invest in securities of small- or medium-sized companies. The Fund may dispose of a security whenever, in the opinion of the Fund's Subadviser, factors indicate it is desirable to do so. Such factors include change in economic or market factors in general or with respect to a particular industry, a change in the market trend or other factors affecting an individual security, changes in the relative market performance or appreciation possibilities offered by individual securities and other circumstances bearing on the desirability of a given investment. The Fund may invest up to 15% of its total assets in REITs and up to 25% of its total assets in securities of foreign issuers, including emerging market securities. The Fund may purchase and sell certain derivative instruments, such as options, futures and options on futures, for hedging and cash management purposes. For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O CAPITALIZATION RISK O FOREIGN RISK O EMERGING MARKETS RISK O CREDIT RISK O INTEREST RATE RISK O DERIVATIVES RISK O REAL ESTATE INVESTMENTS RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI.
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - --------------------------------------------------------------- ------------------------------------------------------------ CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Investing for long-term goals, such as retirement O Pursuing an aggressive high growth investment strategy - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Seeking income and growth of capital O Seeking a stable share price - --------------------------------------------------------------- ------------------------------------------------------------ - --------------------------------------------------------------- ------------------------------------------------------------ O Pursuing a balanced approach to investments in both O Investing emergency reserves growth and income producing securities - --------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 124 - -------------------------------------------------------------------------------- PERFORMANCE INFORMATION The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The performance of the Fund will vary from year to year. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -14.71%, 2003: 27.46%, 2004: 13.82%, 2005: 9.24%, 2006: 15.90%, 2007: 2.64%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 15.92% Lowest (Q3, 2002) -17.75%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Van Kampen Growth and Income Fund 5/1/2001 2.64% 13.52% 6.99% Russell 1000 Value Index -0.17% 14.63% 7.29%
The Fund's performance is compared to the Russell 1000 Value Index, an unmanaged index that measures the performance of the certain securities found in the Russell universe with less-than-average growth orientation and low price-to-book and earnings ratios. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 125 - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The tables below only reflect Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.75% Distribution (12b-1) Fees(2) 0.25% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 1.09% Fee Waiver((3)) 0.00% ----- Net Annual Fund Operating Expenses(1)((3)) 1.09% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.675% on the first $100 million of assets and 0.65% on assets over $100 million through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower. (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.20% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $111 $347 $601 $1,329 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 126 - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AZL(R) VAN KAMPEN MID CAP GROWTH FUND - -------------------------------------------------------------------------------- AZL(R) VAN KAMPEN MID CAP GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of the AZL Van Kampen Mid Cap Growth Fund is to seek capital growth. The Fund normally invests at least 80% of its net assets plus any borrowings for investment purposes in common stocks and other equity securities of mid capitalization growth companies. The Fund considers mid capitalization companies to be those that, at the time of purchase, have market capitalizations within the range of the Russell MidCap Growth Index, which was between $624 million and $42 billion at December 31, 2007. The Fund may also invest in preferred stocks and securities convertible into common stocks or other equity securities. The Fund will provide notice to shareholders at least 60 days prior to any change in this mid capitalization policy. The Fund seeks to invest in high quality companies it believes have sustainable competitive advantages and the ability to redeploy capital at high rates of return. The Fund typically favors companies with rising returns on invested capital, above average business visibility, strong free cash flow generation and attractive risk/reward. The Fund generally considers selling an investment when it determines the company no longer satisfies its investment criteria. The Fund may purchase and sell certain derivative instruments, such as options, futures and options on futures, for hedging and cash management purposes. In addition, the Fund may enter into various currency transactions, such as currency forward contracts and currency futures contracts. The Fund may invest up to 25% of its total assets in securities of foreign companies, including emerging market securities, primarily through ownership of depositary receipts. The Fund may invest up to 10% of its total assets in real estate investment trusts (REITs). For temporary defensive purposes, or when cash is temporarily available, the Fund may invest in investment grade, short-term debt instruments, including government, corporate and money market securities. If the Fund invests substantially in such instruments, it may not be pursuing its principal investment strategies and may not achieve its investment objective. For more information about Temporary Defensive Positions, see "More About the Funds." - ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in value of the investments held by the Fund. You may lose money by investing in the Fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will achieve its objective. The Fund faces the following general risks which are described in the section "Principal Investment Risks" later in this prospectus: O MARKET RISK O ISSUER RISK O SELECTION RISK O GROWTH STOCKS RISK O CAPITALIZATION RISK O FOREIGN RISK O EMERGING MARKETS RISK O REAL ESTATE INVESTMENTS RISK O DERIVATIVES RISK O CURRENCY RISK A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is included in the SAI. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 127
- ---------------------------------------------------------------------------------------------------------- WHO MAY WANT TO INVEST? - ---------------------------------------------------------- ----------------------------------------------------------------- CONSIDER INVESTING IN THIS FUND IF YOU ARE: THIS FUND MAY NOT BE APPROPRIATE FOR SOMEONE: - ---------------------------------------------------------- ----------------------------------------------------------------- - ---------------------------------------------------------- ----------------------------------------------------------------- O Seeking capital growth over the long-term O Seeking safety of principal - ---------------------------------------------------------- ----------------------------------------------------------------- - ---------------------------------------------------------- ----------------------------------------------------------------- O Not seeking current income from their investment O Investing for the short-term or investing emergency reserves - ---------------------------------------------------------- ----------------------------------------------------------------- - ---------------------------------------------------------- ----------------------------------------------------------------- O Able to withstand substantial volatility in the O Looking primarily for regular income value of their shares of the Fund - ---------------------------------------------------------- ----------------------------------------------------------------- - ---------------------------------------------------------- ----------------------------------------------------------------- O Wishing to add to their investment portfolio a fund that emphasizes a growth style of investing in common stocks and other equity securities - ---------------------------------------------------------- -----------------------------------------------------------------
The following bar chart and table provide an indication of the risks of an investment in the Fund by showing changes in its performance from year to year and by showing how the Fund's average annual returns for one year, five years and since its inception compare with those of a broad measure of market performance. Both the bar chart and the table assume reinvestment of dividends and distributions, and reflect fee waivers. Without fee waivers, the Fund's performance would have been lower. The Fund's performance does not reflect the cost of insurance and separate account charges which are imposed under your variable annuity contract or variable life insurance policy. If they were included, performance would be reduced. Past performance does not indicate how the Fund will perform in the future. PERFORMANCE BAR CHART AND TABLE [BAR CHART GRAPHIC - 2002: -24.25%, 2003: 28,43%, 2004: 21.23%, 2005: 17.54%, 2006: 9.21%, 2007: 22.19%] HIGHEST AND LOWEST QUARTER RETURNS (FOR PERIODS SHOWN IN THE BAR CHART) Highest (Q2, 2003) 13.46% Lowest (Q3, 2002) -15.72%
AVERAGE ANNUAL TOTAL RETURNS ONE YEAR ENDED FIVE YEARS ENDED INCEPTION DECEMBER 31, 2007 DECEMBER 31, 2007 SINCE INCEPTION AZL Van Kampen Mid Cap Growth Fund 5/1/2001 22.19% 19.55% 9.01% Russell MidCap Growth Index 11.43% 17.90% 6.38%
The Fund's performance is compared to the Russell MidCap Growth Index, an unmanaged index which measures the performance individual securities found in the Russell MidCap universe with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 128 fees. The Fund's performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index, although they can invest in the underlying securities. - -------------------------------------------------------------------------------- FEES AND EXPENSES ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) The following expense table indicates the estimated expenses that an investor will incur as a shareholder of the Fund during the current fiscal year. These expenses are reflected in the share price of the Fund. The table below only reflects Fund expenses. Since the Funds are offered exclusively for variable contracts, there are also additional separate account expenses that would apply. If applicable separate account expenses were included, overall expenses would be higher. Management Fee(1) 0.80% Distribution (12b-1) Fees(2) 0.25% Other Expenses((3)) 0.12% ----- Total Annual Fund Operating Expenses 1.17% Fee Waiver((4)) 0.00% ----- Net Annual Fund Operating Expenses(1)((4)) 1.17% ===== (1) The Manager and the Fund have entered into a written agreement whereby the Manager has voluntarily reduced the management fee to 0.80% on the first $100 million of assets and 0.75% on assets above $100 million through April 30, 2009. If this temporary fee reduction were reflected in the table, the Net Annual Fund Operating Expense would be lower.] (2) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays Allianz Life Financial Services, LLC, the Fund's distributor, an annual fee of up to 0.25% of average daily net assets as payment for distributing its shares and providing shareholder services. (3) Other expenses have been restated to reflect current expenses. (4) The Manager and the Fund have entered into a written contract limiting operating expenses to 1.30% through April 30, 2009. The Fund is authorized to reimburse the Manager for management fees previously waived and/or for the cost of Other Expenses paid by the Manager provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to fees paid or reimbursements made by the Manager within the three fiscal years prior to the date of such reimbursement. To the extent that such reimbursements to the Manager are expected in the upcoming year, the amount of the reimbursements, if any, is included in the financial statements in the Fund's shareholder reports and is reflected in Other Expenses in the table above. Please see the section of this prospectus "Distribution (12b-1) Fees" for more information. Also, see the contract prospectus for more information regarding the additional fees and expenses associated with your variable contract. EXPENSE EXAMPLE Use the following table to compare fees and expenses of the Fund to other investment companies. It illustrates the amount of fees and expenses an investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3) redemption at the end of each time period, and (4) no changes in the Fund's total operating expenses. It does not reflect the effect of any fee or expense waivers. It also does not reflect separate account or insurance contract fees and charges. If it did, the costs shown would be higher. An investor's actual costs may be different. 1 YEAR 3 YEARS 5 YEARS 10 YEARS $119 $372 $644 $1,420 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 129 - -------------------------------------------------------------------------------- MORE ABOUT THE FUNDS - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT RISKS The following are general risks of investing in the Funds:
----------------------------------------------------------------------------- ALLOCATION RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- O AZL TargetPLUS Balanced Fund The risk that the Manager could allocate assets in a manner which results in the Fund underperforming other funds with similar investment objectives. Because the Manager has discretion to allocate Fund assets between the two underlying portfolios, and O AZL TargetPLUS Growth Fund because the underlying portfolios represent different asset O AZL TargetPLUS Moderate Fund classes, each portfolio is subject to different levels and combinations of risk, depending on the Fund's exact asset allocation. --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- CALL RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Legg Mason Value Fund If interest rates fall, it is possible that issuers of callable securities held by the Fund will call or prepay their securities before their maturity dates. In this event, the proceeds from the called securities would most likely be reinvested by the Fund in o AZL Van Kampen Equity and Income Fund securities bearing the new, lower interest rates, resulting in a possible decline in the Fund's income and distributions to shareholders and termination of any conversion option on convertible securities. --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- CAPITALIZATION RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Columbia Technology Fund To the extent the Fund invests significantly in small or o AZL Dreyfus Premier Small Cap Value Fund mid-capitalization companies, it may have capitalization risk. o AZL First Trust Target Double Play Fund These companies may present additional risk because they have o AZL Franklin Small Cap Value Fund less predictable earnings or no earnings, more volatile share o AZL Legg Mason Value Fund prices and less liquid securities than large capitalization o AZL NACM International Fund companies. These securities may fluctuate in value more than those of larger, more established companies and, as a group, may o AZL Neuberger Berman Regency Fund suffer more severe price declines during periods of generally o AZL OCC Opportunity Fund declining stock prices. The shares of smaller companies tend to o AZL OCC Value Fund trade less frequently than those of larger, more established o AZL Oppenheimer Global Fund companies, which can adversely affect the price of smaller o AZL Oppenheimer International Growth Fund companies' securities and the Fund's ability to sell them when o AZL Schroder Emerging Markets Equity Fund the portfolio manager deems it appropriate. These companies may o AZL Schroder International Small Cap Fund have limited product lines, markets, or financial resources, or o AZL Small Cap Stock Index Fund may depend on a limited management group. The value of some of o AZL TargetPLUS Balanced Fund the Fund's investments will rise and fall based on investor o AZL TargetPLUS Equity Fund perception rather than economic factors. o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 130 ----------------------------------------------------------------------------------------------------------------------- CONVERTIBLE SECURITIES RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund The values of the convertible securities in which the Fund may o AZL Columbia Technology Fund invest also will be affected by market interest rates, the risk o AZL Jennison 20/20 Focus Fund that the issuer may default on interest or principal payments o AZL Jennison Growth Fund and the value of the underlying common stock into which these o AZL Legg Mason Growth Fund securities may be converted. Specifically, since these types of o AZL Legg Mason Value Fund convertible securities pay fixed interest and dividends, their o AZL LMP Large Cap Growth Fund values may fall if market interest rates rise, and rise if o AZL OCC Opportunity Fund market interest rates fall. Additionally, an issuer may have o AZL OCC Value Fund the right to buy back certain of the convertible securities at a o AZL Oppenheimer International Growth Fund time and at a price that is unfavorable to the Fund. o AZL Schroder Emerging Markets Equity Fund o AZL Schroder International Small Cap Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- COUNTRY/ REGIONAL RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Schroder International Small Cap Fund Local events, such as political upheaval, financial troubles, or natural disasters, may weaken a country's or a region's securities markets. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, its performance may be hurt disproportionately by the poor performance of its investments in that area. Country/regional risk is especially high in emerging markets. --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- CREDIT RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Jennison 20/20 Focus Fund Credit risk is the chance that the issuer of a debt security o AZL LMP Large Cap Growth Fund will fail to repay interest and principal in a timely manner, o AZL Legg Mason Value Fund reducing the Fund's return. Also, an issuer may suffer adverse o AZL NACM International Fund changes in financial condition that could lower the credit o AZL OCC Opportunity Fund quality and liquidity of a security, leading to greater o AZL OCC Value Fund volatility in the price of the security and the Fund's shares. o AZL Oppenheimer Main Street Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Growth and Income Fund ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ The Fund could lose money if the issuer or the guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement, or a loan of portfolio securities, is unwilling or unable to make payments of principal o AZL PIMCO Fundamental IndexPLUS Total Return and/or interest in a timely manner, or to otherwise honor its Fund obligations. Securities are subject to varying degrees of o AZL TargetPLUS Balanced Fund credit risk, which are often reflected in their credit ratings. o AZL TargetPLUS Growth Fund Those Funds that are permitted to invest in municipal bonds are o AZL TargetPLUS Moderate Fund subject to the risk that litigation, legislation, or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer's ability to make payments of principal and/or interest. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 131 ---------------------------------------------------- ------------------------------------------------------------------ Although credit risk is low because the Fund invests only in o AZL Money Market Fund high quality obligations, if an issuer fails to pay interest or repay principal, the value of the Fund's assets could decline. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- CURRENCY RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund Funds that invest in securities that trade in, and receive o AZL Columbia Technology Fund revenues in, foreign currencies are subject to the risk that o AZL Davis NY Venture Fund those currencies will decline in value relative to the U.S. o AZL Dreyfus Founders Equity Growth Fund dollar, or, in the case of hedging positions, that the U.S. o AZL First Trust Target Double Play Fund dollar will decline in value relative to the currency being o AZL Franklin Small Cap Value Fund hedged. Currency rates in foreign countries may fluctuate o AZL Jennison 20/20 Focus Fund significantly over short periods of time for a number of o AZL Jennison Growth Fund reasons, including changes in interest rates, intervention (or o AZL Legg Mason Growth Fund failure to intervene) by the U.S. or foreign governments, o AZL Legg Mason Value Fund central banks, or supranational authorities, such as the o AZL LMP Large Cap Growth Fund International Monetary Fund, or by the imposition of currency o AZL NACM International Fund controls or other political developments in the U.S. or abroad. o AZL Neuberger Berman Regency Fund As a result, the Fund's investments with exposure to foreign o AZL OCC Opportunity Fund currency fluctuations may decline in value (in terms of the U.S. o AZL OCC Value Fund dollar) and reduce the returns of the Fund. o AZL Oppenheimer Global Fund o AZL Oppenheimer International Growth Fund o AZL PIMCO Fundamental IndexPLUS Total Return Fund o AZL Schroder Emerging Markets Equity Fund o AZL Schroder International Small Cap Fund o AZL TargetPLUS Balanced Fund o AZL TargetPLUS Equity Fund o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Global Real Estate Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- CYCLICAL OPPORTUNITIES RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Oppenheimer Global Fund The Fund may seek to take advantage of changes in the business cycle by investing in companies that are sensitive to those changes if the Subadviser believes they have growth potential. The Fund might sometimes seek to take tactical advantage of short-term market movements or events affecting particular issuers or industries. There is a risk that if the event does not occur as expected, the value of the stock could fall, which in turn could depress the Fund's share prices. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 132 ----------------------------------------------------------------------------------------------------------------------- DERIVATIVES RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund The AZL PIMCO Fundamental IndexPLUS Total Return Fund, the AZL o AZL Columbia Technology Fund TargetPLUS Balanced Fund, the AZL TargetPLUS Growth Fund, and o AZL Dreyfus Premier Small Cap Value Fund the AZL TargetPLUS Moderate Fund invest in derivatives. The o AZL Jennison 20/20 Focus Fund other Funds listed may invest in derivatives. A derivative is a o AZL Jennison Growth Fund financial contract whose value depends on, or is derived from, o AZL Legg Mason Value Fund the value of an underlying asset, reference rate, or risk. o AZL LMP Large Cap Growth Fund Funds typically use derivatives as a substitute for taking a o AZL NACM International Fund position in the underlying asset and/or as part of a strategy o AZL OCC Opportunity Fund designed to reduce exposure to other risks, such as interest o AZL OCC Value Fund rate or currency risk. Funds may also use derivatives for o AZL Oppenheimer Global Fund leverage, in which case their use would involve leveraging o AZL Oppenheimer International Growth Fund risk. Use of derivative instruments involves risks different o AZL PIMCO Fundamental IndexPLUS Total Return from, or possibly greater than, the risks associated with Fund investing directly in securities and other traditional o AZL S&P 500 Index Fund investments. Derivatives are subject to a number of other o AZL Schroder Emerging Markets Equity Fund risks, such as liquidity risk, interest rate risk, market risk, o AZL Schroder International Small Cap Fund credit risk, and management risk. Derivatives also involve the o AZL Small Cap Index Fund risk of mispricing or improper valuation and the risk that o AZL TargetPLUS Balanced Fund changes in the value may not correlate perfectly with the o AZL TargetPLUS Growth Fund underlying asset, rate, or index. Using derivatives may result o AZL TargetPLUS Moderate Fund in losses, possibly in excess of the principal amount invested. o AZL Turner Quantitative Small Cap Growth Fund Also, suitable derivative transactions may not be available in o AZL Van Kampen Comstock Fund all circumstances. The counterparty to a derivatives contract o AZL Van Kampen Equity and Income Fund could default. o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- DIVIDEND RISK ----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------------------- o AZL Dreyfus Founders Equity Growth Fund There is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that if o AZL First Trust Target Double Play Fund declared, they will either remain at current levels or increase o AZL OCC Value Fund over time. o AZL TargetPLUS Equity Fund o AZL Van Kampen Comstock Fund ----------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------------------- There is no guarantee that the issuers of the stocks held by the Equity Portfolio will declare dividends in the future or that if declared, they will either remain at current levels or increase over time. Because a significant portion of the o AZL TargetPLUS Balanced Fund securities held by the Fixed Income Portfolio may have variable o AZL TargetPLUS Growth Fund or floating interest rates, the amounts of its monthly o AZL TargetPLUS Moderate Fund distributions to shareholders are expected to vary with fluctuations in market interest rates. Generally, when market interest rates fall, the amount of the distributions to shareholders will likewise decrease. ----------------------------------------------------- ----------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 133 ----------------------------------------------------------------------------------------------------------------------- FOCUSED INVESTMENT RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Jennison 20/20 Focus Fund Focusing investments in a small number of issuers, industries, or regions increases risk. Funds that invest in a relatively small number of issuers may have more risk because changes in the value of a single security or the impact of a single economic, political, or regulatory occurrence may have a greater impact on the Fund's net asset value. Some of those issuers also may present substantial credit or other risks. The Fund may from o AZL Van Kampen Global Franchise Fund time to time have greater risk if it invests a substantial portion of its assets in companies in related industries, such as technology or financial and business services, that may share common characteristics and are often subject to similar business risks and regulatory burdens. The securities of companies in similar industries may react similarly to economic, market, political, or other developments. ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ The Fund invests in a limited number of securities, and the securities selected for the strategies used to manage this Fund may be issued by companies concentrated in particular industries, including consumer products and technology. Companies within an industry are often faced with the same o AZL First Trust Target Double Play Fund obstacles, issues or regulatory burdens, and their common stock o AZL TargetPLUS Balanced Fund may react similarly and move in unison to these and other market o AZL TargetPLUS Equity Fund conditions. As a result of these factors, stocks in which the o AZL TargetPLUS Growth Fund Fund invests may be more volatile and subject to greater risk of o AZL TargetPLUS Moderate Fund adverse developments that may affect many of the companies in which the Fund invests, than a mixture of stocks of companies from a widevariety of industries. Generally, in the context of the total portfolio, these holdings may not be large enough to consider the Fund as a whole as concentrated. ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ Although the Fund seeks to manage risk by broadly diversifying among industries and by maintaining a risk profile similar to the Russell 2000 Value Index, the Fund holds fewer securities o AZL Dreyfus Premier Small Cap Value Fund than the index. Owning fewer securities and the ability to purchase companies not listed in the index can cause the Fund to underperform the index. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 134 ----------------------------------------------------------------------------------------------------------------------- FOREIGN RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund Because the Fund invests in securities of foreign issuers, it o AZL Columbia Technology Fund may be subject to risks not usually associated with owning o AZL Davis NY Venture Fund securities of U.S. issuers. These risks include, among others, o AZL Dreyfus Founders Equity Growth Fund adverse fluctuations in foreign currency values as well as o AZL First Trust Target Double Play Fund adverse political, social and economic developments affecting a o AZL Franklin Small Cap Value Fund foreign country, including the risk of nationalization, o AZL Jennison 20/20 Focus Fund expropriation or confiscatory taxation. In addition, foreign o AZL Jennison Growth Fund investing involves less publicly available information, and more o AZL Legg Mason Growth Fund volatile or less liquid securities markets. Investments in o AZL Legg Mason Value Fund foreign countries could be affected by factors not present in o AZL LMP Large Cap Growth Fund the U.S., such as restrictions on receiving the investment o AZL NACM International Fund proceeds from a foreign country, confiscatory foreign tax laws, o AZL Neuberger Berman Regency Fund and potential difficulties in enforcing contractual o AZL OCC Opportunity Fund obligations. Transactions in foreign securities may be subject o AZL OCC Value Fund to less efficient settlement practices, including extended o AZL Oppenheimer Global Fund clearance and settlement periods. Foreign accounting may be o AZL Oppenheimer International Growth Fund less revealing than U.S. accounting practices. Foreign o AZL PIMCO Fundamental IndexPLUS Total Return regulation may be inadequate or irregular. Owning foreign Fund securities could cause the Fund's performance to fluctuate more o AZL Schroder Emerging Markets Equity Fund than if it held only U.S. securities. o AZL Schroder International Small Cap Fund o AZL TargetPLUS Balanced Fund o AZL TargetPLUS Equity Fund o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Global Real Estate Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ The Fund may invest in obligations of foreign banks and other foreign issuers that involve certain risks in addition to those of domestic issuers, including higher transaction costs, less o AZL Money Market Fund complete financial information, political and economic instability, less stringent regulatory requirements and less market liquidity. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 135 ----------------------------------------------------------------------------------------------------------------------- EMERGING MARKETS RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund In addition to the risks described under "Foreign Risk", issuers o AZL Davis NY Venture Fund in emerging markets may present greater risk than investing in o AZL Franklin Small Cap Value Fund foreign issuers generally. Emerging markets may have less o AZL Jennison Growth Fund developed trading markets and exchanges which may make it more o AZL Legg Mason Growth Fund difficult to sell securities at an acceptable price and their o AZL LMP Large Cap Growth Fund prices may be more volatile than securities of companies in more o AZL NACM International Fund developed markets. Settlements of trades may be subject to o AZL Oppenheimer Global Fund greater delays so that the Fund may not receive the proceeds of o AZL Oppenheimer International Growth Fund a sale of a security on a timely basis. Emerging countries may o AZL Schroder International Small Cap Fund also have less developed legal and accounting systems and o AZL TargetPLUS Balanced Fund investments may be subject to greater risks of government o AZL TargetPLUS Equity Fund restrictions, nationalization, or confiscation. o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Global Real Estate Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ Emerging markets may have less developed trading markets and exchanges. Emerging countries may have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions of withdrawing the sales proceeds of securities from the country. Economies of developing countries may be more dependent on relatively few industries o AZL Schroder Emerging Markets Equity Fund that may be highly vulnerable to local and global changes. Governments may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of stocks of local companies. These investments may be substantially more volatile than stocks of issuers in the U.S. and other developed countries and may be very speculative. ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ Foreign investment risk may be particularly high to the extent that the Fund invests in emerging market securities of issuers o AZL PIMCO Fundamental IndexPLUS Total Return based in countries with developing economies. These securities Fund may present market, credit, currency, liquidity, legal, political, and other risks different from, or greater than, the risk of investing in developed foreign countries. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 136 ----------------------------------------------------------------------------------------------------------------------- FREQUENT TRADING ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Columbia Technology Fund The Fund may actively and frequently trade its portfolio o AZL Dreyfus Founders Equity Growth Fund securities. High portfolio turnover (100% or more) results in o AZL First Trust Target Double Play Fund higher transaction costs and can adversely affect the Fund's o AZL Jennison 20/20 Focus Fund performance. o AZL Legg Mason Growth Fund o AZL NACM International Fund o AZL OCC Opportunity Fund o AZL Oppenheimer Main Street Fund o AZL PIMCO Fundamental IndexPLUS Total Return Fund o AZL Schroder Emerging Markets Equity Fund o AZL TargetPLUS Balanced Fund o AZL TargetPLUS Equity Fund o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- GROWTH STOCKS RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund The returns on growth stocks may or may not move in tandem with o AZL Columbia Technology Fund the returns on other categories of stocks, or the stock market o AZL Dreyfus Founders Equity Growth Fund as a whole. Growth stocks may be particularly susceptible to o AZL Jennison 20/20 Focus Fund rapid price swings during periods of economic uncertainty or in o AZL Jennison Growth Fund the event of earnings disappointments. Further, growth stocks o AZL LMP Large Cap Growth Fund typically have little or no dividend income to cushion the o AZL Legg Mason Growth Fund effect of adverse market conditions. To the extent a growth o AZL OCC Opportunity Fund style of investing emphasizes certain sectors of the market, o AZL Oppenheimer Global Fund such investments will be more sensitive to market, political, o AZL Oppenheimer International Growth Fund regulatory and economic factors affecting those sectors. o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- HEADLINE RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Davis NY Venture Fund The Subadviser seeks to acquire companies with expanding earnings at value prices. They may make such investments when a company becomes the center of controversy after receiving adverse media attention. The company may be involved in litigation, the company's financial reports or corporate governance may be challenged, the company's annual report may disclose a weakness in internal controls, investors may question the company's published financial reports, greater government regulation may be contemplated, or other adverse events may threaten the company's future. While the Subadviser researches companies subject to such contingencies, it cannot be correct every time, and the company's stock may never recover. --------------------------------------------------- ------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 137 ----------------------------------------------------------------------------------------------------------------------- INCOME RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Money Market Fund Income risk is the chance that falling interest rates will cause o AZL Van Kampen Equity and Income Fund the Fund's income to decline. Income risk is generally higher for short-term bonds. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- INDEXING STRATEGY RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL S&P 500 Index Fund The Fund uses an indexing strategy. It does not attempt to manage market volatility, use defensive strategies, or reduce the effects of any long-term periods of poor stock performance. The correlation between the performance of the Fund and the o AZL Small Cap Stock Index Fund performance of the index may be affected by the Fund's expenses, changes in securities markets, changes in the composition of the index, and the timing of purchases and redemptions of Fund shares. --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- INDUSTRY SECTOR RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Columbia Technology Fund The value of the Fund's shares is particularly vulnerable to risks affecting technology companies and/or companies having investments in technology. The technology sector historically has had greater stock price fluctuation as compared to the general market. By focusing on the technology sector of the stock market rather than a broad spectrum of companies, the Fund's share price will be particularly sensitive to market and economic events that affect those technology companies. The stock prices of technology companies during the past few years have been highly volatile, o AZL OCC Opportunity Fund largely due to the rapid pace of product change and development within this sector. This phenomenon may also result in future stock price volatility. In addition, technologies that are dependent on consumer demand may be more sensitive to changes in consumer spending patterns. Technology companies focusing on the information and telecommunications sectors may also be subject to international, federal and state regulations and may be adversely affected by changes in those regulations. --------------------------------------------------- ------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- At times, the Fund may invest a significant portion of its assets in the securities of companies involved in the financial services sector. By focusing on a particular sector from time to time, the Fund carries greater risk of adverse developments in a sector than a fund that always invests in a wide variety of sectors. Financial services companies are subject to extensive government regulation, which may affect their profitability in many ways, o AZL Davis NY Venture Fund including by limiting the amount and types of loans and other o AZL Franklin Small Cap Value Fund commitments they can make, and the interest rates and fees they o AZL Van Kampen Equity and Income Fund can charge. A financial services company's profitability, and therefore its stock price is especially sensitive to interest rate changes throughout the world, as well as the ability of borrowers to repay their loans. Changing regulations, continuing consolidations, and development of new products and structures are all likely to have a significant impact on financial services companies. --------------------------------------------------- ------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 138 --------------------------------------------------- ------------------------------------------------------------------- At times, the Fund may increase the relative emphasis of its investments in a particular industry. Stocks of issuers in a o AZL Dreyfus Founders Equity Growth Fund particular industry are subject to changes in economic o AZL Neuberger Berman Regency Fund conditions, government regulations, availability of basic o AZL OCC Value Fund resources or supplies, or other events that affect that industry o AZL Oppenheimer Global Fund more than others. To the extent that the Fund has greater o AZL Oppenheimer International Growth Fund emphasis on investments in a particular industry, its share values may fluctuate in response to events affecting that industry. --------------------------------------------------- ------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- Because of its concentration in the financial services industry, the fund will be exposed to a large extent to the risks associated with that industry, such as government regulation, the availability and cost of capital funds, consolidation and general o AZL Money Market Fund economic conditions. Financial services companies are also exposed to losses if borrowers and other counter-parties experience financial problems and/or cannot repay their obligations. - --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- INITIAL PUBLIC OFFERINGS RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Columbia Technology Fund The Fund may invest in initial public offerings (IPOs). By definition, securities issued in IPOs have not traded publicly until the time of their offerings. There may be only a limited number of shares available for trading, the market for those securities may be unseasoned, and the issuer may have a limited operating history. These factors may contribute to price o AZL Dreyfus Premier Small Cap Value Fund volatility. The limited number of shares available for trading in o AZL Jennison 20/20 Focus Fund some IPOs may also make it more difficult for the Fund to buy or o AZL OCC Opportunity Fund sell significant amounts of shares without an unfavorable impact o AZL OCC Value Fund on prevailing prices. In addition, some companies initially o AZL Schroder Emerging Markets Equity Fund offering their shares publicly are involved in relatively new o AZL Turner Quantitative Small Cap Growth Fund industries or lines of business, which may not be widely understood by investors. Some of the companies involved in new industries may be regarded as developmental stage companies, without revenues or operating income, or the near-term prospects of them. Many IPOs are by small- or micro-cap companies that are undercapitalized. --------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- INTEREST RATE RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund Interest rate risk is the chance that the value of the bonds the o AZL Jennison 20/20 Focus Fund Fund holds will decline due to rising interest rates. When o AZL Legg Mason Value Fund interest rates rise, the price of most bonds goes down. The o AZL LMP Large Cap Growth Fund price of a bond is also affected by its maturity. Bonds with o AZL Oppenheimer International Growth Fund longer maturities generally have greater sensitivity to changes o AZL Oppenheimer Main Street Fund in interest rates. o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Growth and Income Fund ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 139 ---------------------------------------------------- ------------------------------------------------------------------ This is the risk that changes in nominal interest rates, which consist of a real interest rate and the expected rate of inflation, will affect the value of the Fund's investments in o AZL Money Market Fund income-producing or debt securities. Although the value of money market investments is less sensitive to interest rate risk than longer-term securities, increases in nominal interest rates may cause the value of the Fund's investments to decline. ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ As nominal interest rates rise, the value of fixed income securities held by a Fund is likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than o AZL PIMCO Fundamental IndexPLUS Total Return securities with shorter durations. A nominal interest rate can Fund be described as the sum of a real interest rate and an expected o AZL TargetPLUS Balanced Fund inflation rate. Inflation-indexed securities, including o AZL TargetPLUS Growth Fund Treasury Inflation-Protected Securities ("TIPS"), decline in o AZL TargetPLUS Moderate Fund value when real interest rates rise. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, inflation-indexed securities may experience greater losses than other fixed income securities with similar durations. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- INVESTMENT STRATEGY RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL First Trust Target Double Play Fund Investment strategy risk is the chance that Subadviser's strategies for selecting securities for the Fund's portfolio will cause the Fund to underperform other funds with similar investment objectives. One of the Fund's principal investment strategies involves selecting common stocks of companies that have experienced certain rate of growth in return on assets and a lower, but positive price-to-book ratio. There can be no assurance that the companies whose stocks are selected for the Fund's portfolio using this strategy will continue to experience continued growth in return on assets. The other principal investment strategy involves ranking and selecting stocks based on their prospective price performance. There can be no assurance that the companies whose stocks are selected for the Fund's portfolio using this strategy will actually perform better than other stocks. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 140 - ---------------------------------------------------- ------------------------------------------------------------------ Certain strategies involve selecting common stocks that have high dividend yields relative to other common stocks comprising an index. The dividend yields of such stocks may be high relative to such other stocks because the share price of the stock has declined relative to such other stocks. The stocks selected may be out of favor with investors because the issuer is experiencing financial difficulty, has had or forecasts weak earnings performance, has been subject to negative publicity, or has experienced other unfavorable developments relating to its business. There can be no assurance that the negative factors that have caused the issuer's stock price to have declined relative to other stocks will not cause further decreases in the issuer's stock price, or that the dividend paid on the stock o AZL TargetPLUS Balanced Fund will be maintained. o AZL TargetPLUS Equity Fund o AZL TargetPLUS Growth Fund Certain strategies involve selecting common stocks of issuers o AZL TargetPLUS Moderate Fund that have experienced certain rates of growth in sales and stocks that have experienced recent price appreciation. There can be no assurance that the issuers whose stocks are selected will continue to experience growth in sales, or that the issuer's operations will result in positive earnings even if sales continue to grow. There further can be no assurance that the prices of such issuers' stocks will not decline. Value Line's TimelinessTM rankings reflect Value Line's views as to the prospective price performance of the #1 ranked stocks relative to other stocks ranked by Value Line(R). There is no assurance that the #1 ranked stocks will actually perform better than other stocks and, as a result, the Fund may underperform other similar investments. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- INVESTMENTS IN POOLED VEHICLES RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Schroder Emerging Markets Equity Fund The Fund may invest in shares of closed-end investment companies (including single country funds) and ETFs. Investing in another investment company exposes the Fund to all the risks of that investment company and, in general, subjects it to a pro rata portion of the other investment company's fees and expenses. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- ISSUER RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- The value of a security may decline for a number of reasons that o All of the Funds directly relate to the issuer, such as management performance, financial leverage, and reduced demand for the issuer's products or services. --------------------------------------------------- ------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 141 - ----------------------------------------------------------------------------------------------------------------------- LEVERAGING RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL PIMCO Fundamental IndexPLUS Total Return Certain transactions may give rise to a form of leverage. Such Fund transactions may include, among others,reverse repurchase agreements, loans of portfolio securities, and the use of when-issued, delayed delivery, or forward commitment transaction. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, the Fund will segregate or o AZL TargetPLUS Balanced Fund "earmark" liquid assets or otherwise cover transactions that may o AZL TargetPLUS Growth Fund give rise to such risk. The use of leverage may cause a Fund to o AZL TargetPLUS Moderate Fund liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. In addition, leverage, including borrowing, may exaggerate the effect of any increase or decrease in the value of a Fund's portfolio securities. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- LICENSE TERMINATION RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL First Trust Target Double Play Fund The Fund relies on third party license(s) that permit the use of the intellectual property of such parties in connection with the o AZL S&P 500 Index Fund name of the Fund and/or the investment strategies of the Fund. o AZL Small Cap Stock Index Fund Such license(s) may be terminated by the licensors, and as a o AZL TargetPLUS Balanced Fund result, the Fund may lose its ability to use the licensed name o AZL TargetPLUS Equity Fund as a part of the name of the Fund or to receive data from the o AZL TargetPLUS Growth Fund third party as it relates to the investment strategy. o AZL TargetPLUS Moderate Fund Accordingly, in the event a license is terminated, the Fund may have to change its name or investment strategy(ies). ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- LIMITED MANAGEMENT RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL First Trust Target Double Play Fund The Fund's strategy of investing in companies according to criteria determined on or about the last business day before each Stock Selection Date prevents the Fund from responding to market fluctuations, or changes in the financial condition or o AZL TargetPLUS Balanced Fund (Equity Portfolio) business prospects of the selected companies, between Stock o AZL TargetPLUS Equity Fund Selection Dates. As compared to other funds, this could subject o AZL TargetPLUS Growth Fund (Equity Portfolio) the Fund to more risk if one of the selected stocks declines in o AZL TargetPLUS Moderate Fund (Equity Portfolio) price or if certain sectors of the market, or the United States economy, experience downturns. The investment strategy may also prevent the Fund from taking advantage of opportunities available to other funds. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 142 ----------------------------------------------------------------------------------------------------------------------- LIQUIDITY RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Columbia Technology Fund Liquidity risk exists when particular investments are difficult o AZL Franklin Small Cap Value Fund to purchase or sell. Investments in illiquid securities may o AZL Jennison 20/20 Focus Fund reduce the returns of the Fund because it may be unable to sell o AZL Jennison Growth Fund the illiquid securities at an advantageous time or price. o AZL Legg Mason Value Fund Restricted securities may be subject to liquidity risk because o AZL NACM International Fund they may have terms that limit their resale to other investors o AZL OCC Opportunity Fund or may require registration under applicable securities laws o AZL Oppenheimer International Growth Fund before they may be sold publicly. Funds with principal o AZL PIMCO Fundamental IndexPLUS Total Return investment strategies that involve restricted securities, Fund foreign securities, derivatives, companies with small market o AZL Schroder Emerging Markets Equity Fund capitalization or securities with substantial market and/or o AZL Schroder International Small Cap Fund credit risk tend to have the greatest exposure to liquidity risk. o AZL TargetPLUS Balanced Fund o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ The Fund may purchase variable and floating rate instruments. The absence of an active market for these securities could make o AZL Money Market Fund it difficult for the Fund to dispose of them if the issuer defaults. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- MARKET RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o All of the Funds The market price of securities owned by the Fund may go up or down, sometimes rapidly and unpredictably. Securities may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of a security may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously. The value of the Fund's portfolio may fluctuate to a greater or lesser degree than fluctuations of the general stock market. For those Funds that invest in stocks of foreign companies, the value of the Fund's portfolio will be affected by changes in foreign stock markets and the special economic and other factors that might primarily affect stock markets in particular foreign countries and regions. Equity securities generally have greater price volatility than fixed income securities. --------------------------------------------------- ------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 143 ----------------------------------------------------------------------------------------------------------------------- MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL PIMCO Fundamental IndexPLUS Total Return The Fund may invest in a variety of mortgage-related and other Fund asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool's obligations to other o AZL TargetPLUS Balanced Fund investors have been satisfied. An unexpectedly high rate of o AZL TargetPLUS Growth Fund defaults on the mortgages held by a mortgage pool may limit o AZL TargetPLUS Moderate Fund substantially the pool's ability to make payments of principal o AZL Van Kampen Equity and Income Fund or interest to the Fund as a holder of such subordinated o AZL Van Kampen Comstock Fund securities, reducing the values of those securities or in some cases rendering them worthless. The risk of such defaults is generally higher in the case of mortgage pools that include so-called "subprime" mortgages. An unexpectedly high or low rate of prepayments on a pool's underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk of non-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund's investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- NON-DIVERSIFICATION RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL First Trust Target Double Play Fund The Fund is non-diversified. This means that the percentage of its assets invested in any single issuer is not limited by the 1940 Act. When the Fund's assets are invested in the securities o AZL Legg Mason Growth Fund of a limited number of issuers or it holds a large portion of o AZL Legg Mason Value Fund its assets in a few issuers, the value of its shares will be o AZL Van Kampen Global Franchise Fund more susceptible to any single economic, political or regulatory o AZL Van Kampen Global Real Estate Fund event affecting those issuers or their securities than shares of a diversified fund. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 144 ----------------------------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENTS RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund The performance of real estate investments (REITs) depends on o AZL Dreyfus Premier Small Cap Value Fund the strength of real estate markets, REIT management and o AZL Franklin Small Cap Value Fund property management which can be affected by many factors, o AZL Jennison 20/20 Focus Fund including national and regional economic conditions. o AZL Jennison Growth Fund o AZL Neuberger Berman Regency Fund o AZL OCC Opportunity Fund o AZL OCC Value Fund o AZL Oppenheimer Main Street Fund o AZL S&P 500 Index Fund o AZL Schroder International Small Cap Fund o AZL Small Cap Stock Index Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ ---------------------------------------------------- ------------------------------------------------------------------ Because of the Fund's policy of concentrating its investments in securities of companies operating in the real estate industry, the Fund is more susceptible to the risks of investing in real estate directly. Real estate is a cyclical business, highly sensitive to general and local economic developments and characterized by intense competition and periodic overbuilding. Real estate income and values may also be greatly affected by demographic trends, such as population shifts or changing tastes and values. Government actions, such as tax increases, zoning law changes or environmental regulations, may also have a major impact on real estate. Changing interest rates and credit o AZL Van Kampen Global Real Estate Fund quality requirements will also affect the cash flow of real estate companies and their ability to meet capital needs. Investing in companies operating in the real estate industry also exposes investors to the way in which these real estate companies are organized and operated. In addition to investing directly in real estate, these companies may engage directly in real estate management or development activities. Operating these companies requires specialized management skills and the Fund indirectly bears the management expenses of these companies along with the direct expenses of the Fund. Individual real estate companies may own a limited number of properties and may concentrate in a particular region or property type. ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 145 ----------------------------------------------------------------------------------------------------------------------- SECURITY QUALITY RISK (ALSO KNOWN AS "HIGH YIELD RISK") ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Legg Mason Value Fund The Fund may invest in high yield, high risk debt securities and unrated securities of similar credit quality (commonly known as "junk bonds") may be subject to greater levels of credit and o AZL Oppenheimer Main Street Fund liquidity risk than funds that do not invest in such securities. o AZL Oppenheimer International Growth Fund These securities are considered predominately speculative with o AZL PIMCO Fundamental IndexPLUS Total Return respect to the issuer's continuing ability to make principal and Fund interest payments. An economic downturn or period of rising o AZL TargetPLUS Balanced Fund interest rates could adversely affect the market for these o AZL TargetPLUS Growth Fund securities and reduce the Fund's ability to sell these o AZL TargetPLUS Moderate Fund securities (liquidity risk). If the issuer of a security is in default with respect to interest or principal payments, the Fund may lose the value of its entire investment. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- SELECTION RISK (ALSO KNOWN AS "MANAGEMENT RISK") ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL AIM International Equity Fund The Fund is an actively managed investment portfolio. The o AZL Columbia Technology Fund portfolio manager(s) make investment decisions for the Fund's o AZL Davis NY Venture Fund assets. However, there can be no guarantee they will produce the o AZL Dreyfus Founders Equity Growth Fund desired results and poor security selection may cause the Fund o AZL Dreyfus Premier Small Cap Value Fund to underperform its benchmark index or other funds with similar o AZL Franklin Small Cap Value Fund investment objectives. o AZL Jennison 20/20 Focus Fund o AZL Jennison Growth Fund o AZL Legg Mason Growth Fund o AZL Legg Mason Value Fund o AZL LMP Large Cap Growth Fund o AZL Money Market Fund o AZL LMP Large Cap Growth Fund o AZL NACM International Fund o AZL Neuberger Berman Regency Fund o AZL OCC Value Fund o AZL OCC Opportunity Fund o AZL Oppenheimer Global Fund o AZL Oppenheimer International Growth Fund o AZL Oppenheimer Main Street Fund o AZL PIMCO Fundamental IndexPLUS Total Return Fund o AZL Schroder Emerging Markets Equity Fund o AZL Schroder International Small Cap Fund o AZL TargetPLUS Balanced Fund o AZL TargetPLUS Growth Fund o AZL TargetPLUS Moderate Fund o AZL Turner Quantitative Small Cap Growth Fund o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Global Franchise Fund o AZL Van Kampen Global Real Estate Fund o AZL Van Kampen Growth and Income Fund o AZL Van Kampen Mid Cap Growth Fund ---------------------------------------------------- ------------------------------------------------------------------ - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 146 ----------------------------------------------------------------------------------------------------------------------- SHORT SALE RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Jennison Growth Fund Short sales are subject to special risks. A short sale involves the sale by the Fund of a security that it does not own with the hope of purchasing the same security at a later date at a lower price. Certain of the Funds may also enter into short derivatives positions through futures contracts or swap agreements. If the price of the security or derivative has o AZL PIMCO Fundamental IndexPLUS Total Return increased during this time, then the Fund will incur a loss Fund equal to the increase in price from the time that the short sale o AZL TargetPLUS Balanced Fund was entered into plus any premiums and interest paid to the o AZL TargetPLUS Growth Fund third party. Therefore, short sales involve the risk that o AZL TargetPLUS Moderate Fund losses may be exaggerated, potentially resulting in the loss of more money than the actual cost of the investment. Short sales "against the box" give up the opportunity for capital appreciation in the security. Also, there is the risk that the third party to the short sale may fail to honor its contract terms, causing a loss to the Fund. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- SPECIAL SITUATIONS RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL Oppenheimer Global Fund Periodically, the Fund might use aggressive investment techniques. These might include seeking to benefit from what the Subadviser perceives to be "special situations", such as mergers, reorganizations, restructurings or other unusual events expected to affect a particular issuer. However, there is a risk that the change or event might not occur, which could have a negative impact on the price of the issuer's securities. The Fund's investment might not produce the expected gains or could incur a loss for the portfolio. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- STRATEGY SELECTION RISK ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------------ o AZL TargetPLUS Balanced Fund The risk that the Manager could allocate assets in a manner that will cause the Funds to underperform other funds with similar investment objectives. The Manager may have a potential conflict of interest in allocating Fixed Income Portfolio assets between the Diversified Income Strategy and the Total Return o AZL TargetPLUS Growth Fund Strategy because the subadvisory fee rate it pays to the o AZL TargetPLUS Moderate Fund Subadviser are different for the two strategies. However, the Manager is a fiduciary to the Funds and is legally obligated to act in their best interests when selecting strategies, without taking fees into consideration. ---------------------------------------------------- ------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------------------- VALUE STOCKS RISK ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------- o AZL Dreyfus Small Cap Value Fund The value style of investing emphasizes stocks of undervalued o AZL Franklin Small Cap Value Fund companies whose characteristics may lead to improved valuations. o AZL Jennison 20/20 Focus Fund These stocks may remain undervalued because value stocks, as a o AZL Legg Mason Value Fund category, may lose favor with investors compared to other o AZL Neuberger Berman Regency Fund categories of stocks or because the valuations of these stocks do o AZL OCC Value Fund not improve in response to changing market or economic conditions. o AZL Van Kampen Comstock Fund o AZL Van Kampen Equity and Income Fund o AZL Van Kampen Global Franchise Fund --------------------------------------------------- -------------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 147 MORE ABOUT THE FUNDS Investors should carefully consider their investment goals and willingness to tolerate investment risk before allocating their investment among the Funds. The Funds have the flexibility to make portfolio investments and engage in other investment techniques that are in addition to the principal strategies discussed in this prospectus. More information on the Funds' investment strategies and risks may be found in the SAI (see back cover). Unless otherwise indicated, any percentage limitation on a Fund's holdings which is set forth in the Risk/Return Summaries above is applied only when securities of the kind in question are purchased. In addition to the information about the Funds in the Risk/Return Summaries, investors should consider the following information about the Funds. - -------------------------------------------------------------------------------- TEMPORARY DEFENSIVE POSITIONS In order to meet liquidity needs or for temporary defensive purposes, each Fund may hold investments, including uninvested cash reserves, that are not part of its main investment strategy. Each of the Funds, except the Money Market Fund, may invest for temporary defensive purposes up to 100% of its total assets in money market instruments, including short-term debt securities issued by the U.S. Government and its agencies and instrumentalities, domestic bank obligations, commercial paper or in repurchase agreements secured by bank instruments (with regard to Funds that invest in foreign securities, such investments may include those of foreign governments and companies). In addition, each Fund may hold equity securities which in the Subadviser's opinion are more conservative than the types of securities in which the Fund typically invests. To the extent the Funds are engaged in temporary or defensive investments, a Fund may not achieve its investment objective. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 148 - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- THE MANAGER Allianz Investment Management LLC serves as the Manager for the Funds pursuant to the terms of an investment management agreement. The Manager was formerly known as Allianz Life Advisers, LLC. The Manager has signed subadvisory agreements or portfolio management agreements ("Subadvisory Agreements") with various Subadvisers for portfolio management functions for the Funds. The Subadvisers manage the portfolio securities of the Funds and provide additional services including research, selection of brokers and similar services. The Manager compensates the Subadvisers for their services as provided in the Subadvisory Agreements. A discussion of the Board of Trustees' basis for approving the Funds' Investment Management Agreement with the Manager and the Subadvisory Agreements with the Subadvisers is available in the Funds' Annual Reports for the year ended December 31, 2007. The Manager has entered into an agreement with the First Trust Advisors L.P. whereby the Manager and certain of its affiliates will be prohibited from using, or causing another party to use, investment methodologies that are substantially similar to those described in this prospectus for the AZL First Trust Target Double Play Fund, the AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund to manage any fund and the word "Target" to label an investment methodology in the event the Manager or the Funds fail to renew the Subadvisory Agreement with First Trust Advisors L.P. or if any portion of the assets of either or both the AZL First Trust Target Double Play Fund or AZL TargetPLUS Equity Fund, or the Equity Portfolio of any or all of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and/or AZL TargetPLUS Moderate Fund are placed under the management of the Manager or another asset manager. The Manager was established as an investment adviser by Allianz Life Insurance Company of North America in April 2001. The Manager does not provide investment advice with regard to selection of individual portfolio securities, but rather evaluates and selects subadvisers for the Trust, subject to the oversight of the Board of Trustees. In addition, the Manager constantly evaluates possible additional or alternative subadvisers for the Trust. The Manager currently acts as Manager of all of the Funds of the Trust. Currently, the Manager's only client other than the Trust is the Allianz Variable Insurance Products Fund of Funds Trust. As of December 31, 2007, the Manager had aggregate assets under management of $9.1 billion. The Manager monitors and reviews the activities of each of the Subadvisers. The Manager's address is 5701 Golden Hills Drive, Minneapolis, Minnesota 55416.
- ---------------------------------------------------------------------------------------------------------- THE SUBADVISERS OF THE FUNDS - ------------------------------------------------------------------------------------ -------------------------------- SUBADVISER FUND(S) - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION ("BLACKROCK") was organized in 1977 AZL Money Market Fund to perform advisory services for investment companies and has its principal offices at 100 Bellevue Parkway, Wilmington, DE 19809. BlackRock is a wholly-owned, indirect subsidiary of BlackRock, Inc., one of the largest publicly traded investment management firms in the United States having, together with its affiliates, approximately $1.4 trillion in investment company and other assets under management as of December 31, 2007. BlackRock, Inc. is an affiliate of The PNC Financial Services Group, Inc. and Merrill Lynch & Co., Inc. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- CLEARBRIDGE ADVISORS, LLC ("CLEARBRIDGE"), with offices at 620 Eighth Avenue, New York, New York 10018-1405, is a recently-organized investment adviser that has been formed to succeed to the equity securities portfolio management business of Citigroup Asset Management, which was acquired by Legg Mason, Inc. in December 2005. As of December 31, 2007, ClearBridge had $100.5 billion in assets under AZL LMP Large Cap Growth Fund management. ClearBridge is a wholly owned subsidiary of Legg Mason, a financial services holding company, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202. - ------------------------------------------------------------------------------------ -------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 149 - ------------------------------------------------------------------------------------ -------------------------------- COLUMBIA MANAGEMENT ADVISORS, LLC ("COLUMBIA ADVISORS") located at 100 Federal AZL Columbia Technology Fund Street, Boston, Massachusetts 02110, is the Fund's Subadviser. At December 31, 2007, Columbia Advisors had $370.2 billion in assets under management. Columbia Advisors is an SEC-registered investment adviser and indirect, wholly-owned subsidiary of Bank of America Corporation. Its management experience covers all major asset classes, including equity securities, fixed income securities and money market instruments. In addition to serving as investment manager for mutual funds, Columbia Advisors acts as an investment manager for individuals, corporations, retirement plans, private investment companies and financial intermediaries. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- DAVIS SELECTED ADVISERS, L.P. ("DAVIS") is located at 2949 East Elvira Road, Suite AZL Davis NY Venture Fund 101, Tucson, Arizona 85706. Davis is controlled by its general partner, Davis Investments, LLC. Davis Investments, LLC is a holding company with no business operations. Davis Investments, LLC is controlled by Christopher Davis as sole member. Christopher Davis's principal business over the last five years has been portfolio manager. Davis has been providing investment advice since 1969. As of December 31, 2007, Davis managed $105 billion in assets. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- THE DREYFUS CORPORATION ("DREYFUS") is located at 200 Park Avenue, New York, NY 10166. Founded in 1947, Dreyfus manages approximately $263 billion in 180 mutual AZL Dreyfus Premier Small Cap fund portfolios as of December 31, 2007. Dreyfus is the primary mutual fund Value Fund business of The Bank of New York Mellon Corporation, a global financial services company focused on helping clients more and manage their financial assets, AZL S&P 500 Index Fund operating in 34countries and serving more than 100 markets. BNY Mellon has more than $23 trillion in assets under management, and it services more than $41 AZL Small Cap Index Fund trillion in outstanding debt. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- AZL First Trust Target Double Play Fund AZL TargetPLUS Balanced Fund FIRST TRUST ADVISORS L.P. ("FIRST TRUST") is located at 1001 Warrenville Road, (Equity Portfolio only) Suite 300, Lisle, Illinois 60532. First Trust and First Trust Portfolios L.P., an affiliate of First Trust, were established in 1991 and at March 31, 2008, had AZL TargetPLUS Equity Fund approximately $32.20 billion in assets under management and supervision, of which approximately $3.5 billion was invested in trusts serving as underlying funds for AZL TargetPLUS Growth Fund variable annuity and insurance contracts. (Equity Portfolio only) AZL TargetPLUS Moderate Fund (Equity Portfolio only) - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- FOUNDERS ASSET MANAGEMENT LLC ("FOUNDERS") is a wholly owned subsidiary of MBSC Securities Corporation, which is a wholly owned subsidiary of The Dreyfus Corporation. The Dreyfus Corporation is a wholly owned subsidiary of The Bank of New York Mellon Corporation, a global financial services company with more than $1.1 trillion in assets under management. The Founders corporate offices are AZL Dreyfus Founders Equity located at 210 University Boulevard, Suite 800, Denver,Colorado 80206. Founders Growth Fund and its predecessor companies have operated as investment advisers since 1938. Founders also serves as investment adviser or subadviser to other investment companies. - ------------------------------------------------------------------------------------ -------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 150 - ------------------------------------------------------------------------------------ -------------------------------- FRANKLIN ADVISORY SERVICES, LLC ("FRANKLIN"), One Parker Plaza, Ninth Floor, Fort AZL Franklin Small Cap Value Lee, New Jersey 07024, is the Fund's investment Subadviser, and was founded in Fund 1947. Together, as of January 31, 2007, Franklin and its affiliates had over $643 billion in assets under management. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- INVESCO AIM CAPITAL MANAGEMENT, INC. ("INVESCO AIM"; FORMERLY A I M CAPITAL AZL AIM International Equity MANAGEMENT, INC.) is located at 11 Greenway Plaza, Suite 100, Houston, Texas Fund 77046-1173. Invesco Aim has acted as an investment advisor since its organization in 1976 and advises together with its affiliates,over 225 investment portfolios. Assets under management by Invesco Aim and its affiliate as of December 31, 2007 were approximately $166 billion. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- JENNISON ASSOCIATES LLC ("JENNISON"), 466 Lexington Avenue, New York, New York AZL Jennison 20/20 Focus Fund 10017, is a Delaware limited liability company and has been in the investment advisory business since 1969 (includes its predecessor, Jennison Associates Capital Corp.). Jennison is a direct, wholly owned subsidiary of Prudential Investment Management, Inc., which is a direct, wholly owned subsidiary of Prudential Asset Management Holding Company LLC, which is in turn a wholly owned subsidiary of Prudential Financial, Inc. As of December 31, 2007, Jennison managed AZL Jennison Growth Fund in excess of $86 billion in assets. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- LEGG MASON CAPITAL MANAGEMENT, INC. ("LMCM"), is located at 100 Light Street, AZL Legg Mason Growth Fund Baltimore, MD 21202, and was founded in 1982. As of December 31, 2007, LMCM, together with its sister companies Legg Mason Funds Management, Inc., and LMM LLC, had aggregate assets under management of $59.7 billion. AZL Legg Mason Value Fund - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- NEUBERGER BERMAN MANAGEMENT INC. ("NEUBERGER BERMAN") is located at 605 Third AZL Neuberger Berman Regency Avenue 2nd Floor, New York, NY 10158-0180. Together, the Neuberger Berman affiliates manage $148.9 billion in total assets as of December 31, 2007, and continue an asset management history that began in 1939. Fund - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- NICHOLAS-APPLEGATE CAPITAL MANAGEMENT LLC ("NACM"), organized under the laws of Delaware, is located at 600 West Broadway, Suite 2900, San Diego, California 92101. NACM was founded in 1984 and as of December 31, 2007 managed approximately $15 billion in discretionary assets for numerous clients, including employee AZL NACM International Fund benefit plans, corporations, public retirement systems and unions, university endowments, foundations, and other institutional investors and individuals. NACM is affiliated with the Manager. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- OPPENHEIMER CAPITAL LLC ("OCC") is a Delaware limited liability company and is a AZL OCC Opportunity Fund registered investment adviser under the Advisers Act. Its principal place of business is 1345 Avenue of the Americas, 48th Floor, New York, New York 10105. As of December 31, 2007, OCC had aggregate assets under management of $22.5 billion. OCC is affiliated with the Manager. AZL OCC Value Fund - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- OPPENHEIMERFUNDS, INC. ("OFI"), is located at Two World Financial Center, 225 AZL Oppenheimer Global Fund Liberty St., 11th Floor, New York, NY 10281. OFI has been an investment advisor AZL Oppenheimer International since January 1960. OFI is one of the largest and most respected mutual fund Growth Fund companies in the U.S., with more than $260 billion in assets under management as of December 31, 2007. AZL Oppenheimer Main Street Fund - ------------------------------------------------------------------------------------ -------------------------------- - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 151 - ------------------------------------------------------------------------------------ -------------------------------- PACIFIC INVESTMENT MANAGEMENT COMPANY LLC ("PIMCO") is located at 840 Newport AZL PIMCO Fundamental Center Drive, Newport Beach, CA 92660. Organized in 1971, PIMCO provides investment management and advisory services to private accounts of institutional IndexPLUS Total Return Fund* and individual clients and to mutual funds. As of December 31, 2007, PIMCO had $746.3 billion in assets under management. AZL TargetPLUS Balanced Fund (Fixed Income Portfolio) * SUB-SUBADVISER WITH REGARDS ONLY TO THE AZL PIMCO FUNDAMENTAL INDEXPLUS ------------------------------------------------------------------------ TOTAL RETURN FUND: RESEARCH AFFILIATES, LLC, a California limited AZL TargetPLUS Growth Fund liability company, is located at 155 N. Lake Ave., Suite 900, Pasadena, CA (Fixed Income Portfolio) 91101. As of December 31, 2007, Research Affiliates, LLC had $31 billion in assets under management. AZL TargetPLUS Moderate Fund (Fixed Income Portfolio) - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. ("SCHRODERS"), 875 Third Avenue, AZL Schroder Emerging Markets 22nd Floor, New York, NY 10022-6225, has been a registered investment advisor, Equity Fund together with its predecessor, since 1968, and is part of a worldwide group of financial services companies that are together known as Schroders. Schroders currently serves as investment advisor to other mutual funds, and a broad range of institutional investors. At December 31, 2007, Schroders, together with its affiliated companies, managed approximately $277 billion in assets. Schroder Investment Management North America Ltd (Schroder Ltd), an affiliate of Schroders with headquarters located at 31 Gresham Street, London EC2V 7QA, England, serves AZL Schroder International as the sub-subadviser to the Fund and is responsible for day-to-day management of Small Cap Fund the Fund's assets. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- TURNER INVESTMENT PARTNERS, INC. ("TURNER"), 1205 Westlakes Drive, Suite 100, Berwyn, Pennsylvania 19312, is an employee-owned investment management firm founded by Robert E. Turner, Mark D. Turner and Christopher K. McHugh. Turner began managing assets, including institutional assets, in 1990. Turner offers a AZL Turner Quantitative Small variety of growth, core and value equity investment strategies across all market Cap Growth Fund capitalizations, totaling approximately $29.1 billion in assets under management as of December 31, 2007. - ------------------------------------------------------------------------------------ -------------------------------- - ------------------------------------------------------------------------------------ -------------------------------- VAN KAMPEN ASSET MANAGEMENT ("VKAM") is a wholly-owned subsidiary of Van Kampen AZL Van Kampen Comstock Fund AZL Van Kampen Equity and Income Fund AZL Van Kampen Global Investments Inc. ("Van Kampen") and was founded in 1927. Van Kampen, together with Franchise Fund its affiliated asset management companies, had approximately $589 billion under management or supervision as of December 31, 2007. Van Kampen is a wholly-owned AZL Van Kampen Global Real subsidiary of MSAM Holdings II, Inc. which is a wholly-owned subsidiary of Morgan Estate Fund Stanley. The offices of Van Kampen Asset Management are located at 522 Fifth Avenue, New York, NY 10036. AZL Van Kampen Growth and Income Fund AZL Van Kampen Mid Cap Growth Fund - ------------------------------------------------------------------------------------ -------------------------------- - ----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THE PORTFOLIO MANAGERS OF THE FUNDS AZL AIM INTERNATIONAL EQUITY FUND The following individuals are jointly and primarily responsible for the day-to-day management of the Fund: Shuxin Cao, Senior Portfolio Manager, has been responsible for the Fund since 2003 and has been associated with Invesco - ------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 152 Aim and/or its affiliates since 1997. Jason T. Holzer, Senior Portfolio Manager, has been responsible for the Fund since 1999 and has been associated with Invesco Aim and/or its affiliates since 1996. Clas G. Olsson, (lead portfolio manager with respect to the Fund's investments in Europe and Canada), Senior Portfolio Manager, has been responsible for the Fund since 1997 and has been associated with Invesco Aim and/or its affiliates since 1994. Barrett K. Sides, (lead portfolio manager with respect to the Fund's investments in Asia Pacific and Latin America), Senior Portfolio Manager, has been responsible for the Fund since 1995 and has been associated with Invesco Aim and/or its affiliates since 1990. Matthew W. Dennis, Portfolio Manager, has been responsible for the Fund since 2003 and has been associated with Invesco Aim and/or its affiliates since 2000. The lead managers generally have final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead managers may perform these functions, and the nature of these functions, may change from time to time. They are assisted by Invesco Aim's Asia Pacific/Latin America and Europe/Canada Teams which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the Fund but do not have any day-to-day management responsibilities with respect to the Fund. Members of the team may change from time to time. AZL COLUMBIA TECHNOLOGY FUND Wayne Collette is a director and senior portfolio manager for Columbia Management. Mr. Collette is the team leader for the Portland small and mid-cap growth and technology strategy team. He joined Columbia Management in 2001 and has been a member of the investment community since 1996. Prior to joining Columbia Management, Mr. Collette served as an equity research analyst at Neuberger Berman and Schroder Capital Management. Mr. Collette earned his B.A. degree in political science from Brandeis University and his M.B.A. degree in finance, as a member of Beta Gamma Sigma Honor Society, from Columbia Business School at Columbia University. He holds the Chartered Financial Analyst designation and is a member of the CFA Society of Portland. AZL DAVIS NY VENTURE FUND The portfolio managers of the Fund are Christopher C. Davis and Kenneth C. Feinberg, who together serve as portfolio manager for a number of large cap value equity portfolios at the Subadviser. They are the persons primarily responsible for investing the Fund's assets on a daily basis. Mr. Davis has over 15 years experience in investment management and securities research. He joined the Subadviser in 1989. Mr. Feinberg joined the Subadviser in 1994. AZL DREYFUS FOUNDERS EQUITY GROWTH FUND John B. Jares has been the portfolio manager of the Fund since March 2004. Mr. Jares, a Chartered Financial Analyst, is a portfolio manager at The Boston Company Asset Management, LLC, an affiliate of Founders, where he has been employed since July 2006. He has also been employed by Founders since 2001. AZL DREYFUS PREMIER SMALL CAP VALUE FUND Ronald P. Gala, CFA and Adam T. Logan, CFA have been the Fund's primary portfolio managers since April 2005. Mr. Gala has been employed by Dreyfus as a portfolio manager since October 1994 and is also a portfolio manager with Mellon Capital Management, an affiliate of Dreyfus. Mr. Logan has been employed by Dreyfus as a portfolio manager since March 2003 and is also a portfolio manager with Mellon Capital Management, an affiliate of Dreyfus. AZL FIRST TRUST TARGET DOUBLE PLAY FUND No one individual is primarily responsible for portfolio management decisions for the Funds. Investments are made under the direction of an investment committee (the "First Trust Investment Committee"). Robert F. Carey, CFA, Roger F. Testin, CFA, Jon C. Erickson, CFA, David G. McGarel, CFA, and Daniel J. Lindquist, CFA, comprise the First Trust Investment Committee of First Trust that is responsible for the day-to-day management of each Fund. Mr. Lindquist rejoined First Trust as a Vice President in April 2004 after serving as Chief Operating Officer of Mina Capital Management LLC from January 2004 to April 2004 and Samaritan Asset Management Services, Inc. from April 2000 to January 2004 and is a Senior Vice President of First Trust and a Senior Vice President of First Trust Portfolios L.P. ("FTP"). Mr. Lindquist is Chairman of - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 153 the First Trust Investment Committee and presides over First Trust Investment Committee meetings. Mr. Carey has been with First Trust since 1991 and is the Chief Investment Officer and Senior Vice President of First Trust and Senior Vice President of FTP. As First Trust's Chief Investment Officer, Mr. Carey consults with the First Trust Investment Committee on market conditions and First Trust's general investment philosophy. Mr. Erickson has been with First Trust since 1994 and is a Senior Vice President of First Trust and a Senior Vice President of FTP. As the head of First Trust's Equity Research Group, Mr. Erickson is responsible for determining the securities to be purchased and sold by funds that do not utilize quantitative investment strategies. Mr. McGarel has been with First Trust since 1997 and is a Senior Vice President of First Trust and a Senior Vice President of FTP. As the head of First Trust's Strategy Research Group, Mr. McGarel is responsible for developing and implementing quantitative investment strategies for those funds that have investment policies that require them to follow such strategies. Mr. Testin has been a Senior Vice President of First Trust since August 2001. Prior to joining First Trust, Mr. Testin was an analyst for Dolan Capital Management. As the head of First Trust's Portfolio Management Group, Mr. Testin is responsible for executing the instructions of the Strategy Research Group and Equity Research Group for the funds' portfolios. AZL FRANKLIN SMALL CAP VALUE FUND William J. Lippman has primary responsibility for the investments of the Fund. Mr. Lippman is President and portfolio manager of the Subadviser. He joined Franklin in 1988 and currently manages several retail and insurance funds. He is a member of the Franklin Institutional Small Cap Value Equity Management team. In addition, he is President and Trustee of Franklin Managed Trust and President of Franklin Value Investors Trust. Y. Dogan Sahin, CFA, is a backup portfolio manager of the Fund and is part of a research team for other funds managed by Franklin Advisory Services. Mr. Sahin joined Franklin Advisory Services in September 2003. Prior to his current position, Mr. Sahin was a research analyst working primarily with the Franklin Small Cap Value Fund. Before joining Franklin Advisory Services, Mr. Sahin was a research analyst in Franklin's San Mateo, California office, where he provided industry-specific equity research of specialty retail companies. Mr. Sahin joined Franklin Templeton in July, 2001. Mr. Sahin earned a B.A. in chemistry and biology from Carleton College and an M.A. in molecular and cell biology from U.C. Berkeley. He is a Chartered Financial Analyst (CFA) Charterholder. Bruce Baughman is backup portfolio manager of the Fund. He is senior vice president and portfolio manager of the Subadviser. He joined Franklin in 1988. Mr. Baughman is part of a team that manages several equity funds, including Franklin Balance Sheet Investment Fund and Franklin MicroCap Value Fund, where he is Lead Manager. He is also a member of the Franklin Institutional Small Cap Value Equity Team. Margaret McGee is backup portfolio manager of the Fund. She is Vice President and portfolio manager of the Subadviser. Ms. McGee joined Franklin in 1988 and currently co-manages several mutual funds. She is a member of the Franklin Institutional Small Cap Value Equity Team. Don Taylor is backup portfolio manager of the Fund. He is senior vice president and portfolio manager of the Subadviser. Mr. Taylor joined Franklin in 1996. He is part of a team that manages several equity funds, including Franklin Rising Dividends Fund and Franklin Rising Dividends Securities Fund, where he is Lead Manager. Mr. Taylor is also a member of the Franklin Institutional Small Cap Value Equity Team. AZL JENNISON 20/20 FOCUS FUND Spiros "Sig" Segalas and David A. Kiefer are the portfolio managers of the Fund. Mr. Segalas and Mr. Kiefer have final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows. Spiros "Sig" Segalas was a founding member of Jennison in 1969 and is currently a Director, President and Chief Investment Officer of Jennison. He is a member of The New York Society of Security Analysts, Inc. He has managed the Fund since May 2005. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 154 David A. Kiefer, CFA, is a Managing Director of Jennison, which he joined in September 2000. He was appointed Jennison's Head of Large Cap Value Equity in January 2004, having managed diversified large capitalization portfolios since 1999 and large cap blend equity assets since 2000. He managed the Prudential Utility Fund, now known as the Jennison Utility Fund, from 1994 to June 2005. He joined Prudential's management training program in 1986. From 1988 to 1990, Mr. Kiefer worked at Prudential Power Funding Associates, making loans to the utility and power industry. He then left to attend business school, rejoining Prudential in equity asset management in 1992. He has managed the Fund since May 2005. The portfolio managers for the Fund are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time. AZL JENNISON GROWTH FUND Michael A. Del Balso, Kathleen A. McCarragher and Spiros "Sig" Segalas are the portfolio managers of the Fund. Mr. Del Balso generally has final authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows. Michael A. Del Balso joined Jennison in May 1972 and is currently a Managing Director of Jennison. He is also Jennison's Director of Research for Growth Equity. He is a member of The New York Society of Security Analysts, Inc. He has managed the Fund since May 2005. Kathleen A. McCarragher joined Jennison in May 1998 and is a Director and Managing Director of Jennison. She is also Jennison's Head of Growth Equity. Prior to joining Jennison, she was employed at Weiss, Peck & Greer L.L.C. for six years as a Managing Director and the Director of Large Cap Growth Equities. She has managed the Fund since May 2005. Spiros "Sig" Segalas was a founding member of Jennison in 1969 and is currently a Director, President and Chief Investment Officer of Jennison. He is a member of The New York Society of Security Analysts, Inc. He has managed the Fund since May 2005. The portfolio managers for the Fund are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time. AZL LMP LARGE CAP GROWTH FUND Alan J. Blake is the portfolio manager for the AZL Legg Mason Partners Large Cap Growth Fund. He is a Managing Director and Senior Portfolio Manager for the subadviser, ClearBridge Advisors, LLC. Alan joined the organization in 1991 and has 31 years of investment industry experience. He holds a B.S. from Lehigh University, and an M.S. from the State University of New York at Binghamton. AZL LEGG MASON GROWTH FUND Robert Hagstrom has the responsibility for the day-to-day management of the Fund. He has held this position since April 2005. Mr. Hagstrom has been employed by one or more subsidiaries of Legg Mason, Inc. since 1998. AZL LEGG MASON VALUE FUND Mary Chris Gay has the responsibility for the day-to-day management of the Fund. She has held this position since 2004. Ms. Gay has been employed by one or more subsidiaries of Legg Mason, Inc. since 1989. She is currently a senior vice president for LMCM and Legg Mason Funds Management, Inc. and manages several domestic and international mutual funds and pooled investment vehicles. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 155 AZL NEUBERGER BERMAN REGENCY FUND S. Basu Mullick is a Vice President of Neuberger Berman and a Managing Director of Neuberger Berman, LLC. He has managed the Fund since 2006 and is responsible for the day-to-day management of the Fund. He has been a fund manager at Neuberger Berman since 1998. AZL NACM INTERNATIONAL FUND Kunal Ghosh, Senior Vice President, joined the firm in 2006 and has portfolio management responsibilities on our International, Global, and Emerging Markets Systematic strategies. Prior to joining the firm, Kunal was a research associate and then portfolio manager for Barclays Global Investors. His experience includes building and implementing models for portfolio management. Before that, he was a quantitative analyst for the Cayuga Hedge Fund. Kunal earned his M.B.A. in finance from Cornell University, his M.S. in material engineering from the University of British Columbia, and his B.Tech from Indian Institute of Technology. He has five years of investment industry experience. Steven Tael, Ph.D., CFA, Vice President, joined Nicholas-Applegate in 2005 and has portfolio management responsibilities on the International, Global, and Emerging Markets Systematic strategies. Previously, Steve worked at Mellon Capital Management in San Francisco, where he was a research analyst in the area of investment research. His experience spans quantitative model building, model production and portfolio management. Prior to that, he was an Advisory Systems Engineer for Bank of America, where he co-developed a global portfolio risk reporting system. He also was Director of Information Technologies at AffiniCorp USA. Steve has a Ph.D. in applied mathematics and statistics from State University of New York, Stony Brook, and a B.S. and M.A. in mathematics from the University of California, Santa Barbara. He has twelve years of investment industry experience. AZL OCC OPPORTUNITY FUND Michael Corelli, Portfolio Manager for Oppenheimer Capital's Small Cap Growth team, is the portfolio co-manager of the AZL OCC Opportunity Fund. Prior to joining PEA Capital LLC, an affiliate of OCC, in 1999 as a research analyst, he spent six years at Bankers Trust as an analyst in the small and mid cap growth group. Mr. Corelli earned a BA from Bucknell University. Eric Sartorius, Vice President of Oppenheimer Capital and senior research analyst for Oppenheimer Capital's Small Cap Growth strategy, is the portfolio co-manager of the AZL OCC Opportunity Fund. He specializes in researching the information technology, medical technology and health care sectors of the small-cap equity market. Prior to joining the firm in 2006, he was a senior research analyst at PEA Capital LLC. Prior to joining PEA Capital in 2001, he spent two years as a research associate covering the technology sector at Fred Alger Management. He is a CFA charterholder and holds a B.A. from Williams College. AZL OCC VALUE FUND Colin Glinsman, Managing Director and Chief Investment Officer of Oppenheimer Capital's Value/Core equity platform, is the portfolio manager of the AZL OCC Value Fund. Mr. Glinsman is lead manager of Oppenheimer Capital's Large Cap Focus strategy. He joined Oppenheimer Capital in 1989. Mr. Glinsman holds a BA in Economics from Yale University and an MS in Accounting from New York University. AZL OPPENHEIMER GLOBAL FUND The portfolio manager of the Fund is Rajeev Bhaman, who is the person primarily responsible for the day-to-day management of the Fund's investments. Mr. Bhaman, CFA, has been a portfolio manager of the Fund since August 2004. He has been a Senior Vice President of the Subadviser since 2006 and is a portfolio manager of other portfolios in the OppenheimerFunds complex. Prior to joining the Subadviser in 1996, Mr. Bhaman was employed at Barclays de Zoete Wedd Inc., concentrating on Asian research and research sales. AZL OPPENHEIMER INTERNATIONAL GROWTH FUND The Fund's portfolio is managed by George R. Evans. Mr. Evans is the Fund's lead portfolio manager and has been the person primarily responsible for the day-to-day management of the Fund's portfolio since inception. Mr. Evans is a Senior Vice President of the Subadviser and has been Director of International Equities of the Subadviser since 2004. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 156 AZL OPPENHEIMER MAIN STREET FUND The Fund's portfolio is managed by Nikolaos D. Monoyios and Marc Reinganum who are primarily responsible for the day-to-day management of the Fund's investments. Mr. Monoyios has been a portfolio manager for the Fund since inception. Mr. Monoyios, a Chartered Financial Analyst charterholder, has been a Senior Vice President of the Subadviser since October 2003 and was formerly a Vice President of the Subadviser from April 1998 through September 2003. Mr. Reinganum has been a portfolio manager for the Fund since inception. Mr. Reinganum has been a Vice President of the Subadviser since September 2002 and Director of Quantitative Research and Portfolio Strategist for Equities. He was formerly the Mary Jo Vaughn Rauscher Chair in Financial Investments at Southern Methodist University since 1995. At Southern Methodist University he also served as the Director of the Finance Institute, Chairman of the Finance Department, President of the Faculty at the Cox School of Business and member of the Board of Trustee Investment Committee. AZL PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND The Fund is managed by William H. Gross, Managing Director, Chief Investment Officer and a founding partner of PIMCO. He has been the portfolio manager since the Fund's inception in May of 2006. He has also managed the PIMCO StocksPLUS Fund since January of 1998 and the PIMCO StocksPLUS Total Return Fund since its inception in June of 2002. He has over 30 years of investment experience. AZL S&P 500 INDEX FUND AND AZL SMALL CAP STOCK INDEX FUND Thomas Durante, CFA, is the primary portfolio manager of the AZL S&P 500 Index Fund and the AZL Small Cap Stock Index Fund, and has been employed by The Bank of New York Mellon since 1982. He is also a portfolio manager with Mellon Capital Management, an affiliate of Dreyfus. AZL SCHRODER EMERGING MARKETS EQUITY FUND The Fund is managed on a team basis and is co-led by Allan Conway and Robert Davy. The Emerging Markets Equity Team has overall responsibility for the management of the Fund and also includes portfolio managers James Gotto and Waj Hashmi. Mr. Conway has been an employee of Schroder Ltd. since 2004, prior to that, he was head of global emerging markets, West LB Asset Management and Chief Executive Officer of WestAM (UK) Ltd. Mr. Davy has been an employee of Schroder Ltd. since 1986. Mr. Gotto has been am employee of Schroder Ltd. since 1991. Mr. Hashmi has been an employee of Schroder Ltd. since 2000. AZL SCHRODER INTERNATIONAL SMALL CAP FUND The portfolio manager primarily responsible for the day-to-day management of the Fund is Matthew Dobbs, who chairs the Schroder International Smallcap Investment Committee. The Investment Committee has overall responsibility for the management of the Fund. The Committee, composed of small cap specialists, determines the country allocation of the Fund, while stock selection is primarily the responsibility of senior regional small cap portfolio managers. Mr. Dobbs is Head of Global Equities Small Cap for Schroder plc and Schroder Ltd. He has been with the Schroders Group since 1981. Education: BA, Worcester College, Oxford University. AZL TARGETPLUS EQUITY FUND The AZL TargetPLUS Equity Fund is subadvised by the First Trust Investment Committee as described above for the AZL First Trust Target Double Play Fund. AZL TARGETPLUS BALANCED FUND, AZL TARGETPLUS MODERATE FUND, AND AZL TARGETPLUS GROWTH FUND THE EQUITY PORTFOLIO: The Equity Portfolio of each of the above listed Funds is subadvised by the First Trust Investment Committee as described above for the AZL First Trust Target Double Play Fund. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 157 THE FIXED INCOME PORTFOLIO: DIVERSIFIED INCOME STRATEGY: CURTIS MEWBOURNE. Mr. Mewbourne is an Executive Vice President, portfolio manager and Co-Head of the Emerging Markets portfolio management team. Mr. Mewbourne has over 17 years of trading experience in Credit Markets. He began his career in finance at Lehman Brothers in 1992 as a market maker for Emerging Market debt. Prior to joining PIMCO in 1999, Mr. Mewbourne ran Salomon Brothers Emerging Market trading desk in London. Mr. Mewbourne manages various portfolios and CDOs in Total Return and Credit strategies including Global Investment Grade, High Yield, and Emerging Markets. Mr. Mewbourne holds an Engineering degree in Computer Science from the University of Pennsylvania. TOTAL RETURN STRATEGY: CHRIS DIALYNAS. Mr. Dialynas is a Managing Director, portfolio manager, and a senior member of PIMCO's investment strategy group. He joined PIMCO in 1980. Mr. Dialynas has written extensively and lectured on the topic of fixed income investing. He served on the Editorial Board of The Journal of Portfolio Management and was a member of Fixed Income Curriculum Committee of the Association for Investment Management and Research. He has 25 years of investment experience and holds a bachelor's degree in economics from Pomona College, and holds an MBA in finance from The University of Chicago Graduate School of Business. MANAGER ALLOCATION: As described under the Risk/Return Summary, under normal market conditions the Manager may allocate the Fund's assets between the Fund's Equity Portfolio and Fixed Income Portfolio within a certain range for each portfolio. However, this does not restrict the Manager from allocating assets outside of this range when the Manager considers it appropriate. Furthermore, the Manager, may allocate from 0% to 100% of the Fund's assets allocated to the Fixed Income Portfolio between the Diversified Income Strategy and the Total Return Strategy. Jeffrey W. Kletti is the portfolio manager for the Manager who determines the allocations among and between the Equity Portfolio and the Fixed Income Portfolio as well as between the two strategies underlying the Fixed Income Portfolio. Mr. Kletti is a Chartered Financial Analyst and joined Allianz Life Insurance Company of North America, the parent of the Manager, in 2000. Mr. Kletti served as senior vice president of the Manager from its inception in 2001 until he was elected its president in 2005. Previously, Mr. Kletti held positions with Fortis Financial Group, IAI Mutual Funds, and Kemper Financial Services. AZL TURNER QUANTITATIVE SMALL CAP GROWTH FUND David Kovacs, CFA, is Senior Portfolio Manager for the Fund. Mr. Kovacs is the Chief Investment Officer of Quantitative Strategies and lead portfolio manager of all the quantitative portfolios. Mr. Kovacs developed the quantitative research model that is currently used by Turner. He has worked at Turner since 1998 and has 18 years of investment experience. Prior to joining Turner Investment Partners, Mr. Kovacs was Director of Quantitative Research at Pilgrim Baxter & Associates. He also served as a senior financial analyst at The West Company. He began his career as a research analyst at Allied Signal, Inc. Mr. Kovacs received his MBA from the University of Notre Dame. Mr. Kovacs is a member of CFA Institute and CFA Society of Philadelphia. Jennifer K. Clark, is a Quantitative Analyst and Co-Portfolio Manager for the Fund. Ms. Clark has worked at Turner since 2006 and has six years of investment experience. Prior to joining Turner Investment Partners, Ms. Clark was an Actuarial Analyst at ACE USA. Ms. Clark received her BS in mathematics with a concentration in actuarial science from Pennsylvania State University. She is an affiliate member of CFA Institute and CFA Society of Philadelphia. AZL VAN KAMPEN COMSTOCK FUND The Fund portfolio is managed by the members of the Subadviser's Multi-Cap Value team. The Multi-Cap Value team consists of portfolio managers and analysts. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund's portfolio are B. Robert Baker, Jason Leder and Kevin Holt, each a Managing Director of the Subadviser, James N. Warwick an Executive Director of the Subadviser, and Devin E. Armstrong, a Vice President of the Subadviser. Mr. Baker has been associated with the Subadviser in an investment management capacity since 1991. Mr. Leder has been associated with the Subadviser in an investment management capacity since 1995. Mr. Holt has been associated with the - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 158 Subadviser in an investment management capacity since 1999. Mr. Armstrong has been associated with the Subadviser in a research capacity since August 2004. Prior to August 2004, Mr. Armstrong was attending Columbia Business School (August 2002 - May 2004) and prior to that, he was a research associate at William Blair & Company. Mr. Warwick has been associated with the Subadviser in an investment management capacity since 2002. Mr. Baker is the lead portfolio manager for the Fund and Messrs. Leder, Holt, Armstrong and Warwick are co-portfolio managers. Each team member is responsible for specific sectors. All team members are responsible for the day-to-day management of the Fund's portfolio, and Mr. Baker is responsible for the execution of the overall strategy of the Fund's portfolio. The composition of the team may change without notice from time to time. AZL VAN KAMPEN EQUITY AND INCOME FUND The Fund is managed by the Subadviser's Equity Income and Taxable Fixed Income Teams. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund's portfolio are James A. Gilligan, Steven Kreider, and Thomas B. Bastian, each a Managing Director of the Subadviser, James O. Roeder, Mark Laskin and Sergio Marchel, each an Executive Director of the Subadviser, and Sergio Marcheli, a Vice President of the Subadviser. Messrs. Gilligan and Kreider are the lead portfolio managers of the Fund. Each member is responsible for specific sectors, except Mr. Marcheli who aids in providing research in all sectors as needed. Mr. Marcheli also manages the cash position in the Fund. All team members are responsible for the day-to-day management of the Fund and Messrs. Gilligan and Kreider are responsible for the execution of the overall strategy of the Fund. The composition of the team may change without notice from time to time. See below for more information about the portfolio managers. AZL VAN KAMPEN GLOBAL FRANCHISE FUND The Fund's portfolio is managed within the Subadviser's Global Franchise team. The current members of the team include Hassan Elmasry, Managing Director of the Subadviser, Paras Dodhia and Michael Allison, each an Executive Director of the Subadviser, and Jayson Vowles, Vice President of the Subadviser. Mr. Elmasry is the lead portfolio manager of the Global Franchise strategy and has 24 years' investment experience. He is supported by Michael Allison, Paras Dodhia and Jayson Vowles, the strategy's dedicated portfolio managers. Messrs. Allison, Dodhia and Vowles have 12, 9, and 8 years of investment experience respectively. As lead portfolio manager, Mr. Elmasry has ultimate responsibility for stock selection and portfolio construction. See below for more information about the portfolio managers. AZL VAN KAMPEN GLOBAL REAL ESTATE FUND The Fund's assets are managed within the Real Estate Team. The members of the team who are currently responsible for the day-to-day management of the Fund are Theodore R. Bigman, Michael te Paske, Sven van Kemenade and Angeline Ho, each a Managing Director of the Subadviser. Together, the team determines the investment strategy, establishes asset-allocation frameworks and directs the implementation of investment strategy. See below for more information about the portfolio managers. AZL VAN KAMPEN GROWTH AND INCOME FUND The Fund's portfolio is managed within Van Kampen's Equity Income team. Current members of the team include James Gilligan, who is the Fund's lead portfolio manager, a Managing Director of Van Kampen, Thomas Bastian, a Managing Director of Van Kampen, James Roeder, Mark Laskin, Executive Directors of Van Kampen. Each member is responsible for specific sectors, with the exception of Sergio Marcheli. All team members are responsible for the day-to-day management of the Fund and James Gilligan is responsible for the execution of the overall strategy of the Fund. The composition of the team may change without notice from time to time. See below for more information about the portfolio managers. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 159 AZL VAN KAMPEN MID CAP GROWTH FUND The Fund's portfolio is managed within the Subadviser's Growth Team. The Current members of the team include Dennis Lynch David Cohen, and Sam Chainani, Managing Directors of the Subadviser, and Alexander Norton and Jason Yeung, Executive Directors of the Subadviser. Dennis Lynch is the lead portfolio manager of the Fund. David Cohen, Sam Chainani, Alex Norton and Jason Yeung are co-portfolio managers. Members of the team collaborate to manage the assets of the Fund. The team manages their funds in 5 primary strategies. The composition of the team may change without notice from time to time. See below for more information about the portfolio managers. THE VAN KAMPEN PORTFOLIO MANAGERS: o Michael Allison has worked for the Subadviser since 2000 and has managed the AZL Van Kampen Global Franchise Fund since February 2005. o B. Robert Baker, has worked for the Subadviser since 1991 and has managed the AZL Van Kampen Comstock Fund since 2001. o Thomas Bastian has worked for the Subadviser since 2003 and joined the team managing the AZL Van Kampen Equity and Income Fund in 2003 and has managed the AZL Van Kampen Growth and Income Fund since 2003. Prior to that, he was a portfolio manager at Eagle Asset Management from 1999 to 2003. o Theodore R. Bigman has worked for the Subadviser since 1995 and has been managing the AZL Van Kampen Global Real Estate Fund since 2006. o Sam Chainani has worked for the Subadviser since 1996 and has managed the AZL Van Kampen Mid Cap Growth since 2004. o David Cohen has worked for the Subadviser since 1993 and has managed the AZL Van Kampen Mid Cap Growth Fund since 2003. o Paras Dodhia has worked for the Subadviser since 2002 and has managed the AZL Van Kampen Global Franchise Fund since 2002. o Hassan Elmasry, has worked for the Subadviser since 1995 and has managed the AZL Van Kampen Global Franchise Fund since April 2002. o James Gilligan has worked for the Subadviser since 1985 and joined the team managing the AZL Van Kampen Equity and Income Fund in 1990 and has managed the AZL Van Kampen Growth and Income Fund since 2001. o Gerhardt Herbert has worked for the Subadviser since 1994 and joined the team managing the AZL Van Kampen Equity and Income Fund in 2005. Prior to 2005, Mr. Herbert worked in an investment management capacity with the Subadviser. o Angeline Ho has worked for the Subadviser since 1997 and has been managing the AZL Van Kampen Global Real Estate Fund since 2006. o Kevin Holt has worked for the Subadviser since 1999 and has managed the AZL Van Kampen Comstock Fund since 2001. o Sven van Kemenade has worked for the Subadviser since 1997 and has been managing the AZL Van Kampen Global Real Estate Fund since 2006. o Steven Kreider has worked for the Subadviser since February 1998 and began managing the AZL Equity and Income Fund in April 2007. o Mark Laskin has worked for the Subadviser since October 2000 and began managing both the AZL Equity and the AZL Growth and Income Fund in January 2007. o Jason Leder has worked for the Subadviser since 1995 and has managed the AZL Van Kampen Comstock Fund since 2001. o Dennis Lynch, who is the Fund's lead portfolio manager, has worked for the Subadviser since 1998 and has managed the AZL Van Kampen Mid Cap Growth Fund since 2003. o Sergio Marcheli has worked for the Subadviser since 2002 and joined the team managing the AZL Van Kampen Equity and Income Fund in 2003 and has managed the AZL Van Kampen Growth and Income Fund since 2003. From 2002-2003, Mr. Marcheli worked in an investment management capacity with the Subadviser and prior to that, he worked in a marketing capacity for an affiliate of the Subadviser. o Alexander Norton has worked for the Subadviser since 2000 and has managed the AZL Van Kampen Mid Cap Growth Fund since July 2005. o Michael te Paske has worked for the Subadviser since 1997 and has been managing the AZL Van Kampen Global Real Estate Fund since 2006. o James O. Roeder has worked for the Subadviser since 1999 and joined the team managing the AZL Van Kampen Equity and Income Fund in 1999 and has managed the AZL Van Kampen Growth and Income Fund since 2001. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 160 o Jayson Vowles has worked for the Subadviser since 2003 and has managed the AZL Van Kampen Global Franchise Fund since 2003. Prior to 2003, Mr. Vowles worked for Goldman Sachs International from 2001 to 2003 as an associate, modeling fixed income derivatives. ? Jason Yeung has worked for the Subadviser since 2002, and has managed the AZL Van Kampen Mid Cap Growth Fund since September 2007. - -------------------------------------------------------------------------------- MORE INFORMATION ABOUT FUND MANAGEMENT The Manager, Oppenheimer Capital LLC, PIMCO, and Nicholas-Applegate Capital Management LLC are subsidiaries of Allianz SE, one of the world's largest insurance and financial services companies. Allianz SE is headquartered in Munich, Germany and has operations in more than 70 countries. As of December 31, 2007, Allianz SE had third-party assets under management of $1.125 trillion. In North America, Allianz SE subsidiaries are engaged in the life insurance, property/casualty insurance, broker-dealer, banking, investment adviser, and mutual fund businesses. The SAI has more detailed information about the Manager, the Subadvisers and other service providers. The SAI also provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Funds. - -------------------------------------------------------------------------------- DUTIES OF THE MANAGER AND SUBADVISERS Within the scope of an investment program approved by the Board of Trustees, the Manager oversees the AZL Funds and the selection of Subadvisers and advises on the Funds' investment policies. The Subadvisers determine which securities are bought and sold, and in what amounts. The Manager is also responsible for allocation of assets between the Equity Portfolio and Fixed Income Portfolio and between the Diversified Income Strategy and the Total Return Strategy within the Fixed Income Portfolio for the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund. However, the Subadvisers determine which securities are bought and sold, and in what amounts, for each of those portfolios and strategies. The Manager continuously monitors the performance of various investment management organizations, including the Subadvisers, and generally oversees the services provided to Allianz VIP Funds by its administrator, custodian and other service providers. Further information about the Subadvisers is included in the SAI. The Manager is paid a fee as set forth under "Fees" below, by the Fund for its services, which includes any fee paid to the Subadviser. Each of these Funds and the Manager, under an order received from the Securities and Exchange Commission ("SEC") on September 17, 2002, may enter into and materially amend agreements with Subadvisers without obtaining shareholder approval. This type of structure is commonly known as a "Manager of Managers" structure. For any Fund that is relying on the order, the Manager may: O hire one or more subadvisers; O change subadvisers; and O reallocate management fees between itself and subadvisers. The Manager continues to have the ultimate responsibility for the investment performance of these Funds due to its responsibility to oversee Subadvisers and recommend their hiring, termination and replacement. No Fund will rely on the order until it receives approval from: O its shareholders; or O the Fund's sole initial shareholder before the Fund is available to the public, and the Fund states in its prospectus that it intends to rely on the order. The Manager will not enter into an agreement with an affiliated subadviser without that agreement, including the compensation to be paid under it, being similarly approved except as may be permitted by applicable law. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 161 POTENTIAL CONFLICT OF INTEREST Potential or apparent conflicts of interest may arise for the Manager related to its discretion over the allocation of assets for the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "Multi-Manager Funds"). As described under the Risk/Return Summary, under normal market conditions the Manager may allocate the Funds' assets between each of the Funds' Equity Portfolios and Fixed Income Portfolios within a certain range for each portfolio. However, this does not restrict the Manager from allocating assets outside of this range when the Manager considers it appropriate. Furthermore, the Manager, may allocate from 0% to 100% of each of the Funds' assets allocated to the Fixed Income Portfolio between the Diversified Income Strategy and the Total Return Strategy. The Manager receives a management fee for the services provided and expenses assumed for each Fund, including each of the Multi-Manager Funds. Also for each Multi-Manager Fund, the Manager pays each Subadviser a subadvisory fee based on the assets allocated to each Subadviser out of the management fees it receives. The amount of the subadvisory fee differs between the Equity Portfolio (subadvised by First Trust Advisors L.P.) and the Fixed Income Portfolio (subadvised by Pacific Investment Management Company LLC). Furthermore, the subadvisory fees the Manager pays to the Subadviser of the Fixed Income Portfolio differ between the Diversified Income Strategy and the Total Return Strategy. These differences may create an incentive for the Manager to consider the impact on net revenues the Manager will receive in allocating among and between the Equity Portfolio and Fixed Income Portfolio and among and between the Diversified Income Strategy and the Total Return Strategy of the Fixed Income Portfolio. However, the Manager is a fiduciary of the Funds and is legally obligated to act in their best interests when allocating assets among subadvisers and selecting strategies without taking fees into consideration. - -------------------------------------------------------------------------------- PAYMENTS TO AFFILIATED INSURANCE COMPANIES Currently, the Funds are available as underlying investment options of variable annuity contracts and variable life insurance policies (the "Products") offered by Allianz Life Insurance Company of North America and its affiliates (the "Affiliated Insurance Companies"), which are also affiliates of the Manager. In addition to the Funds, these products include other funds for which the Manager is not the investment manager (the "Nonproprietary Funds"). The Affiliated Insurance Companies may receive payments from the sponsors of the Nonproprietary Funds as a result of including them as investment options in the Products. Similarly, the Affiliated Insurance Companies are allocated resources, including revenue earned by the Manager for providing investment management and other services to the Funds, as a result of including the Funds in the Products. The amount of payments from Nonproprietary Funds or allocations of resources from the Manager varies, and may be significant and may create an incentive for the Affiliated Insurance Companies regarding its decision of which funds to include in the Products. OTHER ADMINISTRATIVE SERVICES The Affiliated Insurance Companies provide administrative and other services to the contract and policy owners on behalf of the funds, including the Funds and the Nonproprietary Funds, that are available under the Products. The Affiliated Insurance Companies may receive payment for these services. - -------------------------------------------------------------------------------- TRANSFER SUPPORTED FEATURES OF CERTAIN ANNUITY CONTRACTS The Funds may be offered under certain variable annuities that have guaranteed value or benefit features that are supported by automatic transfers between investment choices available under the product (the "Transfer Supported Features"). If the Transfer Supported Features are available to you, they are described in the prospectus for your variable annuity contract. These features may be known as the Guaranteed Account Value Benefit, Guaranteed Principal Value Benefit, the PRIME Plus Benefit, the Lifetime Plus Benefit, the Lifetime Plus II Benefit, Target Date Retirement Benefit, or another name. Under the Transfer Supported Features, contract values may be rebalanced periodically. This rebalancing can cause a fund, including the Funds, to incur transactional expenses as it buys or sells securities to manage asset inflows or outflows. Also, large outflows from a fund may increase expenses attributable to the assets remaining in the fund. These increased expenses can have an adverse impact on the performance of an affected fund and on contract or policy owners who have assets allocated to it. Even if you do not participate in the Transfer Supported Programs you may be impacted if you allocate assets to a fund, including the Funds, that is affected by transfers under the Transfer Supported Features. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 162 - -------------------------------------------------------------------------------- MANAGEMENT FEES Each Fund paid the Manager a fee for advisory services (including subadvisory fees) during 2007 at the annual rate shown on the following table, before and after fee waivers:
PERCENTAGE OF AVERAGE PERCENTAGE OF AVERAGE NET ASSETS AS OF 12/31/07 NET ASSETS AS OF 12/31/07 BEFORE FEE WAIVERS AFTER FEE WAIVERS - ---------------------------------------------------------------------------------------------------------------------------- AZL AIM International Equity Fund 0.90% 0.90% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Columbia Technology Fund 0.80% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Davis NY Venture Fund 0.75% 0.75% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Dreyfus Founders Equity Growth Fund 0.77% 0.74% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Dreyfus Premier Small Cap Value Fund 0.90% 0.85% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL First Trust Target Double Play Fund 0.60% 0.36% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Franklin Small Cap Value Fund 0.75% 0.75% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Jennison 20/20 Focus Fund 0.77% 0.72% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Jennison Growth Fund 0.80% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL LMP Large Cap Growth 0.80% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Legg Mason Growth Fund 0.85% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Legg Mason Value Fund 0.75% 0.75% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Money Market Fund 0.35% 0.35% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL NACM International Fund 0.85% 0.79% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Neuberger Berman Regency Fund 0.75% 0.75% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL OCC Opportunity Fund 0.85% 0.85% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL OCC Value Fund 0.75% 0.73% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Global Fund 0.90% 0.80% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer International Growth Fund 0.73% 0.73% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Oppenheimer Main Street Fund 0.80% 0.75% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL PIMCO Fundamental IndexPLUS Total Return Fund 0.75% 0.74% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Schroder Emerging Markets Equity Fund 1.23% 0.92% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Schroder International Small Cap Fund 1.00% 1.00% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL S&P 500 Index Fund 0.17% -0.07% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Small Cap Stock Index Fund 0.26% -0.03% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Balanced Fund 0.52% 0.11% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Equity Fund 0.60% 0.25% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Growth Fund 0.52% 0.36% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL TargetPLUS Moderate Fund 0.52% 0.27% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Turner Quantitative Small Cap Growth Fund 0.85% 0.85% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Comstock Fund 0.72% 0.69% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Equity and Income Fund 0.75% 0.70% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Global Franchise Fund 0.95% 0.94% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Global Real Estate Fund 0.90% 0.88% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Growth and Income Fund 0.75% 0.66% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- AZL Van Kampen Mid Cap Growth Fund 0.80% 0.76% - ----------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 163 - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LEGAL PROCEEDINGS As of May 1, 2008 the Manager is not aware of any material pending legal proceedings, other than routine litigation incidental to the conduct of their respective businesses, to which the Funds, the Manager or the principal underwriter is a party. However, some of the Subadvisers currently are the subject of investigations or proceedings which relate to their management of other mutual funds. Brief descriptions thereof are set forth below. Terms that are defined in the following legal proceedings apply only to the sections in which they appear. Such proceedings would be material only to the extent that they are likely to have a material adverse effect on the ability of the Subadviser to perform its agreement with the Manager. BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION BlackRock Institutional Management Corporation is not the subject of any litigation that is currently expected to be material to its business or have a material impact on the services BlackRock provides to its clients. CLEARBRIDGE ADVISORS, LLC To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. COLUMBIA MANAGEMENT ADVISORS, LLC On February 9, 2005, Columbia Management Advisors, Inc. (which has since merged into Banc of America Capital Management, LLC (now named Columbia Management Advisors, LLC)) ("Columbia") and Columbia Funds Distributor, Inc. (which has been renamed Columbia Management Distributors, Inc.) (the "Distributor") (collectively, the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order") on matters relating to mutual fund trading. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Columbia, the Distributor, the Trustees of the Columbia Funds, Bank of America Corporation and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of the Columbia Funds that asserts claims under federal securities laws and state common law. On February 25, 2005, Columbia and other defendants filed motions to dismiss the claims in the pending cases. On March 1, 2006, for reasons stated in the court's memoranda dated November 3, 2005, the U.S. District Court for the District of Maryland granted in part and denied in part the defendants' motions to dismiss. The court dismissed all of the class action claims pending against the Columbia Funds Trusts. As to Columbia and the Distributor, the claims under the Securities Act of 1933, the claims under Sections 34(b) and 36(a) of the Investment Company Act of 1940 ("ICA") and the state law claims were dismissed. The claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and claims under Section 36(b) of the ICA were not dismissed. On March 21, 2005, a purported class action was filed in Massachusetts state court alleging that certain conduct, including market timing, entitled Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit was removed to federal court in Massachusetts and transferred to the MDL. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 164 On September 14, 2007, the plaintiffs and the Columbia defendants named in the MDL, including the Columbia Funds, entered into a stipulation of settlement with respect to all Columbia-related claims in the MDL described above, including the CDSC Lawsuit. The settlement is subject to court approval. In 2004, the Columbia Funds' adviser and distributor and certain affiliated entities and individuals were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. Certain Columbia Funds were named as nominal defendants. The suits allege, INTER ALIA, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purposes. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims by plaintiffs and entered final judgment in favor of the defendants. The plaintiffs appealed to the United States Court of Appeals for the First Circuit on December 30, 2005. A stipulation and settlement agreement dated January 19, 2007 was filed in the First Circuit on February 14, 2007, with a joint stipulation of dismissal and motion for remand to obtain district court approval of the settlement. That joint motion was granted and the appeal was dismissed. On March 6, 2007, the case was remanded to the District Court. The settlement, approved by the District Court on September 18, 2007, became effective October 19, 2007. Pursuant to the settlement, the funds' adviser and/or its affiliates made certain payments, including plaintiffs' attorneys' fees and costs of notice to class members. DAVIS SELECTED ADVISERS, L.P. To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. THE DREYFUS CORPORATION To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. FIRST TRUST ADVISORS, L.P. To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 165 FRANKLIN ADVISORY SERVICES, LLC This disclosure is on behalf of Franklin Advisory Services, LLC ("FAS, LLC"), a wholly-owned subsidiary of Franklin/Templeton Distributors, Inc. ("FTDI"), which is a wholly-owned subsidiary of Franklin Resources, Inc. This response is limited to material investment management related matters from August 2003 to August 18, 2006 and does not include routine matters in the ordinary course of business, if any. In addition to the matters identified below, from time to time Franklin Resources, Inc. and certain of its subsidiaries (together the "Company") may receive requests for documents or other information from governmental authorities or regulatory bodies or also may become the subject of governmental or regulatory investigations and/or examinations. As part of various investigations by a number of federal, state, and foreign regulators and governmental entities, including the Securities and Exchange Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts (the "State of Massachusetts"), relating to certain practices in the mutual fund industry, including late trading, market timing and marketing support payments to securities dealers who sell fund shares, the Company, as well as certain current or former executives and employees of the Company, received subpoenas and/or requests for documents, information and/or testimony. The Company and its current employees provided documents and information in response to those requests and subpoenas. On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary, Franklin Advisers, Inc. ("FAV"), reached a settlement with the SEC that resolved the issues resulting from an SEC investigation into market timing activity. Under the terms of the settlement and the SEC's administrative order, pursuant to which FAV neither admitted nor denied any of the findings contained therein, FAV agreed, among other matters, to pay $50 million, of which $20 million is a civil penalty, to be distributed to shareholders of certain funds in accordance with a plan to be developed by an independent distribution consultant. Such a distribution plan has been prepared and submitted to the SEC for approval. On June 6, 2007, the SEC posted for public comment the proposed plan of distribution for the market timing settlement. Once the SEC approves the final plan of distribution, disbursements of settlement monies will be made promptly to individuals who were shareholders of the designated funds during the relevant period, in accordance with the terms and conditions of the settlement and plan. Franklin Resources, Inc., certain of its subsidiaries and certain funds, current and former officers, employees, and directors have been named in multiple lawsuits in different courts alleging violations of various federal securities and state laws and seeking, among other relief, monetary damages, restitution, removal of fund trustees, directors, investment managers, administrators, and distributors, rescission of management contracts and 12b-1 plans, and/or attorneys' fees and costs. Specifically, the lawsuits claim breach of duty with respect to alleged arrangements to permit market timing and/or late trading activity, or breach of duty with respect to the valuation of the portfolio securities of certain Templeton funds managed by Franklin Resources, Inc. subsidiaries, allegedly resulting in market timing activity. The majority of these lawsuits duplicate, in whole or in part, the allegations asserted in the SEC's findings as described above. The lawsuits are styled as class actions, or derivative actions on behalf of either the named funds or Franklin Resources, Inc. To date, more than 400 similar lawsuits against at least 19 different mutual fund companies, among other defendants, have been filed in federal district courts throughout the country. Because these cases involve common questions of fact, the Judicial Panel on Multidistrict Litigation (the Judicial Panel) ordered the creation of a multidistrict litigation in the United States District Court for the District of Maryland, entitled "In re Mutual Funds Investment Litigation" (the MDL). The Judicial Panel then transferred similar cases from different districts to the MDL for coordinated or consolidated pretrial proceedings. On December 13, 2004, Franklin Templeton Distributors, Inc. (Distributors) (the principal underwriter of shares of the Franklin Templeton mutual funds) and Advisers reached an agreement with the SEC, resolving the issues resulting from the SEC's investigation concerning marketing support payments to securities dealers who sell fund shares. In connection with that agreement, in which Advisers and Distributors neither admitted nor denied any of the findings contained therein, they agreed to pay the funds a penalty of $20 million and disgorgement of $1 (one dollar), in accordance with a plan to be developed by an independent distribution consultant to be paid for by Advisers and Distributors. The SEC approved the independent distribution consultant's proposed plan of distribution arising from this SEC order, and disbursement of the settlement monies to the designated funds under this plan was completed in September 2006, in accordance with the terms and conditions of the SEC's order and the plan. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 166 Franklin Resources, Inc., certain of its subsidiaries and certain funds, current and former officers, employees, and directors, have also been named in multiple lawsuits alleging violations of federal securities and state laws relating to the disclosure of marketing support payments and/or payment of allegedly excessive commissions and/or advisory or distribution fees, and seeking, among other relief, monetary damages, restitution, rescission of advisory contracts, including recovery of all fees paid pursuant to those contracts, an accounting of all monies paid to the named investment managers, declaratory relief, injunctive relief, and/or attorneys' fees and costs. These lawsuits are styled as class actions or derivative actions brought on behalf of certain funds. Franklin Resources, Inc. previously disclosed these issues as matters under investigation by government authorities and the subject of an internal company inquiry as well as private lawsuits in its regulatory filings and on its public website. Any further updates on these matters will be disclosed on Franklin Resources, Inc.'s website at franklintempleton.com under "Statement on Current Industry Issues." INVESCO AIM CAPITAL MANAGEMENT, INC. REGULATORY ACTION ALLEGING MARKET TIMING On August 30, 2005, the West Virginia Office of the State Auditor - Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC purports to make findings of fact that that AIM and ADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws (essentially mirroring the WVAG's allegations mention above). The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the WVASC, AIM's time to respond to that Order has been indefinitely suspended. PRIVATE CIVIL ACTIONS ALLEGING MARKET TIMING Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group, Inc. ("AIM Management"), AMVESCAP, Plc., the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial. Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. In January 2008, we reached an agreement in principal to settle both Lepera and Karlin. It is subject to Court approval and individual plaintiffs have the right to object. A list identifying such lawsuits (excluding those lawsuits that have been recently transferred as mentioned herein) that have been served on IFG, AIM, the AIM Funds or related entities is set forth in Appendix A-1. PRIVATE CIVIL ACTIONS ALLEGING IMPROPER USE OF FAIR VALUE PRICING Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 167 law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived s set forth in Appendix A-2. PRIVATE CIVIL ACTIONS ALLEGING EXCESSIVE ADVISORY AND/OR DISTRIBUTION FEES (SETTLED) Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. These cases were settled and the Court entered an Order of Dismissal with Prejudice on January 29, 2007. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities is set forth in Appendix A-3. PRIVATE CIVIL ACTIONS ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES AND DIRECTED-BROKERAGE ARRANGEMENTS (DISMISSED WITH PREJUDICE BY COURT ORDER) Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. On September 17, 2007, the Court granted defendants' Motion to Dismiss and dismissed all of plaintiffs' claims with prejudice so they cannot amend or refile their Complaint. As of the date of this report, Plaintiffs have failed to timely filed an appeal. Therefore barring some unforeseen circumstances, this matter is concluded. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities is set forth in Appendix A-4. APPENDIX A-1 PENDING LITIGATION ALLEGING MARKET TIMING (SETTLEMENT PENDING COURT APPROVAL) The following civil lawsuits listed below, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived (with the exception of the Sayegh lawsuit discussed below). As described above, all these suits were transferred to the MDL Court for pre-trial purposes. Pursuant to an Order of the MDL Court, all these suits were consolidated into three amended complaints: o A Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 168 o A Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and Fund registrants o An Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. As noted below, the Court dismissed this suit on September 15, 2006, which plaintiff has appealed The plaintiffs in two of these state lawsuits (Carl E. Vonder Haar and Mike Sayegh) continue to seek remand to state court. The other cases could be remanded to their courts of origin if they proceed to trial. As a result of the MDL Court's rulings granting in part Defendants Motions to Dismiss, the derivative lawsuit now only maintains a single claim under Section 36(b) of the 1940 Act based on a failure to disclose market-timing to the funds' Board of Trustees. This sole remaining claim is against the following defendants: AIM, ADI, AIM Investment Services, Inc., INVESCO Asset Management, Ltd., Fund Management Company, INVESCO Distributors, Inc., IFG, INVESCO Global Asset Management (N.A.), and INVESCO Institutional (N.A.), Inc. All other claims and defendants have been dismissed. As a result of the MDL Court's rulings granting in part Defendants Motions to Dismiss, the class action lawsuit now only has the following claims and defendants and all others have been dismissed: o Section 10(b) of the Exchange Act against AIM, ADI, AIM Investment Services, Inc., AMVESCAP PLC, INVESCO Asset Management, Ltd., INVESCO Distributors, Inc., INVESCO Funds Group, Inc., INVESCO Global Asset Management (N.A.), INVESCO Institutional (N.A.), Inc., Michael Brugman, Mark Williamson, Michael D. Legoski, Raymond R. Cunningham, Thomas A. Kolbe, and Timothy J. Miller; o Section 20(a) of the Exchange Act against AIM, AMVESCAP, PLC, IFG, Mark Williamson and Raymond Cunningham; and o Section 36(b) of the Investment Company Act against IFG. On September 15, 2006, Judge Motz dismissed the entire ERISA-based suit against the AIM defendants. Plaintiff has appealed this ruling to the Federal appeals court. Defendants filed their Original Answer in the class action complaint on March 31, 2006. Defendants' obligation to answer the derivative action has been indefinitely deferred by the MDL Court. As stated above, we have reached an agreement to settle the class action (Lepera) and the derivative action (Karlin). This settlement agreement is subject to court approval and individual plaintiffs have the right to object. RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in the District Court, City and County of Denver, Colorado, (Civil Action No. 03-CV-7600), filed on October 2, 2003. This claim alleges: common law breach of fiduciary duty; common law breach of contract; and common law tortious interference with contract. The plaintiff in this case is seeking: compensatory and punitive damages; injunctive relief; disgorgement of revenues and profits; and costs and expenses, including counsel fees and expert fees. MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND, EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL MANAGEMENT L.P., ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA FINANCIAL INC., ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES SCHAFFRAN, MARSH & MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES 1-500, - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 169 in the Superior Court of the State of California, County of Los Angeles (Case No. BC304655), filed on October 22, 2003 and amended on December 17, 2003 to substitute INVESCO Funds Group, Inc. and Raymond R. Cunningham for unnamed Doe defendants. This claim alleges unfair business practices and violations of Sections 17200 and 17203 of the California Business and Professions Code. The plaintiff in this case is seeking: injunctive relief; restitution, including pre-judgment interest; an accounting to determine the amount to be returned by the defendants and the amount to be refunded to the public; the creation of an administrative process whereby injured customers of the defendants receive their losses; and counsel fees. RAJ SANYAL, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER, CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B. WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS, THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B. CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT, BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL MANAGEMENT, LLC, AND NATIONS FUNDS TRUST, in the Superior Court Division, State of North Carolina (Civil Action No. 03-CVS-19622), filed on November 14, 2003. This claim alleges common law breach of fiduciary duty; abuse of control; gross mismanagement; waste of fund assets; and unjust enrichment. The plaintiff in this case is seeking: injunctive relief, including imposition of a constructive trust; damages; restitution and disgorgement; and costs and expenses, including counsel fees and expert fees. L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC. V. AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the United States District Court, District of Colorado (Civil Action No. 03-MK-2406), filed on November 28, 2003. This claim alleges violations of Section 36(b) of the Investment Company Act of 1940 ("Investment Company Act"), and common law breach of fiduciary duty. The plaintiff in this case is seeking damages and costs and expenses, including counsel fees and expert fees. RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-F-2441), filed on December 2, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act of 1933 (the "Securities Act"); Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 170 INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-F-2456), filed on December 4, 2003. This claim alleges violations of: Sections 11 and 15 of Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 03-CV-9634), filed on December 4, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 171 disgorgement; and other costs and expenses, including counsel fees and expert fees. JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in the District Court, City and County of Denver, Colorado (Case Number 03CV9268), filed on December 5, 2003. This claim alleges common law breach of fiduciary duty and aiding and abetting breach of fiduciary duty. The plaintiffs in this case are seeking: injunctive relief; accounting for all damages and for all profits and any special benefits obtained; disgorgement; restitution and damages; costs and disbursements, including counsel fees and expert fees; and equitable relief. STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA, AND DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-N-2559), filed on December 17, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. JOSEPH R. RUSSO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 172 AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 03-CV-10045), filed on December 18, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003. This claim alleges violations of Sections 404, 405 and 406B of the Employee Retirement Income Security Act ("ERISA"). The plaintiffs in this case are seeking: declarations that the defendants breached their ERISA fiduciary duties and that they are not entitled to the protection of Section 404(c)(1)(B) of ERISA; an order compelling the defendants to make good all losses to a particular retirement plan described in this case (the "Retirement Plan") resulting from the defendants' breaches of their fiduciary duties, including losses to the Retirement Plan resulting from imprudent investment of the Retirement Plan's assets, and to restore to the Retirement Plan all profits the defendants made through use of the Retirement Plan's assets, and to restore to the Retirement Plan all profits which the participants would have made if the defendants had fulfilled their fiduciary obligations; damages on behalf of the Retirement Plan; imposition of a constructive trust, injunctive relief, damages suffered by the Retirement Plan, to be allocated proportionately to the participants in the Retirement Plan; restitution and other costs and expenses, including counsel fees and expert fees. PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC. AND AIM ADVISER, INC., in the United States District Court, District of Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003. This claim alleges violations of Sections 15(a), 20(a) and 36(b) of the Investment Company Act. The plaintiffs in this case are seeking: rescission and/or voiding of the investment advisory agreements; return of fees paid; damages; and other costs and expenses, including counsel fees and expert fees. LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-00492), filed on January 21, 2004. This claim alleges violations of: Sections 11 and 15 of the 1933 Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. ROBERT S. BALLAGH, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 173 FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0152), filed on January 28, 2004. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. JONATHAN GALLO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0151), filed on January 28, 2004. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. EILEEN CLANCY, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 174 TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-0713), filed on January 30, 2004. This claim alleges violations of Sections 11 and 15 of the Securities Act. The plaintiffs in this case are seeking: compensatory damages, rescission; return of fees paid; and other costs and expenses, including counsel fees and expert fees. SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-00915), filed on February 3, 2004. This claim alleges violations of Sections 11 and 15 of the Securities Act and common law breach of fiduciary duty. The plaintiffs in this case are seeking compensatory damages; injunctive relief; and costs and expenses, including counsel fees and expert fees. CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-CV-812), filed on February 5, 2004. This claim alleges: common law breach of fiduciary duty; breach of contract; and tortious interference with contract. The plaintiffs in this case are seeking: injunctive relief; damages; disgorgement; and costs and expenses, including counsel fees and expert fees. HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., DEFENDANTS, AND INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS, NOMINAL DEFENDANTS, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0397), filed on March 4, 2004. This claim alleges violations of Section 36(b) of the Investment Company Act and common law breach of fiduciary duty. The plaintiff in this case is seeking damages and costs and expenses, including counsel fees and expert fees. CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO DYNAMICS FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC., AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO DYNAMICS FUND AND THE "INVESCO FUNDS", NOMINAL DEFENDANTS, in the United States District Court, District of Delaware (Civil Action No. 04-CV-188), filed on March 29, 2004. This claim alleges: violations of Section 36(b) of the Investment Company Act; violations of Section 206 of the Advisers Act; common law breach of fiduciary duty; and civil conspiracy. The plaintiff in this case is seeking: damages; injunctive relief; and costs and expenses, including counsel fees and expert fees. ANNE G. PERENTESIS (WIDOW) V. AIM INVESTMENTS, ET AL (INVESCO FUNDS GROUP, INC.), in the District Court of Maryland for Baltimore County (Case No. 080400228152005), filed on July 21, 2005. This claim alleges financial losses, mental anguish and emotional distress as a result of unlawful market timing and related activity by the defendants. The plaintiff in this case is seeking damages and costs ad expenses. APPENDIX A-2 PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 175 The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived. T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON SMITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL, INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 2003-L-001253), filed on September 23, 2003. This claim alleges: common law breach of duty and common law negligence and gross negligence. The plaintiffs in these cases are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. The Third Judicial Circuit Court for Madison County, Illinois has issued an order severing the claims of plaintiff Parthasarathy from the claims of the other plaintiffs against AIM and other defendants. As a result, AIM is a defendant in the following severed action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and the relief sought in the Woodbury lawsuit are identical to those in the Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury lawsuit removed the action to Federal Court (U.S. District Court, Southern District of Illinois, No. 05-CV-302-DRH). This case has been through various procedural steps, including complete dismissal and appeals. The parties were contesting whether the proper venue for this action is the Federal District Court or the Illinois state court and had fully briefed the issue. On July 17, 2007, the Court lifted the Stay and ordered this case remanded back to Illinois State Court. Relying on the rulings of the Appellate Courts, the judge ruled that Defendants' Removal was procedurally defective. On January 1, 2008, the Court denied defendants' Motion to Dismiss this suit in the Illinois State Court. JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the United States District Court, Southern District of Illinois (East St. Louis) (Case No. 03-772), filed on November 19, 2003. This claim alleges: violations of Sections 36(a) and 36(b) of the Investment Company Act of 1940; common law breach of duty; and common law negligence and gross negligence. The plaintiff in this case is seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. This lawsuit has been transferred to the MDL Court by order of the United States District Court, Southern District of Illinois (East St. Louis). APPENDIX A-3 SETTLED LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR DISTRIBUTION FEES The following civil lawsuits involve, depending on the lawsuit, one or more of IFG, AIM, IINA, ADI and/or INVESCO Distributors and allege that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and, in some cases, also allege that the defendants adopted unlawful distribution plans. These lawsuits either have been served or have had service of process waived. All of these lawsuits have been settled. All of the lawsuits discussed below were transferred to the United States District Court for the Southern District of Texas, Houston Division by order of the applicable United States District Court in which they were initially filed. By order of the United States District Court for the Southern District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed below have been consolidated for pre-trial purpose into the Berdat lawsuit discussed below and administratively closed. On December 29, 2005, the defendants filed a Notice of Tag-Along case in the MDL Court regarding this matter due to the extensive allegations of market timing contained in the plaintiffs' Second Amended Consolidated Complaint. These cases were settled; and, as a result, this suit was transferred back to the Federal District Court in Houston which then signed and entered an Order of Dismissal with Prejudice on January 29, 2007. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 176 RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in the United States District Court for the Southern District of Illinois (Civil Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim alleges violations of Section 36(b) of the Investment Company Act of 1940 (the "Investment Company Act"). The plaintiff in this case is seeking: damages; injunctive relief; prospective relief in the form of reduced fees; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM DISTRIBUTORS, INC., in the United States District Court for the Middle District of Florida, Tampa Division (Case No. 8:04-CV-978-T24-TBM), filed on April 29, 2004. This claim alleges violations of Sections 36(b) and 12(b) of the Investment Company Act. The plaintiffs in this case are seeking: damages; injunctive relief; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS, COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M DISTRIBUTORS, INC., in the United States District Court for the Middle District of Florida, Tampa Division (Case No. 8:04-CV-977-T17-MSS), filed on April 29, 2004. This claim alleges violations of Sections 36(b) and 12(b) of the Investment Company Act. The plaintiffs in this case are seeking: damages; injunctive relief; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. APPENDIX A-4 LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES AND DIRECTED-BROKERAGE ARRANGEMENTS (DISMISSED WITH PREJUDICE BY COURT ORDER) The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits either have been served or have had service of process waived. By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On June 7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they make substantially identical allegations to those of the individual underlying lawsuits. However, the City of Chicago Deferred Compensation Plan has been joined as an additional plaintiff in the Consolidated Amended Complaint. Plaintiffs added defendants, including current and former directors/trustees of the AIM Funds formerly advised by IFG. On September 29, 2006, the Court granted the defendants' Motions to Dismiss and dismissed with prejudice all claims against all the defendants except for the Section 36(b) claim, which was dismissed with leave to amend to plead it properly as a derivative claim. On December 7, 2006, the plaintiffs filed an amended derivative complaint under Section 36(b), which included new allegations that the defendants charged excessive fees. On September 17, 2007, the Court granted defendants' Motion to Dismiss and dismissed all of plaintiffs' claims with prejudice so they cannot amend or refile their Complaint. As of the date of this report, Plaintiffs have failed to timely file an appeal. Therefore barring some unforeseen circumstances, this matter is concluded. JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 177 AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the District of Colorado (Civil Action No. 04-B-0958), filed on May 10, 2004. The plaintiffs voluntarily dismissed this case in Colorado and re-filed it on July 2, 2004 in the United States District Court for the Southern District of Texas, Houston Division (Civil Action H-04-2589). This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act of 1940 (the "Investment Company Act") and violations of Sections 206 and 215 of the Investment Advisers Act of 1940 (the "Advisers Act"). The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 178 FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the District of Colorado (Civil Action No. 04-N-0989), filed on May 13, 2004. The plaintiff voluntarily dismissed this case in Colorado and re-filed it on July 1, 2004 in the United States District Court for the Southern District of Texas, Houston Division (Civil Action H-04-2587). This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2802), filed on July 9, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 179 JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W. MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2832), filed on July 12, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 180 INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2884), filed on July 15, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E. PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J. STEPHENSON TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 181 Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-3030), filed on July 27, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. JENNISON ASSOCIATES LLC To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. LEGG MASON CAPITAL MANAGEMENT, INC. To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. NEUBERGER BERMAN MANAGEMENT INC. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Subadviser is a party. NICHOLAS-APPLEGATE CAPITAL MANAGEMENT LLC To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. OPPENHEIMER CAPITAL LLC In June and September 2004, Allianz Global Investors of America, L.P., the parent company of OCC, and certain of its affiliates (Allianz Global Investors Fund Management LLC ("AGIFM") , PEA Capital LLC ("PEA") and Allianz Global Investors Distributors LLC) agreed to settle, without admitting or denying the allegations, claims brought by the SEC, the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which AGIFM serves as investment adviser. Two settlements (with the SEC and New Jersey) related to an alleged "market timing" arrangement in certain open-end funds sub-advised by PEA. Two settlements (with the SEC and California) related to the alleged use of cash and fund portfolio commissions to finance "shelf-space" arrangements with broker-dealers for open-end funds. AGIFM and its affiliates agreed to pay a total of $68 million to settle the claims related to market timing and $20.6 million to settle the claims related to shelf-space. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, brokerage commissions, revenue sharing and shelf-space arrangements, and consented to cease and desist orders and censures. None of the settlements alleged that any inappropriate activity took place with respect to the Fund. Since February 2004, AGIFM and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning "market timing," and "revenue sharing/shelf -space/directed brokerage," which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multi-district litigation proceeding in the United States District Court for the District of Maryland, and the revenue sharing/shelf-space/directed brokerage lawsuits have been consolidated in the United States District Court for the District of Connecticut. Any potential resolution of these matters may include, but not be limited to, judgments or settlements for damages against AGIFM or its affiliates or related injunctions. Subsequent to recent events, PEA deregistered as an investment adviser and dissolved, and its operations and investment personnel were integrated into OCC. OCC believes that these matters are not likely to have a material adverse effect on the Fund or on its ability to perform its investment advisory activities relating to the Fund. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 182 The foregoing speaks only as of the date of this prospectus. While there may be additional litigation or regulatory developments in connection with the matters discussed above, the foregoing disclosure of litigation and regulatory matters will be updated, if required, only if those developments are material. OPPENHEIMERFUNDS, INC. To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. PACIFIC INVESTMENT MANAGEMENT COMPANY LLC ("PIMCO") Since February 2004, PIMCO, AGI, AGID, certain of their affiliates, and certain employees of PIMCO have been named as defendants in fifteen lawsuits filed in various jurisdictions. Eleven of those lawsuits concern "market timing," and they have been transferred to and consolidated for pre-trial proceedings in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland; the other four lawsuits concern "revenue sharing" and have been consolidated into a single action in the U.S. District Court for the District of Connecticut. The lawsuits have been commenced as putative class actions on behalf of investors who purchased, held or redeemed shares of the various series of the PIMCO Funds and the Allianz Funds during specified periods, or as derivative actions on behalf of the PIMCO Funds and Allianz Funds. The market timing actions in the District of Maryland generally allege that certain hedge funds were allowed to engage in "market timing" in certain of the Allianz Funds and PIMCO Funds and this alleged activity was not disclosed. Pursuant to tolling agreements entered into with the derivative and class action plaintiffs, PIMCO, certain PIMCO Funds' Trustees, and certain employees of PIMCO who were previously named as defendants have all been dropped as defendants in the market timing actions; the plaintiffs continue to assert claims on behalf of the shareholders of the PIMCO Funds or on behalf of the PIMCO Funds themselves against other defendants. By order dated November 3, 2005, the U.S. District Court for the District of Maryland granted PIMCO Funds' motion to dismiss claims asserted against it in a consolidated amended complaint where PIMCO Funds was named, in the complaint, as a nominal defendant. Thus, at present the PIMCO Funds is not a party to any "market timing" lawsuit. The revenue sharing action in the District of Connecticut generally alleges that fund assets were inappropriately used to pay brokers to promote the funds of the Allianz Funds and PIMCO Funds, including directing fund brokerage transactions to such brokers, and that such alleged arrangements were not fully disclosed to shareholders. On September 19, 2007 the U.S. District Court for the District of Connecticut granted defendants' motion to dismiss the consolidated amended complaint in the revenue sharing action. The market timing and revenue sharing lawsuits seek, among other things, unspecified compensatory damages plus interest and, in some cases, punitive damages, the rescission of investment advisory contracts, the return of fees paid under those contracts and restitution. Two nearly identical class action complaints have been filed in August 2005, in the Northern District of Illinois Eastern Division, alleging that the plaintiffs each purchased and sold a 10-year Treasury note futures contract and suffered damages from an alleged shortage when PIMCO held both physical and futures positions in 10-year Treasury notes for its client accounts. The two actions have been consolidated into one action, and the two separate complaints have been replaced by a consolidated complaint. PIMCO is a named defendant, and PIMCO Funds has been added as a defendant, to the consolidated action. PIMCO strongly believes the complaint is without merit and intends to vigorously defend itself. In April 2006, certain portfolios of the Trust were served in an adversary proceeding brought by the Official Committee of Asbestos Claimants of G-I Holdings, Inc. in G-I Holdings, Inc.'s bankruptcy in the District of New Jersey. In July 2004, PIMCO was named in this lawsuit and remains a defendant. The plaintiff seeks to recover for the bankruptcy estate assets that were transferred by the predecessor entity of G-I Holdings, Inc. to a wholly-owned subsidiary in 1994. The subsidiary has since issued notes, of which certain portfolios of the Trust are alleged to be holders. The complaint alleges that in 2000, more than two hundred noteholders--including certain funds of the PIMCO Funds and certain other funds managed by PIMCO--were granted a second priority lien on the assets of the subsidiary in exchange for their consent to a refinancing transaction and the granting of a first priority lien to the lending banks. The plaintiff is seeking invalidation of the lien in favor of the noteholders and/or the value of the lien. On June 21, 2006, the District of New Jersey overturned the Bankruptcy Court's decision granting permission to file the adversary proceeding and remanded the matter to the Bankruptcy Court for further proceedings. Following a motion to reconsider, the District Court upheld its remand on August 7, 2006, and instructed the Bankruptcy Court to conduct a "cost-benefit" analysis of the Committee's claims, including the claims against - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 183 the noteholders. The Bankruptcy Court held a status conference on October 25, 2006 and set a briefing schedule relating to this cost-benefit analysis. It is possible that these matters and/or other developments resulting from these matters could result in increased portfolio redemptions or other adverse consequences to the Fund. However, PIMCO and AGID believe that these matters are not likely to have a material adverse effect on the Fund or on PIMCO's or AGID's ability to perform their respective investment advisory or distribution services relating to the Fund. The foregoing speaks only as of the date of this prospectus. While there may be additional litigation or regulatory developments in connection with the matters discussed above, the foregoing disclosure of litigation and regulatory matters will be updated only if those developments are material. SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. To the best of its knowledge, the Subadviser is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. TURNER To the best of its knowledge, the Subadviser is not a party to any pending legal or regulatory proceedings. VAN KAMPEN ASSET MANAGEMENT (MORGAN STANLEY) Morgan Stanley discloses pending litigation that it believes is or may be material in its filings on Form 10-K and Forms 10-Q made with the U.S. Securities and Exchange Commission (the "Commission"). For information regarding such litigation, please refer to the information under Part I, Item 3 in Morgan Stanley's Form 10-K (File No. 1-11758) with respect to the fiscal year ended November 30, 2007, as filed with the Commission. With respect to Van Kampen, no material items were reported on Morgan Stanley's Form 10-K for the fiscal year ended November 30, 2007. - -------------------------------------------------------------------------------- THE ADMINISTRATOR AND DISTRIBUTOR Citi Fund Services Ohio, Inc. ("CFSO," formerly BISYS Fund Services Ohio, Inc.), whose address is 3435 Stelzer Road, Columbus, Ohio 43219-3035, serves as the Funds' administrator, transfer agent and fund accountant. Administrative services of CFSO include providing office space, equipment and clerical personnel to the Funds and supervising custodial, auditing, valuation, bookkeeping, legal and dividend disbursing services. Allianz Life Financial Services, LLC ("ALFS"), whose address is 5701 Golden Hills Drive, Minneapolis, Minnesota 55416, serves as the Funds' distributor. ALFS is affiliated with the Manager. OTHER DISTRIBUTION SERVICES The Affiliated Insurance Companies may make payments for distribution services to other companies, including their affiliates, to provide certain distribution related services for the Funds. The companies that receive such payments may in turn, pay any or all of these fees to their registered representatives who have provided distribution services. The payments made for distribution services under these agreements are paid by the Affiliated Insurance Companies and are not paid out of Fund assets. - -------------------------------------------------------------------------------- THE CUSTODIAN The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675 serves as custodian to the Fund. The Northern Trust Company is paid certain fees and reimbursed for certain out-of-pocket expenses for its services. Fees paid by the Fund for these services are included under "Other Expenses" in the Fees and Expenses table for each Fund. The SAI provides additional information about the services provided to the Funds. - -------------------------------------------------------------------------------- LICENSING ARRANGEMENTS AZL FIRST TRUST TARGET DOUBLE PLAY FUND AND AZL TARGETPLUS EQUITY FUND, AND THE EQUITY PORTFOLIOS OF THE AZL TARGETPLUS BALANCED FUND, AZL TARGETPLUS GROWTH FUND, AND AZL TARGETPLUS MODERATE FUND (THE "FIRST TRUST PORTFOLIOS") In order - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 184 to use the names of certain companies and their products or services in the strategies used to manage them, the AZL First Trust Target Double Play Fund and AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") rely on licenses granted to First Trust. "The Dow(R)," "Dow Jones Industrial AverageSM," "DJIASM," and "Dow Jones Select Dividend IndexSM" are service marks of Dow Jones & Company, Inc. (Dow Jones) and have been licensed for use for certain purposes by First Trust Advisors L.P. and are used by the First Trust Portfolios under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), Dow Jones & Company, Inc., and First Trust Advisors L.P. Dow Jones does not sponsor, endorse, sell, or promote the First Trust Portfolios, or The Dow(R) Target Dividend Strategy. Dow Jones makes no representation regarding the advisability of investing in such products. The First Trust Portfolios are not sponsored, endorsed, sold, or promoted by Dow Jones. Dow Jones makes no representation or warranty, express or implied, to the owners of the First Trust Portfolios or any member of the public regarding the advisability of purchasing the First Trust Portfolios. Dow Jones' only relationship to First Trust and Allianz is the licensing of certain copyrights, trademarks, servicemarks, and service names of Dow Jones. Dow Jones has no obligation to take the needs of First Trust, Allianz, or the owners of the First Trust Portfolios into consideration in determining, composing or calculating the Dow Jones Industrial AverageSM. Dow Jones is not responsible for and has not participated in the determination of the terms and conditions of the First Trust Portfolios to be issued, including the pricing or the amount payable under the policy. Dow Jones has no obligation or liability in connection with the administration or marketing of the First Trust Portfolios. DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, ALLIANZ, OWNERS OF THE FIRST TRUST PORTFOLIOS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS, OR INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND FIRST TRUST OR ALLIANZ. "Value Line," "The Value Line Investment Survey(R)," and "Value Line Timeliness Ranking System" are registered trademarks of Value Line, Inc. or Value Line Publishing, Inc. that have been licensed to First Trust Advisors L.P. and are used by the AZL First Trust Target Double Play Fund and AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), and First Trust Advisors L.P. which is a Licensee of Value Line Publishing, Inc. The First Trust Portfolios and the Value Line(R) Target 25 Strategy are not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the First Trust Portfolios. First Trust Advisors L.P., Allianz, and Allianz Life Insurance Company of North America are not affiliated with any Value Line Company. Value Line Publishing, Inc.'s ("VLPI") only relationship to First Trust is VLPI's licensing to First Trust of certain VLPI trademarks and trade names and the Value Line Timeliness Ranking System (the "System") which is composed by VLPI without regard to First Trust, the First Trust Portfolios, the Value Line(R) Target 25 Strategy or any investor. VLPI has no obligation to take the needs of First Trust or any investor in the First Trust Portfolios or the Value Line(R) Target 25 Strategy into consideration in composing the System. The results of the First Trust Portfolios or the Value Line(R) Target 25 Strategy may differ from the hypothetical or published results of the Value Line Timeliness Ranking System. VLPI is not responsible for and has not participated in the determination of the prices and composition of the First Trust - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 185 Portfolios, the Value Line(R) Target 25 Strategy or the timing of the issuance for sale of the First Trust Portfolios or in the calculation of the equations by which the First Trust Portfolios are to be converted into cash. VLPI MAKES NO WARRANTY CONCERNING THE SYSTEM, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM USAGE OF TRADE, COURSE OF DEALING, OR COURSE OF PERFORMANCE, AND VLPI MAKES NO WARRANTY AS TO THE POTENTIAL PROFITS OR ANY OTHER BENEFITS THAT MAY BE ACHIEVED BY USING THE SYSTEM OR ANY INFORMATION OR MATERIALS GENERATED THEREFROM. VLPI DOES NOT WARRANT THAT THE SYSTEM WILL MEET ANY REQUIREMENTS OR THAT IT WILL BE ACCURATE OR ERROR-FREE. VLPI ALSO DOES NOT GUARANTEE ANY USES, INFORMATION, DATA, OR OTHER RESULTS GENERATED FROM THE SYSTEM. VLPI HAS NO OBLIGATION OR LIABILITY (I) IN CONNECTION WITH THE ADMINISTRATION, MARKETING, OR TRADING OF THE FIRST TRUST PORTFOLIOS; OR (II) FOR ANY LOSS, DAMAGE, COST, OR EXPENSE SUFFERED OR INCURRED BY ANY INVESTOR OR OTHER PERSON OR ENTITY IN CONNECTION WITH THE FIRST TRUST PORTFOLIOS, AND IN NO EVENT SHALL VLPI BE LIABLE FOR ANY LOST PROFITS OR OTHER CONSEQUENTIAL, SPECIAL, PUNITIVE, INCIDENTAL, INDIRECT, OR EXEMPLARY DAMAGES IN CONNECTION WITH THE FIRST TRUST PORTFOLIOS OR THE VALUE LINE(R) TARGET 25 STRATEGY. "NYSE(R)" is a registered trademark of, and "NYSE International 100 Index(R)" is a registered service mark of, NYSE Group, Inc. and have been licensed for use for certain purposes by First Trust and are used by the AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "TargetPLUS Portfolios") under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), NYSE Group, Inc., and First Trust Advisors L.P. The TargetPLUS Portfolios' strategies, based in part on the NYSE International 100 Index(R), are not sponsored, endorsed, sold or promoted by NYSE Group, Inc. and NYSE Group, Inc. makes no representation regarding the advisability of investing in the TargetPLUS Portfolios. NYSE Group, Inc. has no relationship to First Trust or Allianz, other than the licensing of the NYSE International 100 Index(R) (the "Index") and its service marks for use in connection the TargetPLUS Portfolios and the NYSE(R) International Target 25 Strategy. NYSE GROUP, INC. DOES NOT: o Sponsor, endorse, sell, or promote the TargetPLUS Portfolios. o Recommend that any person invest in the TargetPLUS Portfolios or any other securities. o Have any responsibility or liability for, or make any decisions about, the timing, amount, or pricing of the TargetPLUS Portfolios. o Have any responsibility or liability for the administration, management, or marketing of the TargetPLUS Portfolios. o Consider the needs of the TargetPLUS Portfolios or the owners of the TargetPLUS Portfolios in determining, composing, or calculating the Index or have any obligation to do so. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 186 - -------------------------------------------------------------------------------- NYSE GROUP, INC. WILL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE TARGETPLUS PORTFOLIOS OR THE NYSE(R) INTERNATIONAL TARGET 25 STRATEGY. SPECIFICALLY, O NYSE GROUP, INC. DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AND NYSE GROUP, INC. DISCLAIMS ANY WARRANTY ABOUT: O THE RESULTS TO BE OBTAINED BY THE TARGETPLUS PORTFOLIOS OR THE NYSE(R) INTERNATIONAL TARGET 25 STRATEGY, THE OWNERS OF THE TARGETPLUS PORTFOLIOS, OR ANY OTHER PERSON IN CONNECTION WITH THE USE OF THE INDEX AND THE DATA INCLUDED IN THE INDEX; O THE ACCURACY OR COMPLETENESS OF THE INDEX AND ITS DATA; O THE MERCHANTABILITY AND THE FITNESS FOR A PARTICULAR PURPOSE OR USE OF THE INDEX AND ITS DATA; O NYSE GROUP, INC. WILL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS IN THE INDEX OR ITS DATA; O UNDER NO CIRCUMSTANCES WILL NYSE GROUP, INC. OR ANY OF ITS AFFILIATES BE LIABLE FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NYSE GROUP, INC. KNOWS THAT THEY MIGHT OCCUR. THE LICENSING AGREEMENT THAT PERMITS ALLIANZ TO USE THE FOREGOING TRADEMARKS AND SERVICEMARKS IN CONNECTION WITH THE TARGETPLUS PORTFOLIOS IS BETWEEN FIRST TRUST AND NYSE GROUP, INC., AND IS SOLELY FOR THEIR BENEFIT AND NOT FOR THE BENEFIT OF THE OWNERS OF THE TARGETPLUS PORTFOLIOS OR ANY OTHER THIRD PARTIES. - -------------------------------------------------------------------------------- The publishers of the DJIA, the Dow Jones Select Dividend IndexSM, the FT30 Index, the Hang Seng Index, the NYSE International 100 Index(R), and the Value Line Timeliness Ranking System are not affiliated with First Trust Advisors L.P., Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust or Allianz Life Insurance Company of North America and have not participated in creating the AZL First Trust Target Double Play Fund, AZL TargetPLUS Balanced Fund, AZL TargetPLUS Equity Fund, AZL TargetPLUS Growth Fund, or AZL TargetPLUS Moderate Fund, the strategies used to manage any of these Funds, or the selection of securities for these Funds. Except as otherwise noted, none of the index publishers have approved any of the information in this prospectus. AZL S&P 500 INDEX FUND AND AZL SMALL CAP STOCK INDEX FUND(THE "AZL INDEX FUNDS") The AZL S&P 500 Index Fund and AZL Small Cap Stock Index Fund (the "AZL Index Funds") are not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the owners of the AZL Index Funds or any member of the public regarding the advisability of investing in securities generally or in the AZL Index Funds particularly or the ability of the S&P 500 Index and the S&P SmallCap 600 Index to track general stock market performance. S&P's only relationship to the Manager (the "Licensee") is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index and the S&P SmallCap 600 Index which is determined, composed and calculated by S&P without regard to the Licensee or the AZL Index Funds. S&P has no obligation to take the needs of the Licensee or the owners of the AZL Index Funds into consideration in determining, composing or calculating the S&P 500 Index and the S&P SmallCap 600 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the AZL Index Funds or the timing of the issuance or sale of the AZL Index Funds or in the determination or calculation of the equation by which the AZL Index Funds is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the AZL Index Funds. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE AZL INDEX FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 187 - -------------------------------------------------------------------------------- SHAREHOLDER INFORMATION - -------------------------------------------------------------------------------- SHAREHOLDER INFORMATION PRICING OF FUND SHARES The price of each fund share is based on its Net Asset Value (NAV). The NAV is the current value of a share in a mutual fund. The NAV is calculated by adding the total value of a Fund's investments and other assets, subtracting its liabilities, and then dividing that figure by the number of outstanding shares of the Fund: NAV = (Total Assets - Liabilities) / Number of Shares Outstanding Per share NAV for each Fund, other than the Money Market Fund, is determined and its shares are priced at the close of regular trading on the New York Stock Exchange, normally at 4:00 p.m. Eastern Time, on days the NYSE is open. The securities (other than short-term debt securities) of the Funds, with the exception of the AZL Money Market Fund, are generally valued at current market prices. The AZL Money Market Fund values its securities at amortized cost (see below). Also, if market quotations are not available, or if an event occurs after the pricing of a security has been established that would likely cause the value to change, the value of the security may be priced at fair value as determined in good faith by or at the direction of the Funds' Trustees. Foreign securities held by the Funds are valued on a daily basis using a fair valuation program approved by the Funds' Trustees. The fair valuation program includes processes administered by an independent pricing agent (based upon changes in certain markets, indices, and/or securities, if applicable) that may result in a value different from the last closing price of such foreign security on its principal overseas market or exchange. The effect of using fair value pricing is that the Fund's NAV will be subject to the judgment of the Board of Trustees or its designees instead of being determined by the market. In addition, foreign securities acquired by a Fund may be valued in foreign markets on days when the Fund's NAV is not calculated. In such cases, the NAV of a Fund may be significantly affected on days when investors cannot buy or sell shares. MONEY MARKET FUND The Money Market Fund's NAV, the offering price, is expected to be constant at $1.00 per share although this value is not guaranteed. The NAV is determined each day at 1:00 p.m. Eastern Time, on days the NYSE is open. The Money Market Fund values its securities at its amortized cost. The amortized cost method values a portfolio security initially at its cost on the date of the purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and initial cost. PURCHASE AND REDEMPTION OF SHARES Investors may not purchase or redeem shares of the Funds directly, but only through the variable annuity contracts and variable life insurance policies offered through the separate accounts of participating insurance companies. You should refer to the prospectus of the participating insurance company's variable products for information on how to purchase a variable annuity contract or variable life insurance policy, how to select specific Allianz VIP Funds as investment options for your contract or policy and how to redeem monies from the Funds. Orders for the purchase and redemption of shares of a Fund received before the NYSE closes are effected at the net asset value per share determined as of the close of trading on the NYSE (generally 4:00 p.m. Eastern Time) that day. Orders received after the NYSE closes are effected at the next calculated net asset value. Payment for redemption will be made by the Funds within 7 days after the request is received. The Funds may suspend the right of redemption under certain extraordinary circumstances in accordance with the rules of the Securities and Exchange Commission. The Funds do not assess any fees when they sell or redeem their shares. The right of purchase and redemption of Fund shares may also be restricted, and purchase orders may be rejected, in accordance with the market timing policy of the Trust as described under the "Market Timing" section below, and the market timing policy of the separate accounts of participating insurance companies. Please refer to your contract prospectus for the market timing policy of the separate account for your contract. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 188 Each Fund reserves the right to make payment in securities rather than cash, known as "redemption in kind." This could occur under extraordinary circumstances, such as a large redemption that could affect Fund operations (for example, more than 1% of the Fund's net assets). If the Fund deems it advisable for the benefit of all shareholders, redemption in kind will consist of securities equal in market value to the accumulation unit value allocated under your variable contract to the subacount that invests in the Fund. When these securities are converted to cash, the associated brokerage charges will be deducted from the assets of the subaccount. The Funds currently do not foresee any disadvantages to investors if the Funds serve as an investment medium for both variable annuity contracts and variable life insurance policies. However, it is theoretically possible that the interest of owners of annuity contracts and insurance policies for which the Funds serve as an investment medium might at some time be in conflict due to differences in tax treatment or other considerations. The Board of Trustees and each participating insurance company would be required to monitor events to identify any material conflicts between variable annuity contract owners and variable life insurance policy owners, and would have to determine what action, if any, should be taken in the event of such a conflict. If such a conflict occurred, an insurance company investing in a Fund might be required to redeem the investment of one or more of its separate accounts from the Fund, which might force the Fund to sell securities at disadvantageous prices. MARKET TIMING The Board of Trustees has adopted a policy that the Funds will not knowingly permit market timing or other abusive short-term trading practices. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in the same fund by taking advantage of pricing inefficiencies that can prevent a fund's share price from accurately reflecting the value of its portfolio securities. For example, investors may engage in short-term trading in funds that invest in securities which trade on overseas securities markets to take advantage of the difference between the close of the overseas markets and the close of the U.S. markets. This type of short-term trading is sometimes referred to as "time-zone arbitrage." Funds that invest in other securities which are less liquid, or are traded less often, may be vulnerable to similar pricing inefficiencies. Market timing and other abusive short-term trading practices may adversely impact a fund's performance by preventing portfolio managers from fully investing the assets of the fund, diluting the value of shares, or increasing the fund's transaction costs. To the extent that certain of the Funds have significant holdings in foreign securities (including emerging markets securities), small cap stocks, or high yield bonds, or any combination thereof, the risks of market timing may be greater for those Funds than for other Funds. The Funds are offered only through variable annuity contracts and life insurance policies, and shares of the Funds are held in subaccounts of affiliated insurance companies. Because Fund transactions are processed by those insurance companies, rather than by the Trust, the Board of Trustees has not adopted procedures to monitor market timing activity at the Fund level, but rather has approved monitoring procedures designed to detect and deter market timing activities at the contract or policy level. Your variable annuity or variable life insurance prospectus contains a description of the market timing detection and deterrence policy at the contract or policy level. Please refer to your annuity contract or life insurance policy prospectus for specific details on transfers between accounts. The procedures that are designed to detect and deter market timing activities at the contract or policy level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some contracts and policies may prevent or restrict the effectiveness of the market timing procedures from stopping certain market timing activity. Market timing activity that is not identified, prevented, or restricted may adversely impact the performance of a Fund. DISTRIBUTION (12B-1) FEES Distribution fees ("12b-1 fees") compensate the Distributor and affiliates of Allianz Life Insurance Company of North America for services and expenses relating to the distribution of the Funds' shares in connection with the variable products through which Fund shares are sold. 12b-1 fees are paid from Fund assets on an ongoing basis. Over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 189 Each of the Funds (except Class 1 shares of the Multi-Class Funds as identified below) pays an annual 12b-1 fee in the maximum amount of 0.25% of their average daily net assets. The Trustees have authorized the Trust to issue two classes of shares, Class 1 and Class 2, for the following Funds: AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, AZL Oppenheimer Main Street Fund, AZL S&P 500 Index Fund, and AZL Schroder Emerging Markets Equity Fund (the "Multi-Class Funds"). Class 1 and Class 2 shares of the Multi-Class Funds are substantially identical, except that Class 1 shares are not subject to a 12b-1 distribution fee (see "Distribution (12b-1) Fees" in the "Shareholder Information" section of this prospectus), while Class 2 shares are subject to a 12b-1 distribution fee in the amount of 0.25% of average daily net assets attributable to Class 2 shares. For certain variable annuity contracts or variable life insurance policies, Class 1 shares of the AZL S&P 500 Index Fund and AZL Schroder Emerging Markets Equity Fund are available as an investment option. Currently, only Class 2 shares of the AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, and AZL Oppenheimer Main Street Fund are available under variable annuity contracts and variable life insurance policies that offer the Multi-Class Funds as investment options. Class 1 shares of the AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, and AZL Oppenheimer Main Street Fund may be made available in the future to certain variable annuity contract owners and variable life insurance policy owners. DIVIDENDS, DISTRIBUTIONS AND TAXES Any income a Fund receives is paid out, less expenses, in the form of dividends to its shareholders. Shares begin accruing dividends on the day they are purchased. Income dividends are usually paid annually. Income dividends on the AZL Money Market Fund are usually paid monthly. Capital gains for all Funds are distributed at least annually. All dividends and capital gain distributions will be automatically reinvested in additional shares of a Fund at the net asset value of such shares on the payment date. Each Fund is treated as a separate corporate entity for tax purposes. Each Fund intends to elect to be treated as a regulated investment company and each Fund intends to qualify for such treatment for each taxable year under Subchapter M of the Internal Revenue Code of 1986, as amended. In addition, each Fund will diversify its investments so that on the last day of each quarter of a calendar year, no more than 55% of the value of its total assets is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments, and no more than 90% is represented by any four investments. For this purpose, securities of a given issuer generally are treated as one investment and each U.S. Government agency or instrumentality is treated as a separate issuer. Any security issued, guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. Government or an agency or instrumentality of the U.S. Government is treated as a security issued by the U.S. Government or its agency or instrumentality, whichever is applicable. If a Fund fails to meet this diversification requirement, income with respect to variable insurance contracts invested in the Fund at any time during the calendar quarter in which the failure occurred could become currently taxable to the owners of the contracts. Similarly, income for prior periods with respect to such contracts also could be taxable, most likely in the year of the failure to achieve the required diversification. Provided that a Fund and a separate account investing in the Fund satisfy applicable tax requirements, any distributions from the Fund to the separate account will be exempt from current federal income taxation to the extent that such distributions accumulate in a variable annuity contract or a variable life insurance policy. Persons investing in variable annuity contracts or variable life insurance policies should refer to the prospectuses with respect to such contracts or policies for further information regarding the tax treatment of the contracts or policies and the separate accounts in which the contracts or policies are invested. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 190 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the financial performance of the Funds for the periods shown. Certain information reflects financial results for a single Fund share. The total returns in the tables represent returns that you would have earned (or lost) on an investment in the indicated Fund (assuming reinvestment of all dividends and distributions). The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If insurance contract charges were included, the return would be reduced. This information has been derived from information audited by KPMG LLP, independent registered public accounting firm, whose report, along with the Funds' financial statements, are included in the Annual Report to Shareholders and incorporated by reference into the Statement of Additional Information. This should be read in conjunction with those financial statements. Copies of such Annual Report are available without charge upon written request from the Funds at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free 1-877-833 7113. Financial highlights are not presented for Class 1 shares of the AZL Davis NY Venture Fund, AZL Dreyfus Premier Small Cap Value Fund, AZL Oppenheimer Global Fund, and AZL Oppenheimer Main Street Fund because Class 1 shares of those Funds had not commenced operations as of December 31, 2007. - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 191 AZL AIM INTERNATIONAL EQUITY FUND
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- -------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 18.27 $ 14.57 $ 12.64 $ 10.35 $ 8.16 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ............................ 0.13 0.05 0.02 0.03 0.01 Net Realized and Unrealized Gains/(Losses) on Investments 2.51 3.86 2.04 2.26 2.20 -------- -------- -------- -------- -------- Total from Investment Activities......................... 2.64 3.91 2.06 2.29 2.21 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................... (0.11) (0.03) (0.03) -- (0.02) Net Realized Gains....................................... (0.85) (0.18) (0.10) -- -- ---------- ---------- ---------- ------ ------ Total Dividends.......................................... (0.96) (0.21) (0.13) -- (0.02) ---------- ---------- ---------- ------ ---------- NET ASSET VALUE, END OF PERIOD........................... $ 19.95 $ 18.27 $ 14.57 $ 12.64 $ 10.35 ========= ========= ========= ========= ========= TOTAL RETURN(A).......................................... 14.62% 27.04% 16.36% 22.13% 27.14% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ...................... $ 373,047 $ 317,614 $ 169,997 $ 57,135 $ 21,795 Net Investment Income/(Loss) ............................ 0.61% 0.44% 0.52% 0.38% 0.24% Expenses Before Reductions(b) ........................... 1.35% 1.45% 1.50% 1.79% 2.15% Expenses Net of Reductions............................... 1.35% 1.45% 1.43% 1.40% 1.25% Expenses Net of Reductions(c) ........................... 1.35% 1.45% 1.45% N/A N/A Portfolio Turnover Rate.................................. 41.62% 47.75% 34.54% 48.64% 83.36% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
AZL COLUMBIA TECHNOLOGY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- ----------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 8.82 $ 8.60 $ 8.54 $ 9.00 $ 6.34 -------- -------- -------- -------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ (0.03) (0.09) (0.08) (0.06) (0.05) Net Realized and Unrealized Gains/(Losses) on Investments.......................................... 2.04 0.31 0.14 (0.34) 2.71 -------- -------- -------- ---------- -------- Total from Investment Activities..................... 2.01 0.22 0.06 (0.40) 2.66 -------- -------- -------- ---------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Realized Gains................................... (0.01) -- -- (0.06) -- ---------- ------ ------ ---------- ------ Total Dividends...................................... (0.01) -- -- (0.06) -- ---------- ------ ------ ---------- ------ NET ASSET VALUE, END OF PERIOD....................... $ 10.82 $ 8.82 $ 8.60 $ 8.54 $ 9.00 ========= ======== ======== ======== ======== TOTAL RETURN(A)...................................... 22.75% 2.56%(b) 0.70% (4.33)% 41.96% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 104,380 $ 49,987 $ 48,009 $ 48,199 $ 39,938 Net Investment Income/(Loss) ........................ (0.48)% (0.95)% (1.05)% (0.85)% (1.04)% Expenses Before Reductions(c) ....................... 1.20% 1.33% 1.35% 1.31% 1.54% Expenses Net of Reductions .......................... 1.16% 1.33% 1.35% 1.31% 1.25% Expenses Net of Reductions(d) ....................... 1.20% 1.33% 1.35% N/A N/A Portfolio Turnover Rate ............................. 270.98% 244.04% 125.08% 174.40% 170.59% - ------------------------------------------------------------------------------------------------------------------------------ (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the year ended December 31, 2006, Columbia Management Advisors, LLC reimbursed $28,211 to the Fund related to violations of certain investment policies and limitations. The corresponding impact to the total return was 0.06%. (c) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (d) Expenses net of reductions excludes expenses paid indirectly.
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AZL DAVIS NY VENTURE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- -------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 13.61 $ 11.99 $ 11.13 $ 10.10 $ 7.86 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ 0.11 0.06 0.03 0.06 0.06 Net Realized and Unrealized Gains/(Losses) on Investments.......................................... 0.47 1.59 1.04 1.00 2.24 -------- -------- -------- -------- -------- Total from Investment Activities..................... 0.58 1.65 1.07 1.06 2.30 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................ (0.06) (0.03) (0.01) (0.03) (0.06) Net Realized Gains................................... -- -- (0.20) -- -- ------ ------ ---------- ------ ------ Total Dividends...................................... (0.06) (0.03) (0.21) (0.03) (0.06) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD....................... $ 14.13 $ 13.61 $ 11.99 $ 11.13 $ 10.10 ========= ========= ========= ========= ========= TOTAL RETURN(A) ..................................... 4.15% 13.91% 9.68% 10.56% 29.43% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 572,298 $ 538,315 $ 348,036 $ 152,470 $ 48,998 Net Investment Income/(Loss) ........................ 0.82% 0.61% 0.54% 0.65% 0.80% Expenses Before Reductions(b) ....................... 1.09% 1.12% 1.20% 1.20% 1.39% Expenses Net of Reductions........................... 1.09% 1.12% 1.20% 1.18% 1.10% Expenses Net of Reductions(c) ....................... 1.09% 1.12% 1.20% N/A N/A Portfolio Turnover Rate.............................. 14.67% 8.49% 3.62% 57.45% 21.56% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
AZL DREYFUS FOUNDERS EQUITY GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- --------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.52 $ 9.84 $ 9.77 $ 9.07 $ 7.30 --------- -------- -------- -------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ 0.02 0.01 --(a) 0.03 (0.01) Net Realized and Unrealized Gains/(Losses) on Investments.......................................... 0.89 1.22 0.44 0.66 1.78 Net realized gain from payment by affiliate for the disposal of investments in violation of restrictions. -- -- -- 0.01 -- ------ ------ ------ -------- ------ Total from Investment Activities..................... 0.91 1.23 0.44 0.70 1.77 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................ (0.01) --(a) (0.03) -- -- Net Realized Gains................................... (0.37) (0.55) (0.34) -- -- ---------- ---------- ---------- ------ ------ Total Dividends...................................... (0.38) (0.55) (0.37) -- -- ---------- ---------- ---------- ------ ------ NET ASSET VALUE, END OF PERIOD....................... $ 11.05 $ 10.52 $ 9.84 $ 9.77 $ 9.07 ========= ========= ======== ======== ======== TOTAL RETURN(B)...................................... 8.75% 12.93% 4.56% 7.72% 24.25% - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 292,684 $ 120,849 $ 88,325 $ 76,509 $ 52,200 Net Investment Income/(Loss) ........................ 0.34% 0.12% 0.00% 0.36% (0.16)% Expenses Before Reductions(c) ....................... 1.23% 1.19% 1.22% 1.26% 1.39% Expenses Net of Reductions........................... 1.17% 1.19% 1.19% 1.17% 1.10% Expenses Net of Reductions(d) ....................... 1.20% 1.19% 1.20% N/A N/A Portfolio Turnover Rate ............................. 73.29% 117.91% 134.74% 171.66% 44.54% (a) Amount less than $.005. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (d) Expenses net of reductions excludes expenses paid indirectly.
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AZL DREYFUS PREMIER SMALL CAP VALUE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 3, 2004 TO YEAR ENDED DECEMBER 31, DECEMBER 31, ----------------------------------------- ----------------------------------------- ----------------------------------------- 2007 2006 2005 2004(A) ----------- ----------- ----------- ------------------ NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 13.20 $ 12.30 $ 12.06 $ 10.00 --------- --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ............................ 0.05 0.03 0.01 0.01 Net Realized and Unrealized Gains/(Losses) on Investments (1.09) 1.57 0.40 2.16 ---------- -------- -------- -------- Total from Investment Activities......................... (1.04) 1.60 0.41 2.17 ---------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................... (0.03) (0.01) -- (0.01) Net Realized Gains....................................... (0.84) (0.69) (0.17) (0.10) ---------- ---------- ---------- ---------- Total Dividends.......................................... (0.87) (0.70) (0.17) (0.11) ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD........................... $ 11.29 $ 13.20 $ 12.30 $ 12.06 ========= ========= ========= ========= TOTAL RETURN(B) (C) ..................................... (8.24)% 13.40% 3.39% 21.72% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ...................... $ 59,468 $ 73,914 $ 56,954 $ 30,773 Net Investment Income(d) ................................ 0.33% 0.28% 0.10% 0.24% Expenses Before Reductions(d) (e) ....................... 1.29% 1.35% 1.41% 1.51% Expenses Net of Reductions(d) ........................... 1.23% 1.31% 1.35% 1.35% Expenses Net of Reductions(d) (f) ....................... 1.24% 1.31% N/A N/A Portfolio Turnover Rate(c) .............................. 60.22% 90.10% 111.78% 83.52% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (f) Expenses net of reductions excludes expenses paid indirectly.
AZL FIRST TRUST TARGET DOUBLE PLAY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 27, 2006 TO DECEMBER 31, 2007 DECEMBER 31, 2006(A) NET ASSET VALUE, BEGINNING OF PERIOD......................................... $ 9.92 $ 10.00 -------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ................................................ 0.07 --(b) Net Realized and Unrealized Gains/(Losses) on Investments.................... 0.77* (0.08) --------- -------------- Total from Investment Activities............................................. 0.84 (0.08) -------- -------------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income........................................................ --(B) -- --------- ---------- Total Dividends.............................................................. --(B) -- --------- ---------- NET ASSET VALUE, END OF PERIOD............................................... $ 10.76 $ 9.92 ========= ============ TOTAL RETURN(C) (D) ......................................................... 8.47% 0.80% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .......................................... $ 87,547 $ 99 Net Investment Income/(Loss)(e) ............................................. 1.41% 2.98% Expenses Before Reductions(e) (f) ........................................... 1.03% 0.97% Expenses Net of Reductions(e) ............................................... 0.79% 0.79% Portfolio Turnover Rate(d) .................................................. 168.71% --% * The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of the timing of sales and purchases of Fund shares in relation to fluctuating fair values during the period. (a) Period from commencement of operations. (b) Amount less than $.005. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL FRANKLIN SMALL CAP VALUE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 1, 2003 TO DECEMBER 31, YEAR ENDED DECEMBER 31, ---------------------------------------------------------- ---------------------------------------------------------- 2007 2006 2005 2004 2003(A) ----------- ----------- ----------- ----------- ------------------ NET ASSET VALUE, BEGINNING OF PERIOD............. $ 17.96 $ 16.54 $ 15.63 $ 12.71 $ 10.00 --------- --------- --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) .................... 0.14 0.17 0.08(b) 0.13 0.08 Net Realized and Unrealized Gains/(Losses) on Investments...................................... (0.88) 2.29 1.02 2.80 2.75 ---------- -------- -------- -------- -------- Total from Investment Activities................. (0.74) 2.46 1.10 2.93 2.83 ---------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income............................ (0.10) (0.05) (0.08) -- (0.08) Net Realized Gains............................... (0.65) (0.99) (0.11) (0.01) (0.04) ---------- ---------- ---------- ---------- ---------- Total Dividends.................................. (0.75) (1.04) (0.19) (0.01) (0.12) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD................... $ 16.47 $ 17.96 $ 16.54 $ 15.63 $ 12.71 ========= ========= ========= ========= ========= TOTAL RETURN(C) (D) ............................. (4.37)% 15.41% 7.03% 23.10% 28.38% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .............. $ 361,804 $ 394,073 $ 269,237 $ 128,697 $ 25,494 Net Investment Income/(Loss)(e) ................. 0.75% 0.62% 0.49% 1.68% 1.54% Expenses Before Reductions(e) (f) ............... 1.11% 1.09% 1.15% 1.23% 1.60% Expenses Net of Reductions(e) ................... 1.11% 1.09% 1.15% 1.23% 1.25% Portfolio Turnover Rate(d) ...................... 23.76% 14.71% 85.56% 21.14% 13.67% (a) Period from commencement of operations (b) Average shares method used in calculation. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL JENNISON 20/20 FOCUS FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER APRIL 29, 2005 TO 31, DECEMBER 31, 2007 2006 2005(A) ----------- ----------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD................................. $ 13.92 $ 12.35 $ 10.00 --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................ 0.02 0.03 0.01 Net Realized and Unrealized Gains/(Losses) on Investments............ 1.45 1.55 2.35 -------- -------- -------- Total from Investment Activities..................................... 1.47 1.58 2.36 -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................................ (0.03) -- (0.01) Net Realized Gains................................................... (0.51) (0.01) -- ---------- ---------- ------ Total Dividends...................................................... (0.54) (0.01) (0.01) ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD....................................... $ 14.85 $ 13.92 $ 12.35 ========= ========= ========= TOTAL RETURN(B) (C) ................................................. 10.73% 12.79% 23.61% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................................. $ 383,239 $ 314,449 $ 146,054 Net Investment Income(d) ............................................ 0.11% 0.28% 0.28% Expenses Before Reductions(d) (e) ................................... 1.12% 1.15% 1.23% Expenses Net of Reductions(d) ....................................... 1.04% 1.08% 1.20% Expenses Net of Reductions(d) (f) ................................... 1.07% 1.11% N/A Portfolio Turnover Rate(c) .......................................... 119.80% 129.27% 59.04% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (f) Expenses net of reductions excludes expenses paid indirectly.
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AZL JENNISON GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) APRIL 29, 2005 TO DECEMBER 31, YEAR ENDED DECEMBER 31, 2007 2006 2005(A) ----------- ----------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD................................. $ 12.27 $12.08 $ 10.00 --------- ---------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................ (0.01) (0.02) (0.01) Net Realized and Unrealized Gains/(Losses) on Investments............ 1.35 0.21 2.09 -------- -------- -------- Total from Investment Activities..................................... 1.34 0.19 2.08 -------- -------- -------- NET ASSET VALUE, END OF PERIOD....................................... $ 13.61 $ 12.27 $ 12.08 ========= ========= ========= TOTAL RETURN(B) (C) ................................................. 10.92% 1.57% 20.80% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................................. $ 62,264 $ 49,384 $ 36,577 Net Investment Income/(Loss)(d) ..................................... (0.11)% (0.22)% (0.45)% Expenses Before Reductions(d) (e) ................................... 1.18% 1.19% 1.29% Expenses Net of Reductions(d) ....................................... 1.16% 1.18% 1.20% Expenses Net of Reductions(d) (f) ................................... 1.18% 1.19% N/A Portfolio Turnover Rate(c) .......................................... 75.74% 88.02% 24.31% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (f) Expenses net of reductions excludes expenses paid indirectly.
AZL LEGG MASON GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- --------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD......................... $ 11.94 $ 12.34 $ 11.24 $ 10.40 $ 7.62 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ................................ (0.02) (0.03) (0.04) (0.05) (0.03) Net Realized and Unrealized Gains/(Losses) on Investments 1.81 0.07 1.28 0.89 2.81 -------- -------- -------- -------- -------- Total from Investment Activities............................. 1.79 0.04 1.24 0.84 2.78 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Realized Gains........................................... (0.25) (0.44) (0.14) -- -- ---------- ---------- ---------- ------ ------ Total Dividends............................................. (0.25) (0.44) (0.14) -- -- ---------- ---------- ---------- ------ ------ NET ASSET VALUE, END OF PERIOD.............................. $ 13.48 $ 11.94 $ 12.34 $ 11.24 $ 10.40 ========= ========= ========= ========= ========= TOTAL RETURN(A) ............................................ 15.02% 0.70% 11.06% 8.08% 36.48% - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ......................... $ 194,457 $ 96,396 $ 79,579 $ 49,355 $ 30,276 Net Investment Income/(Loss) ............................... (0.19)% (0.32)% (0.50)% (0.51)% (0.55)% Expenses Before Reductions(b) .............................. 1.21% 1.32% 1.30% 1.35% 1.63% Expenses Net of Reductions.................................. 1.15% 1.28% 1.30% 1.27% 1.20% Expenses Net of Reductions(c) .............................. 1.16% 1.29% 1.30% N/A N/A Portfolio Turnover Rate..................................... 64.21% 39.53% 106.33% 138.77% 139.34% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
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AZL LEGG MASON VALUE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- --------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 13.07 $ 12.26 $ 11.59 $ 10.11 $ 8.13 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ..................... (0.02) (0.02) (0.02) 0.04 0.11 Net Realized and Unrealized Gains/(Losses) on Investments....................................... (0.77) 0.83 0.74 1.49 1.98 ---------- -------- -------- -------- -------- Total from Investment Activities.................. (0.79) 0.81 0.72 1.53 2.09 ---------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income............................. -- -- -- (0.05) (0.11) Net Realized Gains................................ (0.21) --(A) (0.05) -- -- ---------- --------- ---------- ------ ------ Total Dividends................................... (0.21) --(A) (0.05) (0.05) (0.11) ---------- --------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD.................... $ 12.07 $ 13.07 $ 12.26 $ 11.59 $ 10.11 ========= ========= ========= ========= ========= TOTAL RETURN(B) .................................. (6.19)% 6.71% 6.27% 15.15% 25.89% - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ............... $ 388,835 $ 407,446 $ 280,336 $ 79,298 $ 32,322 Net Investment Income/(Loss) ..................... (0.19)% (0.22)% (0.32)% 0.28% 1.42% Expenses Before Reductions(c) .................... 1.09% 1.10% 1.20% 1.20% 1.32% Expenses Net of Reductions........................ 1.08% 1.10% 1.20% 1.18% 1.10% Expenses Net of Reductions(d) .................... 1.09% 1.10% N/A N/A N/A Portfolio Turnover Rate........................... 30.60% 16.16% 8.21% 121.63% 38.60% (a) Amount less than $.005. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (d) Expenses net of reductions excludes expenses paid indirectly.
AZL LMP LARGE CAP GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 11.69 $ 11.48 $ 10.50 $ 10.06 $ 8.09 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ (0.04) (0.02) (0.02) 0.04 --(a) Net Realized and Unrealized Gains/(Losses) on Investments.......................................... 0.59 0.49 1.04 0.40 1.97 -------- -------- -------- ----------- -------- Total from Investment Activities..................... 0.55 0.47 1.02 0.44 1.97 -------- -------- -------- ----------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................ -- -- (0.03) -- --(A) Net Realized Gains................................... -- (0.26) (0.01) -- -- ------ ---------- ---------- --------- ------ Total Dividends...................................... -- (0.26) (0.04) -- --(A) ------ ---------- ---------- --------- --------- NET ASSET VALUE, END OF PERIOD....................... $ 12.24 $ 11.69 $ 11.48 $ 10.50 $ 10.06 ========= ========= ========= ========= ========= TOTAL RETURN(B) ..................................... 4.70% 4.23% 9.70% 4.37% 24.39% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 266,478 $ 283,926 $ 223,064 $ 135,712 $ 66,233 Net Investment Income/(Loss)(c) ..................... (0.28)% (0.20)% (0.16)% 0.56% 0.06% Expenses Before Reductions(c)(d) .................... 1.14% 1.19% 1.21% 1.24% 1.38% Expenses Net of Reductions(c) ....................... 1.14% 1.18% 1.20% 1.19% 1.15% Expenses Net of Reductions(c) (e) ................... 1.14% 1.19% 1.20% N/A N/A Portfolio Turnover Rate.............................. 18.95% 18.84% 78.89% 31.73% 19.22% (a) Amount Less than $0.005 (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Annualized for periods less than one year. (d) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (e) Expenses net of reductions excludes expenses paid indirectly.
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AZL MONEY MARKET FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ 0.05 0.04 0.03 0.01 --(a) Net Realized Gains/(Losses) on investments........... --(A) --(A) --(A) --(A) --(A) --------- --------- --------- --------- --------- Total from Investment Activities..................... 0.05 0.04 0.03 0.01 --(A) -------- -------- -------- -------- --------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................ (0.05) (0.04) (0.03) (0.01) --(a) Net Realized Gains................................... -- -- -- -- --(A) ------ ------ ------ ------ --------- Total Dividends...................................... (0.05) (0.04) (0.03) (0.01) --(A) ---------- ---------- ---------- ---------- --------- NET ASSET VALUE, END OF PERIOD....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== TOTAL RETURN(B) ..................................... 4.79% 4.43% 2.57% 0.67% 0.34% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 596,861 $ 404,406 $ 330,910 $ 236,639 $ 186,491 Net Investment Income/(Loss) ........................ 4.66% 4.41% 2.58% 0.70% 0.34% Expenses Before Reductions........................... 0.69% 0.69% 0.74% 0.78% 0.88% Expenses Net of Reductions........................... 0.69% 0.69% 0.74% 0.78% 0.88% (a) Amount less than $.005. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower.
AZL NACM INTERNATIONAL FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) NET ASSET VALUE, BEGINNING OF PERIOD ............................................. $ 10.00 ----- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ..................................................... 0.05 Net Realized and Unrealized Gains/(Losses) on Investments ........................ (0.49) ---------- Total from Investment Activities.................................................. (0.44) ---------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income............................................................. (0.02) ---------- Total Dividends (0.02) ---------- NET ASSET VALUE, END OF PERIOD.................................................... $ 9.54 ======== TOTAL RETURN(B) (C) .............................................................. (4.39)% - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ............................................... $ 79,493 Net Investment Income/(Loss)(d) .................................................. 0.78% Expenses Before Reductions(d) (e) ................................................ 1.43% Expenses Net of Reductions(d) .................................................... 1.38% Portfolio Turnover Rate(c) ....................................................... 138.59% (a) Period from commencement of operations (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL NEUBERGER BERMAN REGENCY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED MAY 1, 2006 TO DECEMBER 31, DECEMBER 31, 2007 2006(A) ------------------------------------------- ------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.................................. $ 10.14 $ 10.00 --------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ......................................... 0.05 0.03 Net Realized and Unrealized Gains/(Losses) on Investments............. 0.34 0.14 -------- ------------ Total from Investment Activities...................................... 0.39 0.17 -------- ------------ DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................................. --(B) (0.03) --------- -------------- Total Dividends....................................................... --(B) (0.03) --------- -------------- NET ASSET VALUE, END OF PERIOD........................................ $ 10.53 $ 10.14 ========= ============= TOTAL RETURN(C) (D) .................................................. 3.85% 1.72% - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ................................... $ 94,377 $ 65,535 Net Investment Income/(Loss)(e) ...................................... 0.50% 0.59% Expenses Before Reductions(e) (f) .................................... 1.10% 1.14% Expenses Net of Reductions(e) ........................................ 1.07% 1.12% Expenses Net of Reductions(e) (g) .................................... 1.10% 1.14% Portfolio Turnover Rate(d) ........................................... 62.98% 16.03% (a) Period from commencement of operations. (b) Amount less than $.005. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such reductions had not occurred, the ratios would have been as indicated. (g) Expenses net of reductions excludes expenses paid indirectly.
AZL OCC OPPORTUNITY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD............... $ 15.84 $ 14.69 $ 13.98 $ 13.01 $ 8.09 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ...................... (0.07) (0.14) (0.14) (0.11) (0.07) Net Realized and Unrealized Gains/(Losses) on Investments........................................ 1.49 1.80 0.85 1.11 5.09 -------- -------- -------- -------- -------- Total from Investment Activities................... 1.42 1.66 0.71 1.00 5.02 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Realized Gains................................. (2.29) (0.51) -- (0.03) (0.10) ---------- ---------- ------ ---------- ---------- Total Dividends.................................... (2.29) (0.51) -- (0.03) (0.10) ---------- ---------- ------ ---------- ---------- NET ASSET VALUE, END OF PERIOD..................... $ 14.97 $ 15.84 $ 14.69 $ 13.98 $ 13.01 ========= ========= ========= ========= ========= TOTAL RETURN(A) ................................... 8.89% 11.68% 5.08% 7.76% 62.03% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ................ $ 195,330 $ 158,687 $ 132,560 $ 122,817 $ 64,589 Net Investment Income/(Loss) ...................... (0.47)% (0.92)% (1.06)% (1.02)% (1.11)% Expenses Before Reductions(b) ..................... 1.21% 1.22% 1.35% 1.32% 1.39% Expenses Net of Reductions......................... 1.10% 1.20% 1.35% 1.32% 1.25% Expenses Net of Reductions(c) ..................... 1.21% 1.22% N/A N/A N/A Portfolio Turnover Rate............................ 183.55% 269.47% 193.67% 189.43% 174.59% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
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AZL OCC VALUE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- ---------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 14.62 $ 13.20 $ 13.60 $ 11.77 $ 8.15 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................ 0.14 0.19 0.10 0.06 0.06 Net Realized and Unrealized Gains/(Losses) on Investments.......................................... (0.92) 2.36 0.23 1.87 3.62 ---------- -------- -------- -------- -------- Total from Investment Activities..................... (0.78) 2.55 0.33 1.93 3.68 ---------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................ (0.20) (0.12) (0.03) (0.02) (0.06) Net Realized Gains................................... (1.14) (1.01) (0.70) (0.08) -- ---------- ---------- ---------- ---------- ------ Total Dividends...................................... (1.34) (1.13) (0.73) (0.10) (0.06) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD....................... $ 12.50 $ 14.62 $ 13.20 $ 13.60 $ 11.77 ========= ========= ========= ========= ========= TOTAL RETURN(A) ..................................... (5.77)% 20.11% 2.67% 16.52% 45.21% - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................. $ 443,220 $ 246,575 $ 223,695 $ 229,389 $ 84,964 Net Investment Income/(Loss) ........................ 1.30% 1.29% 0.76% 0.56% 0.73% Expenses Before Reductions(b) ....................... 1.17% 1.15% 1.20% 1.19% 1.27% Expenses Net of Reductions........................... 1.10% 1.12% 1.15% 1.18% 1.10% Expenses Net of Reductions(c) ....................... 1.14% 1.15% 1.20% N/A N/A Portfolio Turnover Rate.............................. 93.94% 85.04% 122.68% 38.88% 80.85% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
AZL OPPENHEIMER GLOBAL FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 3, 2004 TO YEAR ENDED DECEMBER 31, DECEMBER 31, 2007 2006 2005 2004(A) NET ASSET VALUE, BEGINNING OF PERIOD.............................$...14.79. $ 13.01 $ 11.58 $ 10.00 - ----- --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................0.10.. 0.08 0.03 (0.01) Net Realized and Unrealized Gains/(Losses) on Investments .... 0.75 2.01 1.43 1.59 -------- -------- -------- -------- Total from Investment Activities.............................. 0.85 2.09 1.46 1.58 -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income......................................... (0.08) (0.01) -- -- Net Realized Gains............................................ (0.51) (0.30) (0.03) -- ---------- ---------- ---------- ------ Total Dividends............................................... (0.59) (0.31) (0.03) -- ---------- ---------- ---------- ------ NET ASSET VALUE, END OF PERIOD................................ $ 15.05 $ 14.79 $ 13.01 $ 11.58 ========= ========= ========= ========= TOTAL RETURN(B) (C) .......................................... 5.76% 16.29% 12.62% 15.80% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ........................... $ 218,981 $ 218,610 $ 151,585 $ 78,636 Net Investment Income/(Loss)(d) .............................. 0.59% 0.65% 0.21% (0.21)% Expenses Before Reductions(d) (e) ............................ 1.30% 1.34% 1.45% 1.51% Expenses Net of Reductions(d) ................................ 1.20% 1.27% 1.45% 1.45% Portfolio Turnover Rate(c) ................................... 22.87% 29.86% 27.47% 9.61% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL OPPENHEIMER INTERNATIONAL GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ ------------------------------------------------------------------ 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................... $ 18.80 $ 14.60 $ 13.20 $ 11.57 $ 8.75 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) .......................... 0.14 0.14 0.02 0.04 0.12 Net Realized and Unrealized Gains/(Losses) on Investments 2.16 4.09 1.83 1.63 2.81 -------- -------- -------- -------- -------- Total from Investment Activities....................... 2.30 4.23 1.85 1.67 2.93 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................. (0.12) -- -- (0.04) (0.10) Net Realized Gains..................................... (0.34) (0.03) (0.45) -- (0.01) ---------- ---------- ---------- ------ ---------- Total Dividends........................................ (0.46) (0.03) (0.45) (0.04) (0.11) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD......................... $ 20.64 $ 18.80 $ 14.60 $ 13.20 $ 11.57 ========= ========= ========= ========= ========= TOTAL RETURN(A)........................................ 12.29% 28.98% 14.18% 14.48% 33.77% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................... $ 267,537 $ 209,330 $ 97,247 $ 38,049 $ 14,660 Net Investment Income/(Loss) .......................... 0.73% 1.09% 0.19% 0.21% 1.05% Expenses Before Reductions(b) ......................... 1.19% 1.40% 1.51% 1.77% 1.91% Expenses Net of Reductions............................. 1.19% 1.40% 1.45% 1.40% 1.25% Portfolio Turnover Rate................................ 32.64% 19.45% 19.24% 95.05% 9.22% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL OPPENHEIMER MAIN STREET FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 3, 2004 TO DECEMBER 31, YEAR ENDED DECEMBER 31, 2007 2006 2005 2004(A) NET ASSET VALUE, BEGINNING OF PERIOD.......................... 12.68 11.36 10.79 10.00 --------- --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss).................................. 0.09 0.06 0.07 0.06 Net Realized and Unrealized Gains/(Losses) on Investments..... 0.41 1.57 0.51 0.80 -------- -------- -------- -------- Total from Investment Activities.............................. 0.50 1.63 0.58 0.86 -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income......................................... (0.07) (0.06) -- (0.06) Net Realized Gains............................................ (0.69) (0.25) (0.01) (0.01) ---------- ---------- ---------- ---------- Total Dividends............................................... (0.76) (0.31) (0.01) (0.07) ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD................................ $ 12.42 $ 12.68 $ 11.36 $ 10.79 ========= ========= ========= ========= TOTAL RETURN(B) (C) .......................................... 3.80%(d) 14.59% 5.45% 8.60% - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets at End of Period (000's) .......................... $ 139,593 $ 129,416 $ 99,016 $ 65,487 Net Investment Income/(Loss)(e) .............................. 0.72% 0.66% 0.70% 1.52% Expenses Before Reductions(e) (f) ............................ 1.25% 1.22% 1.28% 1.29% Expenses Net of Reductions(e) ................................ 1.20% 1.19% 1.19% 1.20% Expenses Net of Reductions(e) (g) ............................ 1.20% 1.19% 1.20% N/A Portfolio Turnover Rate(c) ................................... 126.24% 105.81% 80.76% 75.56% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not Annualized for periods less than one year. (d) During the year ended December 31, 2007, OppenheimerFunds, Inc. reimbursed $51,744 to the Fund related to violations of certain investment policies and limitations. The corresponding impact to the total return was 0.04%. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (g) Expenses net of reductions excludes expenses paid indirectly.
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AZL PIMCO FUNDAMENTAL INDEXPLUS TOTAL RETURN FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED MAY 1, 2006 TO DECEMBER 31, DECEMBER 31, 2006(A) 2007 NET ASSET VALUE, BEGINNING OF PERIOD..................................... $ 10.42 $ 10.00 ------------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss)............................................. 0.41 0.23 Net Realized and Unrealized Gains/(Losses) on Investments................ 0.25 0.96 ------------ ------------ Total from Investment Activities......................................... 0.66 1.19 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................................... (0.61) (0.23) Return of Capital........................................................ (0.24) -- Net Realized Gains....................................................... (0.01) (0.54) -------------- -------------- Total Dividends.......................................................... (0.86) (0.77) -------------- -------------- NET ASSET VALUE, END OF PERIOD........................................... $ 10.22 $ 10.42 ============= ============= TOTAL RETURN(B) (C)...................................................... 6.66% 11.97% - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's)....................................... $ 76,198 $ 66,123 Net Investment Income/(Loss)(d).......................................... 4.13% 4.07% Expenses Before Reductions(d) (e)........................................ 1.21% 1.19% Expenses Net of Reductions(d)............................................ 1.19% 1.19% Portfolio Turnover Rate(c)............................................... 138.38% 7.35% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL S&P 500 INDEX FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) CLASS 1 CLASS 2 MAY 14, 2007 TO MAY 1, 2007 TO DECEMBER 31, ---------------- --------------------------- DECEMBER 31,2007(A) 2007(A) NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 10.14 $ 10.00 ------------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss)............................. 0.11 0.09 Net Realized and Unrealized Gains/(Losses) on Investments (0.26) (0.12) -------------- -------------- Total from Investment Activities......................... (0.15) (0.03) -------------- -------------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................... (0.11) (0.09) Net Realized Gains....................................... (0.02) (0.02) -------------- -------------- Total Dividends.......................................... (0.13) (0.11) -------------- -------------- NET ASSET VALUE, END OF PERIOD........................... $ 9.86 $ 9.86 ============ ============ TOTAL RETURN(B) (C) ..................................... (1.48)% (0.25)% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's) ..................... $ 411 $ 27,614 Net Investment Income (d) ............................... 1.81% 1.60% Expenses Before Reductions(d) (e) ....................... 0.53% 0.73% Expenses Net of Reductions (d) .......................... 0.24% 0.49% Portfolio Turnover Rate (c) (f) ......................... 15.95% 15.95% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (f) Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.
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AZL SCHRODER EMERGING MARKETS EQUITY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) CLASS 1 CLASS 2 ------------------- --------------------------------- ------------------- --------------------------------- MAY 6, 2007 TO YEAR ENDED MAY 1, DECEMBER 31, DECEMBER 31, 2006 TO 2007(A) 2007 DECEMBER 31, 2006(A) NET ASSET VALUE, BEGINNING OF PERIOD................................. $ 11.64 $ 10.56 $ 10.00 --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................ 0.04 0.03 0.02 Net Realized and Unrealized Gains/(Losses) on Investments............ 2.10 3.17 0.55 -------- -------- -------- Total from Investment Activities..................................... 2.14 3.20 0.57 -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................................ (0.01) --(B) (0.01) ---------- --------- ---------- Total Dividends...................................................... (0.01) --(B) (0.01) ---------- --------- ---------- NET ASSET VALUE, END OF PERIOD....................................... $ 13.77 $ 13.76 $ 10.56 ========= ========= ========= TOTAL RETURN(C) (D) ................................................. 19.23% 30.32% 5.70% - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) .................................. $ 359 $ 249,236 $ 93,712 Net Investment Income/(Loss)(e) ..................................... 0.32% 0.40% 0.32% Expenses Before Reductions(e) (f) ................................... 1.69% 1.96% 2.53% Expenses Net of Reductions(e) ....................................... 1.40% 1.65% 1.55% Portfolio Turnover Rate(d) (g) ...................................... 192.53% 192.53% 36.16% (a) Period from commencement of operations. (b) Amount less than $.005. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (g) Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.
AZL SCHRODER INTERNATIONAL SMALL CAP FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) ------------------------- ------------------------- NET ASSET VALUE, BEGINNING OF PERIOD ......................................................... $ 10.00 --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ................................................................. 0.02 Net Realized and Unrealized Gains/(Losses) on Investments..................................... (0.69) ---------- Total from Investment Activities.............................................................. (0.67) ---------- NET ASSET VALUE, END OF PERIOD................................................................ $ 9.33 ======== TOTAL RETURN(B) (C) .......................................................................... (6.70)% - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ........................................................... $ 85,492 Net Investment Income/(Loss)(d) .............................................................. 0.30% Expenses Before Reductions(d) ................................................................ 1.52% Portfolio Turnover Rate(c) ................................................................... 26.74% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year.
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AZL SMALL CAP STOCK INDEX FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) ----------------------- ----------------------- NET ASSET VALUE, BEGINNING OF PERIOD....................................... $ 10.00 --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) .............................................. 0.04 Net Realized and Unrealized Gains/(Losses) on Investments.................. (0.63) ---------- Total from Investment Activities........................................... (0.59) ---------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income...................................................... (0.05) Net Realized Gains......................................................... (0.09) ---------- Total Dividends............................................................ (0.14) ---------- NET ASSET VALUE, END OF PERIOD............................................. $ 9.27 ======== TOTAL RETURN(B) (C) ....................................................... (5.83)% - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ........................................ $ 22,061 Net Investment Income/(Loss)(d) ........................................... 0.73% Expenses Before Reductions(d) (e) ......................................... 0.87% Expenses Net of Reductions(d) ............................................. 0.58% Portfolio Turnover Rate(c) ................................................ 19.08% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL TARGETPLUS BALANCED FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 10.00 --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ............................ 0.11 Net Realized and Unrealized Gains/(Losses) on Investments 0.10 -------- Total from Investment Activities......................... 0.21 -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................... (0.16) Return of Capital........................................ (0.01) ---------- Total Dividends.......................................... (0.17) ---------- NET ASSET VALUE, END OF PERIOD........................... $ 10.04 ========= TOTAL RETURN(B) (C) ..................................... 2.12% - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ...................... $ 11,177 Net Investment Income/(Loss)(d) ......................... 2.59% Expenses Before Reductions(d) (e) ....................... 1.30% Expenses Net of Reductions(d) ........................... 0.89% Portfolio Turnover Rate (c) ............................. 120.57% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL TARGETPLUS EQUITY FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) DECEMBER 27, 2006 TO DECEMBER 31, YEAR ENDED DECEMBER 31, 2007 2006(A) ---------------------------- ------ NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 9.92 $ 10.00 ------------ ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ............................ 0.08 --(b) Net Realized and Unrealized Gains/(Losses) on Investments 0.67 (0.08) ------------ -------------- Total from Investment Activities......................... 0.75 (0.08) ------------ -------------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................... (0.08) -- Net Realized Gains....................................... (0.02) -- -------------- ---------- Total Dividends.......................................... (0.10) -- -------------- ---------- NET ASSET VALUE, END OF PERIOD........................... $ 10.57 $ 9.92 ============= ============ TOTAL RETURN(C) (D) ..................................... 7.60% 0.80% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ...................... $ 86,067 $ 248 Net Investment Income/(Loss)(e) ......................... 1.54% 2.98% Expenses Before Reductions(e) (f) ....................... 1.14% 0.97% Expenses Net of Reductions(e) ........................... 0.79% 0.79% Portfolio Turnover Rate(d) .............................. 154.12% 0.00% (a) Period from commencement of operations. (b) Amount less than $.005. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL TARGETPLUS GROWTH FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) NET ASSET VALUE, BEGINNING OF PERIOD...................................................... $ 10.00 --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ............................................................. 0.07 Net Realized and Unrealized Gains/(Losses) on Investments................................. (0.04) ---------- Total from Investment Activities.......................................................... 0.03 -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income..................................................................... (0.09) Return of Capital......................................................................... (0.01) ---------- Total Dividends........................................................................... (0.10) ---------- NET ASSET VALUE, END OF PERIOD............................................................ $ 9.93 ======== TOTAL RETURN(B) (C) ...................................................................... 0.33% - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ....................................................... $ 38,758 Net Investment Income(d) ................................................................. 1.80% Expenses Before Reductions(d) (e) ........................................................ 1.06% Expenses Net of Reductions(d) ............................................................ 0.89% Portfolio Turnover Rate(c) ............................................................... 110.66% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL TARGETPLUS MODERATE FUND (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED) MAY 1, 2007 TO DECEMBER 31, 2007(A) NET ASSET VALUE, BEGINNING OF PERIOD.......................................... $ 10.00 --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ................................................. 0.08 Net Realized and Unrealized Gains/(Losses) on Investments..................... 0.09 -------- Total from Investment Activities.............................................. 0.17 -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income......................................................... (0.13) ---------- Total Dividends............................................................... (0.13) ---------- NET ASSET VALUE, END OF PERIOD................................................ $ 10.04 ----========= TOTAL RETURN(B) (C) .......................................................... 1.75% - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ........................................... $ 22,718 Net Investment Income/(Loss)(d) .............................................. 2.11% Expenses Before Reductions(d) (e) ............................................ 1.14% Expenses Net of Reductions(d) ................................................ 0.89% Portfolio Turnover Rate(c) ................................................... 161.13% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
AZL TURNER QUANTITATIVE SMALL CAP GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED APRIL 29, 2005 TO DECEMBER 31, DECEMBER 31, -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- 2007 2006 2005(A) ----------- ----------- ------------------ NET ASSET VALUE, BEGINNING OF PERIOD.................................... $ 12.50 $ 11.23 $ 10.00 --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................... (0.08) (0.03) (0.01) Net Realized and Unrealized Gains/(Losses) on Investments............... 0.83 1.30 1.24 -------- -------- -------- Total from Investment Activities........................................ 0.75 1.27 1.23 -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Realized Gains...................................................... (0.35) -- -- ---------- ------ ------ Total Dividends......................................................... (0.35) -- -- ---------- ------ ------ NET ASSET VALUE, END OF PERIOD.......................................... $ 12.90 $ 12.50 $ 11.23 ========= ========= ========= TOTAL RETURN(B) (C) .................................................... 6.07% 11.31% 12.30% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ..................................... $ 62,425 $ 94,669 $ 45,548 Net Investment Loss(d) ................................................. (0.47)% (0.23)% (0.22)% Expenses Before Reductions(d) (e) ...................................... 1.23% 1.24% 1.35% Expenses Net of Reductions(d) .......................................... 1.23% 1.23% 1.35% Expenses Net of Reductions(d) (f) ...................................... 1.23% 1.24% N/A Portfolio Turnover Rate(b) ............................................. 239.53% 94.34% 83.87% (a) Period from commencement of operations. (b) Not annualized for periods less than one year. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (f) Expenses net of reductions excludes expenses paid indirectly.
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AZL VAN KAMPEN COMSTOCK FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- --------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................... $ 12.00 $ 11.15 $ 11.23 $ 9.63 $ 7.44 --------- --------- --------- -------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) .......................... 0.19 0.18 0.11 0.10 0.08 Net Realized and Unrealized Gains/(Losses) on Investments............................................ (0.43) 1.52 0.31 1.54 2.19 ---------- -------- -------- -------- -------- Total from Investment Activities....................... (0.24) 1.70 0.42 1.64 2.27 ---------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income.................................. (0.20) (0.13) (0.04) (0.04) (0.08) Net Realized Gains..................................... (0.35) (0.72) (0.46) -- -- ---------- ---------- ---------- ------ ------ Total Dividends........................................ (0.55) (0.85) (0.50) (0.04) (0.08) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD......................... $ 11.21 $ 12.00 $ 11.15 $ 11.23 $ 9.63 ========= ========= ========= ========= ======== TOTAL RETURN(A) ....................................... (2.22)% 15.76% 3.92% 17.12% 30.53% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ......................$ 754,496 $ 705,155 $ 559,933 $ 380,374 $ 201,265 Net Investment Income/(Loss) ............................. 1.58% 1.71% 1.44% 1.13% 1.08% Expenses Before Reductions(b) ............................ 1.08% 1.08% 1.19% 1.20% 1.28% Expenses Net of Reductions................................ 1.05% 1.05% 1.18% 1.20% 1.20% Expenses Net of Reductions(c) ............................ 1.05% 1.05% 1.19% --% --% Portfolio Turnover Rate................................ 22.75% 28.14% 30.83% 31.77% 36.85% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
AZL VAN KAMPEN EQUITY AND INCOME FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 3, 2004 TO DECEMBER 31, YEAR ENDED DECEMBER 31, ---------------------------------- 2007 2006 2005 2004 (A) ----------- ----------- ----------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 12.68 $ 11.58 $ 10.86 $ 10.00 --------- --------- --------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ................................. 0.26 0.19 0.14 0.05 Net Realized and Unrealized Gains/(Losses) on Investments..... 0.13 1.24 0.59 0.86 -------- -------- -------- ------------ Total from Investment Activities.............................. 0.39 1.43 0.73 0.91 -------- -------- -------- ------------ DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income......................................... (0.20) (0.12) -- (0.05) Net Realized Gains............................................ (0.30) (0.21) (0.01) -- ---------- ---------- ---------- ---------- Total Dividends............................................... (0.50) (0.33) (0.01) (0.05) ---------- ---------- ---------- -------------- NET ASSET VALUE, END OF PERIOD................................ $ 12.57 $ 12.68 $ 11.58 $ 10.86 ========= ========= ========= ============= TOTAL RETURN(B) (C) .......................................... 3.07% 12.52% 6.75% 9.12% - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ........................... $ 244,193 $ 224,971 $ 162,671 $ 81,218 Net Investment Income/(Loss)(d) .............................. 2.05% 2.00% 1.55% 1.40% Expenses Before Reductions(d) (e) ............................ 1.11% 1.11% 1.18% 1.22% Expenses Net of Reductions(d) ................................ 1.06% 1.08% 1.18% 1.20% Portfolio Turnover Rate(c) ................................... 69.49% 55.05% 46.94% 44.65% (a) Period from commencement of operations. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL VAN KAMPEN GLOBAL FRANCHISE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) MAY 1, 2003 TO YEAR ENDED DECEMBER 31, DECEMBER 31, ----------------------------------------------------- ------------ 2007 2006 2005 2004 2003(A) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 18.14 $ 15.46 $ 13.88 $ 12.37 $ 10.00 --------- --------- --------- --------- --------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ......................... 0.35 0.16 0.08 0.08 0.02 Net Realized and Unrealized Gains/(Losses) on Investments........................................... 1.42 3.09 1.54 1.43 2.36 -------- -------- -------- -------- -------- Total from Investment Activities...................... 1.77 3.25 1.62 1.51 2.38 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................. -- (0.25) -- -- (0.01) Net Realized Gains.................................... (0.34) (0.32) (0.04) -- --(B) ---------- ---------- ---------- ------ --------- Total Dividends....................................... (0.34) (0.57) (0.04) -- (0.01) ---------- ---------- ---------- ------ ---------- NET ASSET VALUE, END OF PERIOD........................ $ 19.57 $ 18.14 $ 15.46 $ 13.88 $ 12.37 ========= ========= ========= ========= ========= TOTAL RETURN(C) (D) .................................. 9.82% 21.25% 11.64% 12.21% 23.90% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ................... $ 413,382 $ 391,610 $ 255,583 $ 122,818 $ 23,982 Net Investment Income/(Loss)(e) ...................... 1.71% 1.31% 1.19% 0.80% 0.57% Expenses Before Reductions(e) (f) .................... 1.32% 1.32% 1.42% 1.48% 1.70% Expenses Net of Reductions(e) ........................ 1.32% 1.32% 1.42% 1.44% 1.35% Expenses Net of Reductions(e) (g) .................... 1.32% 1.32% 1.42% N/A N/A Portfolio Turnover Rate(d) ........................... 31.26% 19.43% 16.33% 9.40% 3.31% (a) Period from commencement of operations. (b) Amount less than $0.005. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Not annualized for periods less than one year. (e) Annualized for periods less than one year. (f) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (g) Expenses net of reductions excludes expenses paid indirectly.
AZL VAN KAMPEN GLOBAL REAL ESTATE FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED MAY 1, 2006 TO DECEMBER 31, DECEMBER 31, 2007 2006(A) ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD................................. $ 12.08 $ 10.00 --------- ------------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................................ 0.13 0.05 Net Realized and Unrealized Gains/(Losses) on Investments............ (1.17) 2.12 ---------- ------------ Total from Investment Activities..................................... (1.04) 2.17 ---------- ------------ DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................................ (0.06) (0.07) Net Realized Gains................................................... (0.05) (0.02) ---------- -------------- Total Dividends...................................................... (0.11) (0.09) ---------- -------------- NET ASSET VALUE, END OF PERIOD....................................... $ 10.93 $ 12.08 ========= ============= TOTAL RETURN(B) (C) ................................................. (8.68)% 21.66% - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: $ Net Assets, End of Period ($000's) .................................. $ 157,039 134,713 Net Investment Income/(Loss)(d) ..................................... 1.07% 1.00% Expenses Before Reductions(d) (e) ................................... 1.37% 1.45% Expenses Net of Reductions(d) ....................................... 1.35% 1.33% Portfolio Turnover Rate(b) .......................................... 46.22% 10.75% (a) Period from commencement of operations. (b) Not annualized for periods less than one year. (c) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (d) Annualized for periods less than one year. (e) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
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AZL VAN KAMPEN GROWTH AND INCOME FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- --------------------------------------------------------------------- 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 13.37 $ 12.36 $ 11.76 $ 10.37 $ 8.21 --------- --------- --------- --------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ........................... 0.22 0.15 0.10 0.09 0.08 Net Realized and Unrealized Gains/(Losses) on Investments............................................. 0.14 1.74 0.98 1.34 2.16 -------- -------- -------- -------- -------- Total from Investment Activities........................ 0.36 1.89 1.08 1.43 2.24 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income................................... (0.18) (0.10) (0.04) (0.04) (0.08) Net Realized Gains...................................... (0.60) (0.78) (0.44) -- -- ---------- ---------- ---------- ------ ------ Total Dividends......................................... (0.78) (0.88) (0.48) (0.04) (0.08) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD.......................... $ 12.95 $ 13.37 $ 12.36 $ 11.76 $ 10.37 ========= ========= ========= ========= ========= TOTAL RETURN(A) ........................................ 2.64% 15.90% 9.24% 13.82% 27.46% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ..................... $ 327,862 $ 370,723 $ 315,538 $ 229,249 $ 146,172 Net Investment Income/(Loss) ........................... 1.39% 1.34% 1.02% 0.87% 1.07% Expenses Before Reductions(b) .......................... 1.09% 1.16% 1.20% 1.21% 1.29% Expenses Net of Reductions.............................. 0.99% 1.09% 1.18% 1.17% 1.10% Expenses Net of Reductions(c) .......................... 1.00% 1.10% 1.20% N/A% N/A% Portfolio Turnover Rate................................. 25.25% 29.83% 40.15% 53.80% 57.44% (a) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (b) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (c) Expenses net of reductions excludes expenses paid indirectly.
AZL VAN KAMPEN MID CAP GROWTH FUND (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 13.48 $ 12.75 $ 10.95 $ 9.35 $ 7.28 --------- --------- --------- -------- -------- INVESTMENT ACTIVITIES: Net Investment Income/(Loss) ..................... 0.03 --(a) (0.05) (0.06) (0.05) Net Realized and Unrealized Gains/(Losses) on Investments....................................... 2.89 1.14 1.97 1.99 2.12 -------- -------- -------- -------- -------- Total from Investment Activities.................. 2.92 1.14 1.92 1.93 2.07 -------- -------- -------- -------- -------- DIVIDENDS TO SHAREHOLDERS FROM: Net Investment Income............................. --(a) -- -- -- -- Net Realized Gains................................ (0.81) (0.41) (0.12) (0.33) -- ---------- ---------- ---------- ---------- ------ Total Dividends................................... (0.81) (0.41) (0.12) (0.33) -- ---------- ---------- ---------- ---------- ------ NET ASSET VALUE, END OF PERIOD.................... $ 15.59 $ 13.48 $ 12.75 $ 10.95 $ 9.35 ========= ========= ========= ========= ======== TOTAL RETURN(B) .................................. 22.19% 9.21% 17.54% 21.23% 28.43% - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Net Assets, End of Period ($000's) ............... $ 559,566 $ 305,006 $ 228,828 $ 90,010 $ 52,424 Net Investment Income/(Loss) ..................... 0.31% 0.04% (0.63)% (0.77)% (0.73)% Expenses Before Reductions(c) .................... 1.18% 1.21% 1.30% 1.32% 1.48% Expenses Net of Reductions........................ 1.12% 1.16% 1.24% 1.27% 1.20% Expenses Net of Reductions(d) .................... 1.14% 1.18% 1.30% N/A N/A Portfolio Turnover Rate........................... 72.41% 70.25% 83.78% 123.60% 229.34% (a) Amount less than $.005. (b) The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. (c) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated. (d) Expenses net of reductions excludes expenses paid indirectly.
- -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust Prospectus May 1, 2008 209 THIS PROSPECTUS IS INTENDED FOR USE ONLY WHEN ACCOMPANIED OR PRECEDED BY A VARIABLE PRODUCT PROSPECTUS. - -------------------------------------------------------------------------------- FOR MORE INFORMATION ABOUT THE FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST: ANNUAL/SEMI-ANNUAL REPORTS (SHAREHOLDER REPORTS): Each Fund's annual and semi-annual reports to shareholders contain additional information about the Funds' investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund's performance, except the AZL Money Market Fund, during its last fiscal year. PROXY VOTING RECORDS Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is available without charge. STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information about the Funds, including their respective operations and investment policies. It is incorporated by reference and is legally considered a part of this Prospectus. YOUR REQUEST FOR FREE DOCUMENTS MAY BE MADE IN THE FOLLOWING WAYS:
- -------------------------------- ----------------------------- ----------------------------- ------------------------------- SHAREHOLDER REPORTS Contact a broker or Contact the Funds at: Access the Allianz Life AND THE SAI investment adviser that 3435 STELZER ROAD, website at: sells products that offer COLUMBUS, OHIO 43219 HTTPS://WWW.ALLIANZLIFE.COM the Funds. (TOLL-FREE) 1-877-833-7113 - -------------------------------- ----------------------------- ----------------------------- ------------------------------- - -------------------------------- ------------------------------------------------------------------------------------------- PROXY VOTING RECORDS Access the Allianz Life website at: HTTPS://WWW.ALLIANZLIFE.COM - -------------------------------- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION: You can review information about the Funds (including the SAI), and obtain copies, after paying a duplicating fee, from the SEC as follows: IN PERSON: Public Reference Room in Washington, D.C. (For their hours of operation, call 1-202-551-8090.) BY MAIL: Securities and Exchange Commission Public Reference Section 100 F Street NE Washington, D.C. 20549-0102 ON THE EDGAR DATABASE VIA THE INTERNET: www.sec.gov BY ELECTRONIC REQUEST: publicinfo@sec.gov. The SEC charges a fee to copy any documents. Investment Company Act file no. 811-09491 PART B - SAI _____________________ STATEMENT OF ADDITIONAL INFORMATION AZL(R) AIM International Equity Fund AZL(R) Columbia Technology Fund AZL(R) Davis NY Venture Fund AZL(R) Dreyfus Founders Equity Growth Fund AZL(R) Dreyfus Premier Small Cap Value Fund AZL(R) First Trust Target Double Play Fund AZL(R) Franklin Small Cap Value Fund AZL(R) Jennison 20/20 Focus Fund AZL(R) Jennison Growth Fund AZL(R) LMP Large Cap Growth Fund AZL(R) Legg Mason Growth Fund AZL(R) Legg Mason Value Fund AZL(R) Money Market Fund AZL(R) NACM International Fund AZL(R) Neuberger Berman Regency Fund AZL(R) OCC Opportunity Fund AZL(R) OCC Value Fund AZL(R) Oppenheimer Global Fund AZL(R) Oppenheimer International Growth Fund AZL(R) Oppenheimer Main Street Fund AZL(R) PIMCO Fundamental IndexPLUS Total Return Fund AZL(R) S&P 500 Index Fund AZL(R) Schroder Emerging Markets Equity Fund AZL(R) Schroder International Small Cap Fund AZL(R) Small Cap Stock Index Fund AZL TargetPLUS(SM) Balanced Fund AZL TargetPLUS(SM) Equity Fund AZL TargetPLUS(SM) Growth Fund AZL TargetPLUS(SM) Moderate Fund AZL(R) Turner Quantitative Small Cap Growth Fund AZL(R) Van Kampen Comstock Fund AZL(R) Van Kampen Equity and Income Fund AZL(R) Van Kampen Global Franchise Fund AZL(R) Van Kampen Global Real Estate Fund AZL(R) Van Kampen Growth and Income Fund AZL(R) Van Kampen Mid Cap Growth Fund EACH A "FUND" OF ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST (THE "TRUST") May 1, 2008 This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Prospectus for the Trust dated May 1, 2008, which may be supplemented from time to time. This Statement of Additional Information is incorporated by reference in its entirety into the Prospectus. Copies of the Prospectus and Shareholder Reports may be obtained without charge, upon request, by writing the Trust at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free 1-877-833-7113. TABLE OF CONTENTS History of the Trust......................................3 Investment Strategies and Policies........................5 The Funds..............................................5 Additional Information on Portfolio Instruments and Investment Policies 11 Bank Obligations......................................17 Commercial Paper......................................17 Common Stocks.........................................18 Convertible Securities................................18 Corporate Debt Securities.............................18 Delayed Funding Loans And Revolving Credit Facilities.20 Derivative Instruments................................20 Event-Linked Exposure.................................21 Foreign Currency Options and Futures Transactions.....22 Foreign Securities....................................22 Forward Foreign Currency Exchange Contracts...........25 Futures...............................................25 Futures and Options Investment Risks..................26 Guaranteed investment contracts.......................26 Illiquid Securities...................................26 Investment Company Securities.........................27 Lending of Portfolio Securities.......................28 Loan Participations and Assignments...................28 Mortgage-Related Securities...........................28 Options...............................................31 Preferred Stocks......................................32 Real Estate Investment Trusts (REITs).................32 Repurchase Agreements.................................33 Reverse Repurchase Agreements and Dollar Roll Agreements 33 Risks of Techniques Involving Leverage................33 Short Sales Against the Box...........................34 Small Company Stocks..................................35 Special Situation Companies...........................35 Structured Notes......................................35 Swap Agreements.......................................35 Taxable and Tax Exempt Municipal Securities...........36 U.S. Government Obligations...........................37 Variable and Floating Rate Demand and Master Demand Notes 37 Warrants and Rights...................................38 When-Issued and Delayed Delivery Securities...........38 Zero Coupon and Pay-In-Kind Securities................38 Investment Restrictions..................................40 Portfolio Turnover....................................42 Other Fund Policies......................................42 Disclosure of Portfolio Holdings......................42 Additional Purchase and Redemption Information........44 Net Asset Value.......................................44 Valuation of the Money Market Fund....................44 Valuation of the Non-Money Market Funds...............44 Redemption in Kind....................................45 Management of the Trust..................................46 Trustees and Officers.................................46 Trustee Holdings......................................50 Control Persons and Principal Holders of Securities...51 The Manager...........................................52 The Subadvisers.......................................57 BlackRock Institutional Management Corporation........62 ClearBridge Advisors, LLC.............................62 Columbia Management Advisors, LLC.....................62 Davis Selected Advisers. L.P..........................62 The Dreyfus Corporation...............................62 First Trust Advisors L.P..............................63 Founders Asset Management LLC.........................63 Franklin Advisory Services, LLC.......................63 INVESCO Aim Capital Management, Inc...................63 Jennison Associates LLC...............................63 Legg Mason Capital Management, Inc....................63 Neuberger Berman Management Inc.......................64 Nicholas-Applegate Capital Management LLC.............64 Oppenheimer Capital LLC...............................64 OppenheimerFunds, Inc.................................64 Pacific Investment Management Company LLC (PIMCO).....64 Schroder Investment Management North America Inc......64 Turner Investment Partners, Inc.......................65 Van Kampen Asset Management...........................65 Other Managed Accounts................................65 Potential Material Conflicts of Interest..............74 Portfolio Manager Compensation........................75 Portfolio Manager Ownership of Securities in the Funds89 Affiliated Persons....................................89 Portfolio Transactions................................89 Affiliated Brokers....................................91 Administrator, Transfer Agent and Fund Accountant.....93 Distributor...........................................96 Custodian.............................................98 Independent Registered Public Accounting Firm.........98 Legal Counsel.........................................99 Codes of Ethics.......................................99 Licensing Arrangements................................99 Additional Information..................................102 Description of Shares................................102 Vote of a Majority of the Outstanding Shares.........104 Additional Tax Information...........................104 Performance Information..............................107 Yields of the Money Market Fund......................108 Yields of the Non-Money Market Funds.................108 Calculation of Total Return..........................109 Miscellaneous........................................109 Financial Statements.................................110 i - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proxy Voting Policies and Procedures.................110 Appendix A..............................................111 Commercial Paper Ratings.............................111 Corporate and Long-Term Debt Ratings.................113 Appendix B -- Proxy Voting Policies.....................117 Allianz Variable Insurance Products Trust............117 Allianz Investment Management LLC....................120 INVESCO Aim Capital Management, Inc..................123 BlackRock Advisors, LLC..............................129 ClearBridge Advisors LLC.............................144 Columbia Management Advisors, LLC....................162 Davis Selected Advisers, LP..........................184 Dreyfus Corporation -- Mellon Financial Corporation..205 First Trust Advisors L.P.............................208 Founders Asset Management LLC........................248 Franklin Advisory Services, LLC......................251 Jennison Associates LLC..............................259 Legg Mason Capital Management, Inc...................318 Neuberger Berman Management Inc......................323 Nicholas-Applegate Capital Management LLC............357 Oppenheimer Capital LLC..............................366 OppenheimerFunds, Inc................................434 PIMCO................................................454 Schroder Investment Management North America Inc.....462 Turner Investment Management LLC.....................472 Morgan Stanley Investment Management (For Funds Subadvised by Van Kampen Asset Management) 475 ii - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HISTORY OF THE TRUST The Trust is an open-end investment management company organized in July 1999 as a Delaware business trust comprised of 36 separate investment portfolios, 31 of which are classified as "diversified" and five of which are classified as "non-diversified" within the meaning of the 1940 Act. The non-diversified funds are the AZL First Trust Target Double Play Fund, the AZL Legg Mason Growth Fund, the AZL Legg Mason Value Fund, the AZL Van Kampen Global Franchise Fund, and the AZL Van Kampen Global Real Estate Fund. The Trust currently offers 35 variable net asset value funds and one money market fund.
The following Funds (Subadvisers) changed effective on the following dates: - --------------------- ----------------------------------------------- --------------------------------------- Date Current Fund name (Subadviser) Previous Fund name (Subadviser) - --------------------- ----------------------------------------------- --------------------------------------- July 13,2007 AZL Turner Quantitative Small Cap Growth Fund AZL LMP Small Cap Growth Fund (Turner Investment Partners, Inc.) (ClearBridge Advisors, LLC) - --------------------- ----------------------------------------------- --------------------------------------- December 10, 2007 AZL Money Market Fund AZL Money Market Fund (BlackRock Institutional Management (Prudential Investment Management, Corporation) Inc.) - -------------------- ----------------------------------------------- --------------------------------------- December 10, 2007 AZL Schroder Emerging Markets Equity Fund AZL Oppenheimer Developing Markets (Schroder Investment Management North America Fund Inc.) (OppenheimerFunds, Inc.) - --------------------- ----------------------------------------------- --------------------------------------- At a Special Meeting of Shareholders held on September 19, 2007, shareholders of each of the Acquired Funds in the following table approved an Agreement and Plan of Reorganization (the "Plan") between each Acquired Fund and its corresponding Acquiring Fund. Under the Plan, effective September 21, 2007, a "Reorganization" was completed whereby each Acquiring Fund has acquired all of the assets and assumed all of the liabilities of its corresponding Acquired Fund in exchange for shares of the Acquiring Fund. Shares of each Acquiring Fund have been distributed proportionately to the shareholders of the corresponding Acquired Fund in complete liquidation of the Acquired Fund and the assumption of the Acquired Fund's liabilities. As a result of the Reorganizations, the Acquired Funds are no longer available. - ---------------------------------------------------- ---------------------------------------------- Acquiring Funds Acquired Funds - ---------------------------------------------------- ---------------------------------------------- AZL(R) Van Kampen Comstock Fund AZL(R) AIM Basic Value Fund - ---------------------------------------------------- ---------------------------------------------- AZL(R) OCC Value Fund AZL(R) OCC Renaissance Fund - ---------------------------------------------------- ---------------------------------------------- AZL(R) Van Kampen Mid Cap Growth Fund AZL(R) Van Kampen Aggressive Growth Fund - ---------------------------------------------------- ---------------------------------------------- AZL(R) Dreyfus Founders Equity Growth Fund AZL(R) Van Kampen Strategic Growth Fund - ---------------------------------------------------- ----------------------------------------------
The Trust is established exclusively for the purpose of providing an investment vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of various life insurance companies (the "Participating Insurance Companies"). Shares of the Trust are not offered to the general public but solely to such separate accounts (the "Separate Accounts"). Much of the information contained in this Statement of Additional Information ("SAI") expands upon subjects discussed in the Prospectus of the Trust described above. Capitalized terms not defined herein are defined in the Prospectus. No investment in shares of a Fund should be made without first reading the Trust's Prospectus. Anticipated Substitution of shares of certain Funds of the VIP Trust for shares of other funds Allianz Life Insurance Company of North America and its subsidiary Allianz Life Insurance Company of New York, and their separate accounts Allianz Life Variable Account A, Allianz Life Variable Account B, and Allianz Life of NY Variable Account C (the "Separate Accounts") (collectively the "Exemptive Order Applicants"), all of which are affiliates of the Manager, have filed applications with the Securities and Exchange Commission for exemptive orders (the "Exemptive Order Applications") that would permit them to substitute shares of certain Funds of the Allianz Variable Insurance Products Trust for shares of certain other funds offered under certain variable annuity contracts and variable life insurance policies issued by the Exemptive Order Applicants. 3 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- If the SEC grants the relief requested in the Exemptive Order Applications, the Exemptive Order Applicants would be permitted to substitute shares of the Replacement Funds for shares of the Replaced Funds held by the Separate Accounts as shown in the following table:
- ---------------------------------------------- ---------- --------------------------------------- ----------- Replacement Fund Share Replaced Fund Share Class(es) Class(es) - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Jennison 20/20 Focus Fund Class 2* Jennison 20/20 Focus Portfolio Class 2* - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL S&P 500 Index Fund Class 1 Dreyfus Stock Index Fund, Inc. Initial Class 2* Service* - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Small Cap Stock Index Fund Class 2* Dreyfus Investment Portfolios Small Service* Cap Stock Index Portfolio - ---------------------------------------------- ---------- --------------------------------------- ----------- - ---------------------------------------------- ---------- --------------------------------------- ----------- AZL Schroder Emerging Markets Equity Fund Class 1 Templeton Developing Markets Class 1 Class 2* Securities Fund Class 2* - ---------------------------------------------- ---------- --------------------------------------- -----------
* A distribution fee is assessed against assets attributable to this class of shares at an annual rate of 0.25% of the average daily net assets attributable to the class. It is currently anticipated that if the SEC grants the relief requested, the substitutions described above will take place in 2008. Neither the Manager nor the VIP Trust are applicants on the Exemptive Order Applications. Also, pursuant to the Exemptive Order Applications, neither the contract owners, the Replaced Funds, nor the Replacement Funds will bear any costs of the Substitutions, and all legal, accounting, and transactional costs and any brokerage or other costs incurred in the Substitutions will be paid by the Exemptive Order Applicants or the Manager, and accordingly, the Substitutions will have no impact on the fees and expenses paid by the Funds and borne by the shareholders of the Funds. 4 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT STRATEGIES AND POLICIES
THE FUNDS AZL AIM International Equity Fund ("AIM International Equity Fund") AZL Columbia Technology Fund ("Columbia Technology Fund") AZL Davis NY Venture Fund ("Davis NY Venture Fund") AZL Dreyfus Founders Equity Growth Fund ("Dreyfus Founders Equity Growth Fund") AZL Dreyfus Premier Small Cap Value Fund ("Dreyfus Premier Small Cap Value Fund") AZL First Trust Target Double Play Fund ("Target Double Play Fund") AZL Franklin Small Cap Value Fund ("Franklin Small Cap Value Fund") AZL Jennison 20/20 Focus Fund ("Jennison 20/20 Focus Fund") AZL Jennison Growth Fund ("Jennison Growth Fund") AZL LMP Large Cap Growth Fund ("LMP Large Cap Growth Fund") AZL Legg Mason Growth Fund ("LM Growth Fund") AZL Legg Mason Value Fund ("LM Value Fund") AZL Money Market Fund ("Money Market Fund") AZL NACM International Fund ("NACM International Fund") AZL Neuberger Berman Regency Fund ("Neuberger Berman Regency Fund") AZL OCC Opportunity Fund ("OCC Opportunity Fund") AZL OCC Value Fund ("OCC Value Fund") AZL Oppenheimer Global Fund ("Oppenheimer Global Fund") AZL Oppenheimer International Growth Fund ("Oppenheimer International Growth Fund") AZL Oppenheimer Main Street Fund ("Oppenheimer Main Street Fund") AZL PIMCO Fundamental IndexPLUS Total Return Fund ("PIMCO Total Return Fund") AZL Schroder Emerging Markets Equity Fund ("Schroder Emerging Markets Equity Fund") AZL Schroder International Small Cap Fund ("Schroder International Small Cap Fund") AZL S&P 500 Index Fund ("S&P 500 Index Fund") AZL Small Cap Stock Index Fund ("Small Cap Stock Index Fund") AZL TargetPLUS Balanced Fund ("TargetPLUS Balanced Fund") AZL TargetPLUS Equity Fund ("TargetPLUS Equity Fund") AZL TargetPLUS Growth Fund ("TargetPLUS Growth Fund") AZL TargetPLUS Moderate Fund ("TargetPLUS Moderate Fund") AZL Turner Quantitative Small Cap Growth Fund ("Turner Quantitative Small Cap Growth Fund") AZL Van Kampen Comstock Fund ("VK Comstock Fund") AZL Van Kampen Equity and Income Fund ("VK Equity and Income Fund") AZL Van Kampen Global Franchise Fund ("VK Global Franchise Fund") AZL Van Kampen Global Real Estate Fund ("VK Global Real Estate Fund") AZL Van Kampen Growth and Income Fund ("VK Growth and Income Fund") AZL Van Kampen Mid Cap Growth Fund ("VK Mid Cap Growth Fund")
5 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Temporary, Defensive Investments As described in the Prospectus, each Fund, except the Money Market Fund, may hold uninvested cash reserves or invest without limit in money market instruments (i.e., short term debt instruments) for temporary defensive purposes when the Subadviser has determined that market or economic conditions so warrant. These debt obligations may include U.S. Government securities; certificates of deposit, bankers' acceptances and other short-term debt obligations of banks with total assets of at least $100,000,000; debt obligations of corporations (corporate bonds, debentures, notes and other similar corporate debt instruments); variable and floating rate demand and master demand notes; commercial paper; and repurchase agreements with respect to securities in which the Fund is authorized to invest. (See "Additional Information on Portfolio Instruments and Investment Policies -- Bank Obligations," "--Commercial Paper," "--Variable and Floating Rate Demand and Master Demand Notes," "--U.S. Government Obligations," "--Corporate Debt Securities" and "--Repurchase Agreements"). Specific Non-Fundamental Investment Restrictions In addition to the information shown in the table under "Additional Information on Portfolio Instruments and Investment Policies" and the information in the section "Investment Restrictions" in this SAI, the following sets forth specific non-fundamental investment restrictions for certain Funds. AIM International Equity Fund. The Fund may invest in equity and debt securities issued by REITs. The Fund's investment in REITs will not exceed 15% of the total assets of the Fund. The Fund may pledge no more than 10% of its total assets as collateral for short sales against the box. The Fund will not write options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. The Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets. Columbia Technology Fund: The Fund may purchase or acquire any security if, as a result, up to 33 ?% of its net assets would be invested in foreign equities in developed markets, including investments in both foreign securities purchased in foreign markets and American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and foreign securities listed on The Nasdaq Stock Market, Inc. (NASDAQ). The Fund may borrow up to 33 ?% of its net assets for temporary investment or cash management purposes. Also, for temporary investment or cash management purposes, the Fund may invest in investment grade securities, other than municipal securities, including U.S. government obligations, domestic bank obligations, and repurchase agreements. The Fund is also permitted to invest in loan transactions, options and financial futures, currency contracts for spot basis or hedging purposes, when-issued securities, and REITs. The Fund is not permitted to invest in securities in emerging markets, currency contracts for speculative purposes, or real estate (not including REITs). ADRs, GDRs and NASDAQ-listed foreign securities are not subject to the limitation on investments in emerging markets securities, even if the issuer is headquartered in, has its principal operations in, derives its revenues from, has its principal trading markets in, or was legally organized in an emerging market. The overall investment activities of Columbia Management and its affiliates may limit the investment opportunities for the Fund in certain markets in which limitations are imposed by regulators upon the amount of investment by affiliated investors, in the aggregate or in individual issuers. From time to time, the Fund's activities also may be restricted because of regulatory restrictions applicable to Columbia management and its affiliates, and/or their internal policies. Davis NY Venture Fund. The Fund may not sell short more than 5% of its total assets. The Fund may not invest 25% or more of its investments in the securities of issuers primarily engaged in any particular industry group. The Fund will not purchase debt securities rated BB or Ba or lower if the securities are in default at the time of purchase or if such purchase would then cause more than 35% of the Fund's net assets to be invested in such lower-rated securities. The Fund will not purchase an option if the purchase would cause the total premiums (at market) of all options then owned to exceed 5% of the Fund's total assets. The Fund will not sell covered calls if the transaction would cause the total premiums (at market) of all covered calls then written to exceed 25% of the Fund's total assets. The fund will not engage in a futures transaction if the transaction would cause the nominal value of futures contracts then purchased or sold to exceed 25% of the Fund's total assets. 6 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Dreyfus Founders Equity Growth Fund. The Fund may invest up to 30% of its total assets in foreign securities. The Fund will not invest more than 5% of its total assets in bonds, debentures, convertible securities, and corporate obligations rated below investment grade, either at the time of purchase or as a result of a rating reduction after purchase, or in unrated securities believed to be equivalent in quality to securities rated below investment grade; this 5% limitation does not apply to preferred stocks. Dreyfus Premier Small Cap Value Fund. The Fund may also invest up to 5% of its net assets in warrants. The Fund will not purchase put or call options that are traded on a national stock exchange in an amount exceeding 5% of its net assets. The Fund will not enter into futures contracts to the extent that its outstanding obligations under these contracts would exceed 25% of the Fund's total assets. Franklin Small Cap Value Fund. The Fund may not invest in any company for the purpose of exercising control or management, except that all or substantially all of the assets of the Fund may be invested in another registered investment company having the same investment goal and policies of the Fund. The Fund may not purchase securities on margin, except that the Fund may make margin payments in connection with futures, options, and currency transactions. The Fund may not buy securities of open-end or closed-end investment companies, except that the Fund may: (i) buy securities of open-end or closed-end investment companies in compliance with the 1940 Act; (ii) invest all or substantially all of its assets in another registered investment company having the same investment goal and policies as the Fund; or (iii) invest in shares of one or more money market funds managed by the manager or its affiliates, to the extent permitted by exemptions granted under the 1940 Act. The Fund may not invest more than 5% of its assets in securities of issuers with less than three years' continuous operation, including the operations of any predecessor companies. The Fund may not hold or purchase the securities of any issuer if, as a result, in the aggregate, more than 15% of the value of the Fund's net assets would be invested in (i) securities that are not readily marketable or (ii) repurchase agreements maturing in more than seven days. The Fund may, however, invest in registered investment companies as described in above. Jennison 20/20 Focus Fund. The Fund may invest more than 5% of its total assets in the securities of a single issuer. The Fund will not invest more than 5% of its total assets in unattached rights and warrants. The Fund may invest up to 35% of its total assets in securities of foreign issuers. This does not include ADRs and other similar receipts or shares traded in U.S. Markets. The Fund may invest up to 5% of its total assets in structured notes. No more than 25% of the Fund's net asset will be, when added together, (1) deposited as collateral for the obligation to replace securities borrowed to effect short sales, (2) segregated in connection with short sales, and (3) used as cover for short sales. Short sales "against the box" are not subject to this limitation. The Fund may invest up to 10% of its total assets in securities of other non-affiliated investment companies. Jennison Growth Fund. The Fund may invest up to 20% of its total assets in foreign equity securities. This does not include ADRs and other similar receipts or shares traded in U.S. markets. Up to 25% of the Fund's net assets may be subject to short sales, including short sales "against the box." LM Growth Fund. The Fund will not borrow for investment purposes an amount in excess of 5% of its total assets. The Fund may not sell securities short (unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short). However, this does not prevent the Fund from entering into short positions in foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars, securities purchased or sold on a forward-commitment or delayed-delivery basis or other financial instruments. The Fund may not purchase securities on margin, except that (1) the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and (2) the Fund may make margin payments in connections with foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis or other financial instruments. The Fund's when-issued purchases, delayed-delivery transactions and forward commitments in total will not exceed 5% of the value of the Fund's net assets. This 5% limitation reflects the value of the underlying obligation together with its initial payment. The Fund will not enter into repurchase agreements of more than seven days duration if more than 15% of its net assets would be invested in such agreements and other illiquid securities. The Fund may 7 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- invest up to 25% of its total assets in foreign securities, either directly or indirectly through the purchase of ADRs, GDRs, or European Depositary Receipts ("EDRs"). LM Value Fund. The Fund does not intend to invest more than 25% of its total assets in foreign securities and does not intend to invest more than 5% of its net assets in indexed securities. The Fund may enter into futures contracts and related options provided that not more than 5% of its net assets are required as a futures contract deposit and/or premium; in addition, the Fund may not enter into futures contracts or related options if, as a result, more than 20% of its total assets would be so invested. The Fund will not enter into repurchase agreements of more than seven days duration if more than 15% of its net assets would be invested in such agreements and other illiquid securities. The Fund may not invest more than 5% of its net assets in municipal obligations (including participation interests), may not invest more than 5% of its net assets in either zero coupon bonds or pay-in-kind bonds and may not invest more than 5% of its net assets in floating and variable rate obligations. LMP Large Cap Growth Fund. The Fund may invest up to 20% of its net assets plus borrowings for investment purposes in equity securities of companies with market capitalizations not within the top 1,000 stocks of the equity market. The Fund may invest up to 15% of its assets in foreign securities, including securities of emerging market issuers. Money Market Fund. The Money Market Fund may invest in a broad range of short-term, high quality, U.S. Dollar-denominated instruments, such as government, bank, commercial and other obligations that are available in the money markets. In particular, the Fund may invest in: (a) U.S. dollar-denominated obligations issued or supported by the credit of U.S. or non-U.S. banks or savings institutions with total assets in excess of $1 billion (including obligations of non-U.S. branches of such banks); (b) high quality commercial paper and other obligations issued or guaranteed by U.S. and non-U.S. corporations and other issuers rated (at the time of purchase) A-2 or higher by S&P, Prime-2 or higher by Moody's or F-2 or higher by Fitch Investors Service, Inc. ("Fitch"), as well as high quality corporate bonds rated (at the time of purchase) A or higher by those rating agencies; (c) unrated notes, paper and other instruments that are of comparable quality to the instruments described in (b) above as determined by the Fund's Subadviser; (d) asset-backed securities (including interests in pools of assets such as mortgages, installment purchase obligations and credit card receivables); (e) securities issued or guaranteed as to principal and interest by the U.S. Government or by its agencies or authorities and related custodial receipts; (f) dollar-denominated securities issued or guaranteed by non-U.S. governments or their political subdivisions, agencies or authorities; (g) funding agreements issued by highly-rated U.S. insurance companies; (h) securities issued or guaranteed by state or local governmental bodies; (i) repurchase agreements relating to the above instruments; and (j) municipal bonds and notes whose principal and interest payments are guaranteed by the U.S. Government or one of its agencies or authorities or which otherwise depend on the credit of the United States. All securities acquired by the Fund will be determined at the time of purchase by the Funds' Subadviser, under guidelines established by the Fund's Board of Trustees, to present minimal credit risks and will be "Eligible Securities" as defined by the SEC. Eligible Securities are (a) securities that either (i) have short-term debt ratings at the time of purchase in the two highest rating categories by at least two unaffiliated nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (ii) are comparable in priority and security with an instrument issued by an issuer which has such ratings, and (b) securities that are unrated (including securities of issuers that have long-term but not short-term ratings) but are of comparable quality as determined in accordance with guidelines approved by the Board of Trustees. NACM International Fund. The Fund may not purchase or sell futures or purchase related options if, immediately thereafter, more than 25% of its net assets would be hedged. The Fund also may not purchase or sell futures or purchase related options if, immediately thereafter, the sum of the amount of margin deposits on the Fund's existing futures positions and premiums paid for such options would exceed 5% of the market value of the Fund's net assets. Upon the purchase of futures contracts, the Fund will deposit an amount of cash or liquid debt or equity securities equal to the market value of the futures contracts in a segregated account or in a margin account with a broker to collateralize the position and thereby ensure that the use of such futures is unleveraged. For hedging purposes, the Fund may enter into interest rate and currency swap transactions and purchase or sell interest rate and currency caps and floors. The Fund will not enter into any of these transactions unless the unsecured senior debt or the claims paying ability of the other party to the transaction is rated at least "high quality" 8 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- at the time of the purchase by at least one NRSRO. In addition to the hedging transactions referred to above, the Fund may enter into options, futures and swap transactions to enhance potential gain in circumstances where hedging is not involved. The Fund's net loss exposure resulting from transactions entered into for each purpose will not exceed 5% of the Fund's net assets at any one time and, to the extent necessary, the Fund will close out transactions in order to comply with this limitation. The Fund may not enter into transactions for the purpose of arbitrage, or invest in commodities and commodities contracts, except that the Fund may invest in stock index, currency and financial futures contracts and related options in accordance with any rules of the Commodity Futures Trading Commission ("CFTC"). OCC Value Fund. The Fund may invest up to 5% of its total assets in securities issued in initial public offerings (IPOs). Oppenheimer Global Fund. The Fund may invest in a number of different kinds of derivative investments to seek increased returns or to try to hedge investment risks. It does not currently do so to a significant degree. (See "Additional Information on Portfolio Instruments and Investment Policies -- Derivative Instruments.") The Fund may invest in rights or warrants but does not expect that these investments will exceed 5% of its total assets. Oppenheimer International Growth Fund. The Fund may invest up to 25% of its total assets in debt securities including up to 5% of its total assets in lower rated debt securities. The Fund may invest up to 15% of its net assets in illiquid securities, provided that no more than 10% of its net assets are invested in restricted securities (see "Additional Information on Portfolio Instruments and Investment Policies -- Illiquid Securities"). The Fund may invest up to 5% in the aggregate of its total assets in swap agreements, put and call options and collars. The Fund may use various derivative strategies seeking to protect its assets, implement a cash or tax management strategy or enhance its returns. With derivatives, the Subadviser attempts to predict whether an underlying investment will increase or decrease in value at some future time. The Subadviser considers various factors, such as availability and cost, in deciding whether to use a particular instrument or strategy. Oppenheimer Main Street Fund. The Fund can invest up to 25% of its total assets in lower-grade securities, but it may not invest more than 10% of its total assets in lower-grade securities that are not convertible. The Fund will not invest more than 10% of its net assets in illiquid securities (see "Additional Information on Portfolio Instruments and Investment Policies -- Illiquid Securities"). PIMCO Total Return Fund. Notwithstanding any other fundamental investment policy or limitation, it is a fundamental policy of the Fund that it may pursue its investment objective by investing in one or more underlying investment companies or vehicles that have substantially similar investment objectives, policies and limitations as the Fund. Schroder International Small Cap Fund. No more than 5% of the Fund's total assets may be used as initial margin deposit for futures contracts and no more than 20% of the Fund's total assets may be obligated under futures contracts, options, swap agreements, or other derivative instruments at any time. The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This limitation shall not prevent the Fund from purchasing, selling, or entering into securities or other instruments backed by physical commodities, foreign currencies, foreign currency forward contracts, foreign currency options, futures contracts, options on futures contracts, swap agreements, or other derivative instruments, subject to compliance with applicable provisions of the federal securities and commodities laws. The Fund may not purchase securities on margin or sell securities short, except as permitted by the Fund's investment policies relating to commodities as described in this paragraph. S&P 500 Index Fund. The Fund may not: (i) engage in arbitrage transactions, (ii) purchase warrants (other than those acquired by the Fund in units or attached to securities), (iii) sell securities short, but may sell securities short against the box, or (iv) invest more than 10% of its total assets in the securities of any single issuer or hold more than 20% of the voting securities of any single issuer. Small Cap Stock Index Fund. The Fund may not: (i) engage in arbitrage transactions, (ii) purchase warrants (other than those acquired by the Fund in units or attached to securities), (iii) sell securities short, but may sell securities 9 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- short against the box, or (iv) invest more than 10% of its total assets in the securities of any single issuer or hold more than 20% of the voting securities of any single issuer. Turner Quantitative Small Cap Growth Fund. The Fund may invest up to 20% of its net assets for investment purposes in equity securities of companies whose market capitalizations exceed the market capitalization of companies included in the Russell 2000 Growth Index. The Fund may invest up to 15% of its total assets in equity securities of foreign issuers. VK Comstock Fund. The Fund generally holds 10% of its total assets in high quality short term debt securities and in investment grade corporate debt securities for liquidity purposes. The Fund may invest up to 10% of its net assets in illiquid securities (see "Additional Information on Portfolio Instruments and Investment Policies -- Illiquid Securities"). VK Equity and Income Fund. The Fund may invest up to 10% of its net assets in illiquid and certain restricted securities. The Fund may not borrow money except for a temporary purpose and then not in excess of 10% of its net assets. The Fund may not purchase securities on margin, sell securities short, purchase or sell commodities or commodities futures contracts, or make loans to any individual. The Fund may not purchase a restricted security or a security for which market quotations are not readily available if as a result of such purchase more than 5% of the Fund's assets would be invested in such securities. VK Global Real Estate Fund. The Fund shall not concentrate its investment in any one industry, except that the Fund will invest more than 25% of its total assets in the real estate industry and except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, or (iii) an exemption or other relief from the provisions of the 1940 Act, as amended from time to time. The Fund shall not write, purchase or sell puts, calls or combinations thereof, except that the Fund may (a) write covered or fully collateralized call options, write secured put options, and enter into closing or offsetting purchase transactions with respect to such options, (b) purchase and sell options to the extent that the premiums paid for all such options owned at any time do not exceed 10% of its total assets and (c) engage in transactions in futures contracts and options on futures contracts transactions provided that such transactions are entered into for bona fide hedging purposes (or meet certain conditions as specified in regulations of the Commodities Futures Trading Commission), and provided further that the aggregate initial margin and premiums do not exceed 5% of the fair market value of the Fund's total assets. The Fund may not make short sales of securities, unless at the time of the sale it owns or has the right to acquire and equal amount of such securities; provided that this prohibition does not apply to the writing of options or the sale of forward contracts, futures contracts, foreign currency futures contracts or related options. 10 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES The Funds invest in a variety of securities and employ a number of investment techniques that involve certain risks. The Prospectus for the Funds highlights the principal investment strategies, investment techniques and risks. This SAI contains additional information regarding both the principal and non-principal investment strategies of the Funds. The following table sets forth additional information concerning permissible investments and techniques for each of the Funds. A "Y" in the table indicates that the Fund may purchase or engage in the corresponding instrument or technique. A "N" indicates the Fund (1) is prohibited by investment restriction or policy from purchasing the instrument or engaging in the technique or (2) does not intend to purchase or engage in the corresponding instrument or technique although the Fund is not prohibited from doing so. Following the table is further information describing the investments and techniques listed in the table. Certain strategies of the Funds as described above may modify the information contained in the following pages ("Additional Information" section). 11 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - --------------------------------------------------------------------------------
- --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Dreyfus Dreyfus Premier Franklin AIM Davis Founders Small Small Jennison International Columbia NY Equity Cap Cap 20/20 Jennison Equity Technology Venture Growth Value Value Focus Growth Type of Investment or Technique Fund Fund Fund Fund Fund Fund Fund Fund - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Asset Backed Securities(1) Y N N Y N Y N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Bank obligations Y Y Y Y Y N Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Borrowing money(2) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Collateralized mortgage obligations(3) Y N Y N N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Commercial paper Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Common stocks of U.S. companies Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Convertible securities Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Delayed funding loans & revolving credit facilities N N N N N N N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Depositary receipts(4) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Developing country/emerging market securities(4) Y N Y Y N N Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Event-linked exposure N N N N N N N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Foreign currency options and futures Y Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Foreign securities Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Forward foreign currency exchange contracts Y Y Y Y N N Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Futures(5) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Guaranteed Investment Contracts N N N Y N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Illiquid securities Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Investment company securities (incl. ETFs) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Lending portfolio securities Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Loan Participations and Assignments N Y N N Y Y N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Long-term corporate debt(1) Y N Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Money market instruments(6) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Mortgage dollar rolls(7) Y N N N N N N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Mortgage-related securities Y N Y Y N Y N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Non-investment grade debt(1) N N Y Y N Y N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Options(5) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Preferred stocks Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Real estate investment trusts (REITs) Y Y Y Y Y N Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Repurchase agreements Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Restricted securities(8) Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Reverse repurchase & dollar roll agreements Y Y N Y Y N N N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Short sales (against the box) Y Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Small company stocks Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Sovereign debt (foreign) (4) Y N N Y N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Special situation companies Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Stripped Mortgage Securities(3) N N N N N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Structured notes N N N N N Y Y N - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Swap Agreements Y N Y N N N Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Taxable and tax exempt municipal securities Y N Y Y N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- U.S. Government obligations Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Variable and floating rate notes N N N Y N N N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Warrants and Rights Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- When-issued / delayed-delivery securities Y Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- Zero Coupon/Pay-in Kind Securities N N Y N N Y N Y - --------------------------------------- --------- ---------- --------- ---------- ---------- --------- ---------- --------- See footnotes to Investment Policy Table 12 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- LMP Large Neuberger LM Cap Money NACM Berman OCC Growth LM Value Growth Market Internati Regency Opportunity Type of Investment or Technique Fund Fund Fund Fund Fund Fund Fund - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Asset Backed Securities(1) Y Y Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Bank obligations Y Y Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Borrowing money(2) Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Collateralized mortgage obligations(3) Y Y Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Commercial paper Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Common stocks of U.S. companies Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Convertible securities Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Delayed funding loans & revolving credit facilities N N N N N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Depositary receipts(4) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Developing country/emerging market securities(4) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Event-linked exposure N N N N N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Foreign currency options and futures Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Foreign securities Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Forward foreign currency exchange contracts Y Y Y N Y N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Futures(5) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Guaranteed Investment Contracts N N N N N N N - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Illiquid securities Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Investment company securities (incl. ETFs) Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Lending portfolio securities Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Loan Participations and Assignments N N Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Long-term corporate debt(1) Y Y Y Y Y N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Money market instruments(6) Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Mortgage dollar rolls(7) Y Y Y N N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Mortgage-related securities Y Y Y Y N Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Non-investment grade debt(1) Y Y N N N Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Options(5) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Preferred stocks Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Real estate investment trusts (REITs) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Repurchase agreements Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Restricted securities(8) Y Y Y Y Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Reverse repurchase & dollar roll agreements Y Y Y Y Y Y N - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Short sales (against the box) Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Small company stocks Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Sovereign debt (foreign) (4) Y Y Y Y Y N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Special situation companies Y Y Y N Y Y N - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Stripped Mortgage Securities(3) Y Y Y N N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Structured notes N N N N N N N - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Swap Agreements Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Taxable and tax exempt municipal securities Y Y Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- U.S. Government obligations Y Y Y Y N Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Variable and floating rate notes Y Y Y Y N N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Warrants and Rights Y Y Y N Y N Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- When-issued / delayed-delivery securities Y Y Y N Y Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- Zero Coupon/Pay-in Kind Securities Y Y Y N N Y Y - --------------------------------------- --------- ---------- --------- --------- --------- ---------- --------- See footnotes to Investment Policy Table 13 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Schroder Oppenheimer Oppenheimer PIMCO Emerging Schroder OCC Oppenheimer International Main Total Markets International Value Global Growth Street Return Equity Small Type of Investment or Technique Fund Fund Fund Fund Fund Fund Cap Fund - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Asset Backed Securities(1) N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Bank obligations Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Borrowing money(2) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Collateralized mortgage obligations(3) N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Commercial paper Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Common stocks of U.S. companies Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Convertible securities Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Delayed funding loans & revolving credit facilities N N N N Y N N - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Depositary receipts(4) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Developing country/emerging market securities(4) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Event-linked exposure N N N N Y N N - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Foreign currency options and futures Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Foreign securities Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Forward foreign currency exchange contracts Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Futures(5) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Guaranteed Investment Contracts N N N N N N N - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Illiquid securities Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Investment company securities (incl. ETFs) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Lending portfolio securities Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Loan Participations and Assignments N N N N Y N N - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Long-term corporate debt(1) Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Money market instruments(6) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Mortgage dollar rolls(7) N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Mortgage-related securities N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Non-investment grade debt(1) N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Options(5) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Preferred stocks Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Real estate investment trusts (REITs) Y Y N Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Repurchase agreements Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Restricted securities(8) Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Reverse repurchase & dollar roll agreements N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Short sales (against the box) N N N N Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Small company stocks Y Y Y Y N Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Sovereign debt (foreign) (4) Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Special situation companies Y Y Y Y N N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Stripped Mortgage Securities(3) N Y Y Y Y N N - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Structured notes N N N N Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Swap Agreements N N Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Taxable and tax exempt municipal securities N N N N Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- U.S. Government obligations Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Variable and floating rate notes Y Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Warrants and Rights Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- When-issued / delayed-delivery securities Y Y Y Y Y Y Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- Zero Coupon/Pay-in Kind Securities N Y Y Y Y N Y - --------------------------------------- ---------- --------- ---------- --------- ---------- --------- ---------- See footnotes to Investment Policy Table 14 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Small Cap Target S&P 500 Stock Double TargetPLUS TargetPLUS TargetPLUS TargetPLUS Index Index Play Balanced Equity Growth Moderate Type of Investment or Technique Fund Fund Fund Fund Fund Fund Fund - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Asset Backed Securities(1) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Bank obligations Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Borrowing money(2) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Collateralized mortgage obligations(3) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Commercial paper Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Common stocks of U.S. companies Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Convertible securities Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Delayed funding loans & revolving credit facilities N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Depositary receipts(4) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Developing country/emerging market securities(4) Y Y N Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Event-linked exposure N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Foreign currency options and futures N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Foreign securities Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Forward foreign currency exchange contracts N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Futures(5) Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Guaranteed Investment Contracts N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Illiquid securities Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Investment company securities (incl. ETFs) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Lending portfolio securities Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Loan Participations and Assignments N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Long-term corporate debt(1) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Money market instruments(6) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Mortgage dollar rolls(7) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Mortgage-related securities Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Non-investment grade debt(1) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Options(5) Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Preferred stocks Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Real estate investment trusts (REITs) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Repurchase agreements Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Restricted securities(8) Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Reverse repurchase & dollar roll agreements Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Short sales (against the box) Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Small company stocks Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Sovereign debt (foreign) (4) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Special situation companies Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Stripped Mortgage Securities(3) N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Structured notes N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Swap Agreements N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Taxable and tax exempt municipal securities Y Y N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- U.S. Government obligations Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Variable and floating rate notes Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Warrants and Rights Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- When-issued / delayed-delivery securities Y Y Y Y Y Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- Zero Coupon/Pay-in Kind Securities N N N Y N Y Y - ---------------------------------------- ---------- --------- --------- ---------- --------- ---------- --------- See footnotes to Investment Policy Table 15 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Turner Quantitative VK VK VK Small Equity VK Global Growth VK Mid Cap VK and Global Real and Cap Growth Comstock Income Franchise Estate Income Growth Type of Investment or Technique Fund Fund Fund Fund Fund Fund Fund - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Asset Backed Securities(1) N N Y Y N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Bank obligations N Y Y Y N Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Borrowing money(2) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Collateralized mortgage obligations(3) N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Commercial paper N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Common stocks of U.S. companies Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Convertible securities N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Delayed funding loans & revolving credit facilities N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Depositary receipts(4) Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Developing country/emerging market securities(4) Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Event-linked exposure N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Foreign currency options and futures N N Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Foreign securities Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Forward foreign currency exchange contracts N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Futures(5) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Guaranteed Investment Contracts N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Illiquid securities N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Investment company securities (incl. ETFs) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Lending portfolio securities Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Loan Participations and Assignments N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Long-term corporate debt(1) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Money market instruments(6) Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Mortgage dollar rolls(7) N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Mortgage-related securities N N Y Y Y N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Non-investment grade debt(1) N N Y N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Options(5) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Preferred stocks N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Real estate investment trusts (REITs) Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Repurchase agreements N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Restricted securities(8) N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Reverse repurchase & dollar roll agreements N N N Y N N Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Short sales (against the box) N N N Y Y N Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Small company stocks Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Sovereign debt (foreign) (4) N N Y Y N Y N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Special situation companies Y Y N Y N N Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Stripped Mortgage Securities(3) N N N N N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Structured notes N N N N Y N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Swap Agreements N N N Y Y N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Taxable and tax exempt municipal securities N N N Y N N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- U.S. Government obligations N Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Variable and floating rate notes N N N Y Y N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Warrants and Rights Y Y Y Y Y Y Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- When-issued / delayed-delivery securities Y N Y Y Y N Y - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- Zero Coupon/Pay-in Kind Securities N N Y Y Y N N - ---------------------------------------- --------- ---------- --------- ---------- --------- --------- ---------- See footnotes to Investment Policy Table 16 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Footnotes to Investment Policy Table (1) See description of "Corporate Debt Securities" (2) See description of "Risks of Techniques Involving Leverage" (3) See description of "Mortgage-Related Securities" (4) See description of "Foreign Securities" (5) See also the description of "Futures and Options Investment Risks" (6) See description of "Investment Company Securities" (7) See description of "Reverse Repurchase Agreements and Dollar Roll Agreements" (8) See description of "Illiquid Securities"
BANK OBLIGATIONS Certain Funds may invest in bank obligations consisting of bankers' acceptances, certificates of deposit and time deposits. Bankers' acceptances are negotiable drafts or bills of exchange typically drawn by an importer or exporter to pay for specific merchandise which are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. Bankers' acceptances invested in by the Funds will be those guaranteed by domestic and foreign banks having, at the time of investment, capital, surplus and undivided profits in excess of $100,000,000 (as of the date of their most recently published financial statements). Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. Certificates of deposit and time deposits will be those of domestic and foreign banks and savings and loan associations if (a) at the time of investment, the depository or institution has capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of its most recently published financial statements), or (b) the principal amount of the instrument is insured in full by the Federal Deposit Insurance Corporation. Certain Funds may also invest in Eurodollar certificates of deposit ("Euro CDs"), which are U.S. dollar-denominated certificates of deposit issued by offices of foreign and domestic banks located outside the United States; Yankee certificates of deposit ("Yankee CDs") which are certificates of deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the United States; Eurodollar time deposits ("ETDs") which are U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or foreign bank; and Canadian time deposits, which are basically the same as ETDs, except they are issued by Canadian offices of major Canadian banks. Eurodollar and Yankee bank obligations are subject to the same risks that pertain to domestic issues, notably credit risk, market risk and liquidity risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across their borders. Other risks include: adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes, and the expropriation or nationalization of foreign issues. COMMERCIAL PAPER Commercial paper consists of unsecured promissory notes issued by corporations. Except as noted below with respect to variable amount master demand notes, issues of commercial paper normally have maturities of less than nine months and fixed rates of return. Certain Funds may invest in commercial paper rated in any rating category or not rated by an NRSRO. In general, investment in lower-rated instruments is more risky than investment in instruments in higher-rated categories. For a description of the rating symbols of each NRSRO, see Appendix A. The Funds may also invest in U.S. dollar denominated commercial paper, including U.S. dollar denominated commercial paper issued by a foreign corporation. 17 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- COMMON STOCKS Certain Funds may invest in equity securities including common stocks. Common stocks are the most prevalent type of equity security. Common stockholders receive the residual value of the issuer's earnings and assets after the issuer pays its creditors and any preferred stockholders. As a result, changes in an issuer's earnings directly influence the value of its common stock. CONVERTIBLE SECURITIES Certain Funds may invest in convertible securities. Convertible securities give the holder the right to exchange the security for a specific number of shares of common stock, the cash value of common stock or some other equity security. Convertible securities include convertible preferred stocks, convertible bonds, notes and debentures, and other securities. Convertible securities typically involve less credit risk than common stock of the same issuer because convertible securities are "senior" to common stock -- i.e., they have a prior claim against the issuer's assets. Convertible securities generally pay lower dividends or interest than non-convertible securities of similar quality. They may also reflect changes in the value of the underlying common stock. Certain Funds may invest in "synthetic" convertible securities, which are derivative positions composed of two or more different securities whose investment characteristics, taken together, resemble those of convertible securities. For example, a Fund may purchase a non-convertible debt security and a warrant or option, which enables the Fund to have a convertible-like position with respect to a company, group of companies or stock index. Synthetic convertible securities are typically offered by financial institutions and investment banks in private placement transactions. Upon conversion, the Fund generally receives an amount in cash equal to the difference between the conversion price and the then current value of the underlying security. Unlike a true convertible security, a synthetic convertible comprises two or more separate securities, each with its own market value. Therefore, the market value of a synthetic convertible is the sum of the values of its fixed-income component and its convertible component. For this reason, the values of a synthetic convertible and a true convertible security may respond differently to market fluctuations. A Fund will invest in synthetic convertibles only with respect to companies whose corporate debt securities are rated "A" or higher by Moody's or "A" or higher by S&P and will not invest more than 15% of its net assets in such synthetic securities and other illiquid securities. CORPORATE DEBT SECURITIES Depending upon the prevailing market conditions, the Subadviser may purchase debt securities at a discount from face value, which produces a yield greater than the coupon rate. Conversely, if debt securities are purchased at a premium over face value the yield will be lower than the coupon rate. Such obligations, in the case of debentures will represent unsecured promises to pay, and in the case of notes and bonds, may be secured by mortgages on real property or security interests in personal property and will in most cases differ in their interest rates, maturities and times of issuance. Certain Funds may invest in securities which are rated the fourth highest rating group assigned by an NRSRO (e.g., securities rated BBB by S&P or Baa by Moody's) or, if not rated, are of comparable quality as determined by the Subadviser ("Medium-Grade Securities"). After purchase by a Fund, a security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require a sale of such security by the Fund. A split rated security, i.e., rated in the fourth highest category by one NRSRO and also rated below the fourth highest category by another NRSRO, will not be considered a "medium grade security." As with other fixed-income securities, Medium-Grade Securities are subject to credit risk and market risk. Market risk relates to changes in a security's value as a result of changes in interest rates. Credit risk relates to the ability of an issuer to make payments of principal and interest. Medium-Grade Securities are considered by Moody's to have speculative characteristics. Certain Funds may invest in lower rated securities. Fixed income securities with ratings below Baa (Moody's) or BBB (S&P) are considered below investment grade and are commonly referred to as "junk" bonds ("Lower Rated Securities"). 18 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- These Lower Rated Securities generally offer higher interest payments because the company that issues the bond -- the issuer -- is at greater risk of default (failure to repay the bond). This may be because the issuer is small or new to the market, the issuer has financial difficulties, or the issuer has a greater amount of debt. Some risks of investing in lower rated securities include: o Greater credit risk -- Because of their more precarious financial position, issuers of high yield bonds may be more vulnerable to changes in the economy or to interest rate changes that might affect their ability to repay debt. o Reduced liquidity -- There are fewer investors willing to buy high yield bonds than there are for higher rated, investment grade securities. Therefore, it may be more difficult to sell these securities or to receive a fair market price for them. o Lack of historical data -- Because high yield bonds are a relatively new type of security, there is little data to indicate how such bonds will behave in a prolonged economic downturn. However, there is a risk that such an economic downturn would negatively affect the ability of issuers to repay their debts, leading to increased defaults and overall losses to the Fund. Particular types of Medium-Grade and Lower Rated Securities may present special concerns. The prices of payment-in-kind or zero-coupon securities react more strongly to changes in interest rates than the prices of other Medium-Grade or Lower Rated Securities. Some Medium-Grade Securities and some Lower Rated Securities in which a Fund may invest may be subject to redemption or call provisions that may limit increases in market value that might otherwise result from lower interest rates while increasing the risk that such Fund may be required to reinvest redemption or call proceeds during a period of relatively low interest rates. The credit ratings issued by Moody's and S&P are subject to various limitations. For example, while such ratings evaluate credit risk, they ordinarily do not evaluate the market risk of Medium-Grade or Lower Rated Securities. In certain circumstances, the ratings may not reflect in a timely fashion adverse developments affecting an issuer. For these reasons, the Subadviser conducts its own independent credit analysis of Medium-Grade and Lower Rated Securities. Collateralized Debt Obligations. The Funds may invest in collateralized debt obligations ("CDOs"), which includes collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs") and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust which is backed by a diversified pools of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CDOs may charge management fees and administrative expenses. Collateralized mortgage obligations ("CMOs") are another type of CDO in which some Funds may invest. For more information on CMOs, see the discussion under "Mortgage-Related Securities" later in this section. For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the "equity" tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically have higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by the Funds as illiquid securities, however an active dealer market may exist for CDOs allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed income securities discussed elsewhere in this Statement of Additional Information, CDOs carry additional risks including, but are not limited to: (i) the possibility 19 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the Funds may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. DELAYED FUNDING LOANS AND REVOLVING CREDIT FACILITIES Certain Funds may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will at all times segregate or "earmark" assets, determined to be liquid in accordance with procedures established by the Board of Trustees, in an amount sufficient to meet such commitments. Certain Funds may invest in delayed funding loans and revolving credit facilities with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a result, a Fund may be unable to sell such investments at an opportune time or may have to resell them at less than fair market value. The Funds currently intend to treat delayed funding loans and revolving credit facilities for which there is no readily available market as illiquid for purposes of the Funds' limitation on illiquid investments. For a further discussion of the risks involved in investing in Loan Participations and other forms of direct indebtedness see "Loan Participations and Assignments." Participation interests in revolving credit facilities will be subject to the limitations discussed in "Loan Participations and Assignments." Delayed funding loans and revolving credit facilities are considered to be debt obligations for purposes of the Trust's investment restriction relating to the lending of funds or assets by a Portfolio. DERIVATIVE INSTRUMENTS Certain Funds (other than the Money Market Fund) may use a variety of derivative instruments, including options, futures contracts (sometimes referred to as "futures"), options on futures contracts, stock index options, forward currency contracts and swaps, to hedge a Fund's portfolio or for risk management or for any other permissible purposes consistent with that Fund's investment objective. Derivative instruments are securities or agreements whose value is based on the value of some underlying asset (e.g., a security, currency or index) or the level of a reference index. Derivatives generally have investment characteristics that are based upon either forward contracts (under which one party is obligated to buy and the other party is obligated to sell an underlying asset at a specific price on a specified date) or option contracts (under which the holder of the option has the right but not the obligation to buy or sell an underlying asset at a specified price on or before a specified date). Consequently, the change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset. In contrast, the buyer of an option-based derivative generally will benefit from favorable movements in the price of the underlying asset but is not exposed to the corresponding losses that result from adverse movements in the value of the underlying asset. The seller (writer) of an option-based derivative generally will receive fees or premiums but generally is exposed to losses resulting from changes in the value of the underlying asset. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified. Generally, any Fund that invests in derivative instruments is required to segregate cash and/or liquid securities to the extent that its obligations under the instrument are not otherwise "covered" through ownership of the underlying security, financial instrument, or currency. As an investment company registered with the SEC, the Trust is subject 20 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- to the federal securities laws, the 1940 Act, related regulations, and published positions of the SEC and the staff of the SEC. Further, in accordance with these positions, with respect to certain kinds of derivatives, the Trust must "set aside" (sometimes referred to as "asset segregation") liquid assets or engage in other SEC or SEC staff approved measures while the derivative contracts are still open. For example, with respect to forward contracts and futures that are not legally required to "cash settle," the Trust must cover the open position by setting aside liquid assets in an amount equal to the contract's full notional value. With respect to forward contracts and futures that are required to "cash settle," however, the Trust is permitted to set aside liquid assets in an amount equal to the Trust's daily marked to market (net) obligation, if any, (in other words, the Trust's daily net liability, if any) rather than the notional value. Hybrid instruments: A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index or another interest rate or some other economic factor (each a "benchmark"). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. An example of a hybrid could be a bond issued by an oil company that pays a small base level of interest with additional interest that accrues in correlation to the extent to which oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil. Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, duration management, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. The purchase of hybrids also exposes a Fund to the credit risk of the issuer of the hybrids. These risks may cause significant fluctuations in the net asset value of the Fund. Each Fund that invests in hybrid instruments will not invest more than 5% of its total assets in hybrid instruments. Certain hybrid instruments may provide exposure to the commodities markets. These are derivative securities with one or more commodity-linked components that have payment features similar to commodity futures contracts, commodity options, or similar instruments. Commodity-linked hybrid instruments may be either equity or debt securities, and are considered hybrid instruments because they have both security and commodity-like characteristics. A portion of the value of these instruments may be derived from the value of a commodity, futures contract, index or other economic variable. Certain Funds will invest only in commodity-linked hybrid instruments that qualify under applicable rules of the CFTC for an exemption from the provisions of the Commodity Exchange Act. Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, the Funds' investments in these products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act. EVENT-LINKED EXPOSURE Certain Funds may obtain event-linked exposure by investing in "event-linked bonds" or "event-linked swaps," or implement "event-linked strategies." Event-linked exposure results in gains that typically are contingent on the nonoccurrence of a specific "trigger" event, such as a hurricane, earthquake, or other physical or weather-related phenomena. Some event-linked bonds are commonly referred to as "catastrophe bonds." They may be issued by government agencies, insurance companies, reinsurers, special purpose corporations or other on-shore or off-shore entities (such special purpose entities are created to accomplish a narrow and well-defined objective, such as the issuance of a note in connection with a reinsurance transaction). If a trigger event causes losses exceeding a specific 21 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- amount in the geographic region and time period specified in a bond, a Fund investing in the bond may lose a portion or all of its principal invested in the bond. If no trigger event occurs, the Fund will recover its principal plus interest. For some event-linked bonds, the trigger event or losses may be based on company-wide losses, index-portfolio losses, industry indices, or readings of scientific instruments rather than specified actual losses. Often the event-linked bonds provide for extensions of maturity that are mandatory, or optional at the discretion of the issuer, in order to process and audit loss claims in those cases where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. In addition to the specified trigger events, event-linked bonds may also expose the Fund to certain unanticipated risks including but not limited to issuer risk, credit risk, counterparty risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds are a relatively new type of financial instrument. As such, there is no significant trading history of these securities, and there can be no assurance that a liquid market in these instruments will develop. Lack of a liquid market may impose the risk of higher transaction costs and the possibility that a Fund may be forced to liquidate positions when it would not be advantageous to do so. Event-linked bonds are typically rated, and a Fund will only invest in catastrophe bonds that meet the credit quality requirements for the Fund. FOREIGN CURRENCY OPTIONS AND FUTURES TRANSACTIONS Certain Funds may invest in foreign currency options. A foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise price at a specified date or during the option period. A call option gives its owner the right, but not the obligation, to buy the currency while a put option gives its owner the right, but not the obligation, to sell the currency. The option seller (writer) is obligated to fulfill the terms of an option sold if it is exercised. However, either seller or buyer may close its position during the option period in the secondary market for such options at any time prior to expiration. A call rises in value if the underlying currency appreciates. Conversely, a put rises in value if the underlying currency depreciates. While purchasing a foreign currency option can protect the Fund against an adverse movement in the value of a foreign currency, it does not limit the gain which might result from a favorable movement in the value of such currency. For example, if a Fund were holding securities denominated in an appreciating foreign currency and had purchased a foreign currency put to hedge against the decline of the value of the currency, it would not have to exercise its put. Similarly, if a Fund has entered into a contract to purchase a security denominated in a foreign currency and had purchased a foreign currency call to hedge against a rise in the value of the currency but instead the currency had depreciated in value between the date of the purchase and the settlement date, the Fund would not have to exercise its call, but could acquire in the spot market the amount of foreign currency needed for settlement. Certain Funds may invest in foreign currency futures transactions. As part of its financial futures transactions, the Fund may use foreign currency futures contracts and options on such futures contracts. Through the purchase or sale of such contracts, the Fund may be able to achieve many of the same objectives it may achieve through forward foreign currency exchange contracts more effectively and possibly at a lower cost. Unlike forward foreign currency exchange contracts, foreign currency futures contracts and options on foreign currency futures contracts are standardized as to amount and delivery, and may be traded on boards of trade and commodities exchanges or directly with a dealer which makes a market in such contracts and options. It is anticipated that such contracts may provide greater liquidity and lower cost than forward foreign currency exchange contracts. FOREIGN SECURITIES Certain Funds may invest in securities of foreign issuers. Investing in foreign securities (including through the use of depository receipts) involves certain special considerations which are not typically associated with investing in United States securities. Since investments in foreign companies will frequently involve currencies of foreign countries, and since a Fund may hold securities and funds in foreign currencies, a Fund may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, if any, and may incur costs in connection with conversions between various currencies. Most foreign stock markets, while growing in volume of trading activity, have less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of comparable domestic companies. Similarly, volume and liquidity in 22 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- most foreign bond markets are less than in the United States and, at times, volatility of price can be greater than in the United States. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on United States exchanges, although each Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies in foreign countries than in the United States. In addition, with respect to certain foreign countries, there is the possibility of exchange control restrictions, expropriation or confiscatory taxation, and political, economic or social instability, which could affect investments in those countries. Foreign securities, such as those purchased by a Fund, may be subject to foreign government taxes, higher custodian fees, higher brokerage costs and dividend collection fees which could reduce the yield on such securities. Foreign economies may differ favorably or unfavorably from the U.S. economy in various respects, including growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency, and balance of payments positions. Many foreign securities are less liquid and their prices more volatile than comparable U.S. securities. From time to time, foreign securities may be difficult to liquidate rapidly without adverse price effects. Many European countries have adopted a single European currency, commonly referred to as the "euro." The long-term consequences of the euro conversion on foreign exchange rates, interest rates and the value of European securities, all of which may adversely affect the Fund(s), are still uncertain. Securities of companies with a foreign jurisdiction of legal organization may be deemed domestic securities if they are either headquartered in the U.S., their equity securities (or ADRs) trade primarily in the U.S., or their total revenues are derived primarily from the U.S. Investment in Companies in Developing Countries/Emerging Markets Certain Funds may invest from time to time in companies in developing countries as well as in developed countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of industrialization. Shareholders should be aware that investing in the equity and fixed income markets of developing countries involves exposure to unstable governments, economies based on only a few industries, and securities markets which trade a small number of securities. Securities markets of developing countries tend to be more volatile than the markets of developed countries; however, such markets have in the past provided the opportunity for higher rates of return to investors. The value and liquidity of investments in developing countries may be affected favorably or unfavorably by political, economic, fiscal, regulatory or other developments in the particular countries or neighboring regions. The extent of economic development, political stability and market depth of different countries varies widely. For example, certain countries, including, China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either comparatively underdeveloped or are in the process of becoming developed. Such investments typically involve greater potential for gain or loss than investments in securities of issuers in developed countries. The securities markets in developing countries are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by a Fund. Similarly, volume and liquidity in the bond markets in developing countries are less than in the United States and, at times, price volatility can be greater than in the United States. A limited number of issuers in developing countries' securities markets may represent a disproportionately large percentage of market capitalization and trading volume. The limited liquidity of securities markets in developing countries may also affect the Fund's ability to acquire or dispose of securities at the price and time it wishes to do so. Accordingly, during periods of rising securities prices in the more illiquid securities markets, the Fund's ability to participate fully in such price increases may be limited by its investment policy of investing not more than 15% (10% for certain Funds) of its net assets in illiquid securities. Conversely, the Fund's inability to dispose fully and promptly of positions in declining markets will cause the Fund's net asset value to decline as the value of the unsold positions is marked to lower prices. In 23 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- addition, securities markets in developing countries are susceptible to being influenced by large investors trading significant blocks of securities. Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of the United States. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the value of the Fund's investments in those countries and the availability to the Fund of additional investments in those countries. In addition, developing countries may have or enact restrictions on the right of foreign investors to repatriate their capital and to remit profits abroad. Economies of developing countries may differ favorably or unfavorably from the United States' economy in such respects as rate of growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Certain developing countries do not have comprehensive systems of laws, although substantial changes have occurred in many such countries in this regard in recent years. Laws regarding fiduciary duties of officers and directors and the protection of shareholders may not be well developed. Even where adequate law exists in such developing countries, it may be impossible to obtain swift and equitable enforcement of such law, or to obtain enforcement of the judgment by a court of another jurisdiction. Trading in futures contracts on foreign commodity exchanges may be subject to the same or similar risks as trading in foreign securities. Depositary Receipts For many foreign securities, U.S. dollar-denominated ADRs, which are traded in the United States on exchanges or over-the-counter, are issued by domestic banks. ADRs represent an interest in the securities of a foreign issuer deposited in a domestic bank or a correspondent bank. ADRs do not eliminate all of the risk inherent in investing in the securities of foreign issuers. However, by investing in ADRs rather than directly in foreign issuers' stock, a Fund can avoid currency risks during the settlement period for either purchases or sales. In general, there is a large liquid market in the United States for many ADRs. Certain Funds may also invest in EDRs and GDRs which are receipts evidencing an arrangement with European and other banks similar to that for ADRs and are designed for use in European and other securities markets. EDRs and GDRs are not necessarily denominated in the currency of the underlying security. Certain depositary receipts, typically those categorized as unsponsored, require the holders to bear most of the costs of such facilities while issuers of sponsored facilities normally pay more of the costs. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through the voting rights to facility holders with respect to the deposited securities, whereas the depository of a sponsored facility typically distributes shareholder communications and passes through the voting rights. Foreign Sovereign Debt Certain Funds may invest in sovereign debt obligations issued by foreign governments. To the extent that a Fund invests in obligations issued by developing or emerging markets, these investments involve additional risks. Sovereign obligors in developing and emerging market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiation, new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit for finance interest payments. Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no 24 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- assurance that the foreign sovereign debt securities in which a Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Certain Funds may invest in forward foreign currency exchange contracts. A Fund will conduct its foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through forward contracts to purchase or sell foreign currencies. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders (usually large commercial banks) and their customers. The Funds may enter into forward currency contracts in order to hedge against adverse movements in exchange rates between currencies. For example, when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may want to establish the United States dollar cost or proceeds, as the case may be. By entering into a forward currency contract in United States dollars for the purchase or sale of the amount of foreign currency involved in an underlying security transaction, such Fund is able to protect itself against a possible loss between trade and settlement dates resulting from an adverse change in the relationship between the United States dollar and such foreign currency. Additionally, for example, when a Fund believes that a foreign currency may suffer a substantial decline against the U.S. dollar, it may enter into a forward currency sale contract to sell an amount of that foreign currency approximating the value of some or all of that Fund's portfolio securities or other assets denominated in such foreign currency. Alternatively, when a Fund believes a foreign currency will increase in value relative to the U.S. dollar, it may enter into a forward currency purchase contract to buy that foreign currency for a fixed U.S. dollar amount; however, this tends to limit potential gains which might result from a positive change in such currency relationships. The Subadvisers believe that it is important to have the flexibility to enter into such forward contracts when they determine that to do so is in the best interests of a Fund. They may use foreign currency options and forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. To the extent that the currency is not being used for hedging purposes, the Fund will segregate or "earmark" cash or assets determined to be liquid in an amount not less than the value of the Fund's total assets committed to forward foreign currency exchange contracts entered into for the purchase of a foreign security. If the value of the segregated securities declines, the Fund will add additional assets so that the amount is not less than the Fund's commitments under the Contracts. If the Fund retains the portfolio security and engages in an offsetting transaction, such Fund will incur a gain or a loss to the extent that there has been a movement in forward currency contract prices. If the Fund engages in an offsetting transaction it may subsequently enter into a new forward currency contract to sell the foreign currency. If forward prices decline during the period between which a Fund enters into a forward currency contract for the sale of foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, such Fund would realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. The Funds will have to convert their holdings of foreign currencies into United States dollars from time to time. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. FUTURES Certain Funds (other than the Money Market Fund) may enter into futures contracts. This investment technique is designed primarily to hedge against anticipated future changes in market conditions or foreign exchange rates which otherwise might adversely affect the value of securities which a Fund holds or intends to purchase. For example, when interest rates are expected to rise or market values of portfolio securities are expected to fall, a Fund can seek through the sale of futures contracts to offset a decline in the value of its portfolio securities. When interest rates are 25 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- expected to fall or market values are expected to rise, a Fund, through the purchase of such contract, can attempt to secure better rates or prices for the Fund than might later be available in the market when it effects anticipated purchases. The acquisition of put and call options on futures contracts will, respectively, give a Fund the right (but not the obligation), for a specified price to sell or to purchase the underlying futures contract, upon exercising the option any time during the option period. Futures transactions involve broker costs and require a Fund to segregate liquid assets, such as cash, U.S. government securities or other liquid high-grade debt obligations to cover its performance under such contracts. A Fund may lose the expected benefit of futures contracts if interest rates, securities or foreign exchange rates move in an unanticipated manner. Such unanticipated changes may also result in poorer overall performance than if the Fund had not entered into any futures transactions. In addition, the value of a Fund's futures positions may not prove to be perfectly or even highly correlated with its portfolio securities and foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, foreign exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions. FUTURES AND OPTIONS INVESTMENT RISKS A Fund will incur brokerage fees in connection with its futures and options transactions, and it will be required to segregate funds for the benefit of brokers as margin to guarantee performance of its futures and options contracts. In addition, while such contracts will be entered into to reduce certain risks, trading in these contracts entails certain other risks. Thus, while a Fund may benefit from the use of futures contracts and related options, unanticipated changes in interest rates may result in a poorer overall performance for that Fund than if it had not entered into any such contracts. Additionally, the skills required to invest successfully in futures and options may differ from skills required for managing other assets in the Fund's portfolio. Pursuant to a claim for exemption filed with the Commodity Futures Trading Commission ("CFTC") on behalf of the Funds, neither the Trust nor the Funds are deemed to be a "commodity pool" or "commodity pool operator" under the Commodity Exchange Act ("CEA"), and they are not subject to registration or regulation as such under the CEA. The Manager is not deemed to be a "commodity pool operator" with respect to its service as investment adviser to the Funds. A Fund will not engage in transactions in financial futures contracts or options thereon for speculation, but only to attempt to hedge against changes in market conditions affecting the values of securities which such Fund holds or intends to purchase. When futures contracts or options thereon are purchased to protect against a price increase on securities intended to be purchased later, it is anticipated that at least 25% of such intended purchases will be completed. When other futures contracts or options thereon are purchased, the underlying value of such contracts will at all times not exceed the sum of: (1) accrued profit on such contracts held by the broker; (2) cash or high-quality money market instruments set aside in an identifiable manner; and (3) cash proceeds from investments due in 30 days. GUARANTEED INVESTMENT CONTRACTS A Guaranteed Investment Contract ("GIC") is a pure investment product in which a life insurance company agrees, for a single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of the investment, all of which is paid at the maturity date. GICs typically guarantee the interest rate paid but not the principal. ILLIQUID SECURITIES Securities in which each of the Funds may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "1933 Act"), in reliance on the so-called "private placement" exemption from registration which is afforded by Section 4(2) of the 1933 Act ("Section 4(2) Securities"). Section 4(2) Securities are restricted as to disposition under the federal securities laws, and generally are sold to institutional investors, such as the Funds, who agree that they are purchasing the securities for investment and not with a view to 26 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- public distribution. Any resale must also generally be made in an exempt transaction. Section 4(2) Securities are normally resold to other institutional investors through or with the assistance of the issuer or investment dealers who make a market in such Section 4(2) Securities, thus providing liquidity. The Trust's Board of Trustees has delegated to the Subadvisers the day-to-day authority to determine whether a particular issue of Section 4(2) Securities that are eligible for resale under Rule 144A under the 1933 Act should be treated as liquid. Rule 144A provides a safe-harbor exemption from the registration requirements of the 1933 Act for resales to "qualified institutional buyers" as defined in the Rule. With the exception of registered broker-dealers, a qualified institutional buyer must generally own and invest on a discretionary basis at least $100 million in securities. The Subadvisers may deem Section 4(2) Securities liquid if they believe that, based on the trading markets for such security, such security can be disposed of within seven (7) days in the ordinary course of business at approximately the amount at which a Fund has valued the security. In making such determination, the Subadvisers generally consider any and all factors that they deem relevant, which may include: (i) the credit quality of the issuer; (ii) the frequency of trades and quotes for the security; (iii) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; (iv) dealer undertakings to make a market in the security; and (v) the nature of the security and the nature of market-place trades. Subject to the limitations described above, the Funds may acquire investments that are illiquid or of limited liquidity, such as private placements or investments that are not registered under the 1933 Act. An illiquid investment is any investment that cannot be disposed of within seven days in the normal course of business at approximately the amount at which it is valued by a Fund. The price a Fund pays for illiquid securities or receives upon resale may be lower than the price paid or received for similar securities with a more liquid market. Accordingly, the valuation of these securities will reflect any limitations on their liquidity. A Fund may not invest in illiquid securities if, as a result, more than 15% (10% in the case of the Money Market Fund) of the market value of its net assets would be invested in illiquid securities. Treatment of Section 4(2) Securities as liquid could have the effect of decreasing the level of a Fund's liquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. INVESTMENT COMPANY SECURITIES The Funds may not invest in shares of other mutual funds in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act. However, as permitted by the 1940 Act, a Fund may invest in securities issued by other investment companies, so that, as determined immediately after a securities purchase is made: (a) not more than 5% of the value of a Fund's total assets will be invested in the securities of any one investment company; (b) not more than 10% of the value of a Fund's total assets will be invested in the securities of investment companies as a group; and (c) not more than 3% of the outstanding voting stock of any one investment company will be owned by a Fund. The foregoing restrictions do not apply to investments by the Funds in investment companies that are money market funds, including the Money Market Fund or another money market fund that has an affiliate of the Manager as an investment adviser. As a shareholder of another investment company, a Fund would indirectly bear, along with other shareholders, its pro rata portion of that company's expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations. Investment companies in which a Fund may invest may also impose a sales or distribution charge in connection with the purchase or redemption of their shares and other types of commissions or charges. Such charges will be payable by the Fund and, therefore, will be borne indirectly by shareholders. Exchange Traded Funds The Funds may invest in investment companies in the form of various exchange traded funds ("ETFs"), subject to the Fund's investment objectives, policies, and strategies as described in the Prospectus. ETFs are baskets of securities that, like stocks, trade on exchanges such as the American Stock Exchange and the New York Stock Exchange. ETFs are priced continuously and trade throughout the day. ETFs may track a securities index, a particular market sector, or a particular segment of a securities index or market sector. Some types of ETFs include: o "SPDRs" (S&P's Depositary Receipts), which are securities that represent ownership in a long-term unit investment trust that holds a portfolio of common stocks designed to track the performance of an S&P Index. 27 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Holders of SPDRs are entitled to receive proportionate quarterly cash distributions corresponding to the dividends that accrue to the stocks in the S&P Index's underlying investment portfolio, less any trust expenses. o "Qubes" (QQQ), which invest in the stocks of the Nasdaq 100 Index, a modified capitalization weighted index that includes the stocks of 100 of the largest and most actively traded non-financial companies quoted through Nasdaq. Qubes use a unit investment trust structure that allows immediate reinvestment of dividends. o "iShares" which are securities that represent ownership in a long-term unit investment trust that holds a portfolio of common stocks designed to track the performance of specific indexes. o "HOLDRs" (Holding Company Depositary Receipts), which are trust-issued receipts that represent beneficial ownership in a specified group of 20 or more stocks. Unlike other ETFs, a Fund can hold the group of stocks as one asset or unbundle the stocks and trade them separately, according to the Fund's investment strategies. ETFs can experience many of the same risks associated with individual stocks. ETFs are subject to market risk where the market as a whole, or that specific sector, may decline. ETFs that invest in volatile stock sectors, such as foreign issuers, smaller companies, or technology, are subject to the additional risks to which those sectors are subject. ETFs may trade at a discount to the aggregate value of the underlying securities. The underlying securities in an ETF may not follow the price movements of an entire industry, sector or index. Trading in an ETF may be halted if the trading in one or more of the ETF's underlying securities is halted. Although expense ratios for ETFs are generally low, frequent trading of ETFs by a Fund can generate brokerage expenses. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Funds may, from time to time, lend up to 33 1/3% of their portfolio securities to broker-dealers, banks or institutional borrowers of securities. A Fund must receive initial collateral equal to 102% (105% for foreign securities) of the market value of domestic securities and 100% thereafter (or current percentage consistent with applicable legal or regulatory limitations) in the form of cash or U.S. government securities. This collateral must be valued daily by the Fund and, should the market value of the loaned securities increase, the borrower must furnish additional collateral to the Fund. During the time portfolio securities are on loan, the borrower pays the Fund any dividends or interest paid on such securities. Loans are subject to termination by the Fund or the borrower at any time. While the Fund does not have the right to vote securities on loan, it intends to terminate the loan and regain the right to vote if that is considered important with respect to the investment. In the event the borrower defaults in its obligation to a Fund, the Fund bears the risk of delay in the recovery of its portfolio securities and the risk of loss of rights in the collateral. The Fund will only enter into loan arrangements with broker-dealers, banks or other institutions determined to be creditworthy by the Manager. LOAN PARTICIPATIONS AND ASSIGNMENTS Loans, loan participations and interests in securitized loan pools are interests in amounts owed by a corporate, governmental or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may involve additional risks. For example, if a loan is foreclosed, a Fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a Fund could be held liable as co-lender. It is unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and misrepresentation. In the absence of definitive regulatory guidance, the Fund relies on its Subadviser's research in an attempt to avoid situations where fraud or misrepresentation could adversely affect the Fund. MORTGAGE-RELATED SECURITIES Certain Funds may, consistent with their investment objective and policies, invest in mortgage-related securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. In addition, certain Funds may invest in mortgage-related securities issued by non-governmental entities, including collateralized mortgage obligations 28 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- structured as pools of mortgage pass-through certificates or mortgage loans, subject to the rating limitations described in the Prospectus. Mortgage-related securities, for purposes of the Prospectus and this SAI, represent pools of mortgage loans assembled for sale to investors by various governmental agencies such as GNMA and government-related organizations such as FNMA and the FHLMC, as well as by non-governmental issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or are otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured. Accelerated prepayments have an adverse impact on yields for pass-through securities purchased at a premium (i.e., a price in excess of principal amount) and may involve additional risk of loss of principal because the premium may not have been fully amortized at the time the obligation is prepaid. The opposite is true for pass-through securities purchased at a discount. The Funds may purchase mortgage-related securities at a premium or at a discount. If a Fund purchases a mortgage-related security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying mortgage collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages underlying the securities are prone to prepayment, thereby shortening the life of the security and shortening the period of time over which income at the higher rate is received. When interest rates are rising, though, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-related security's average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security's return to the Funds. In addition, regular payments received in respect of mortgage-related securities include both interest and principal. No assurance can be given as to the return the Funds will receive when these amounts are reinvested. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool's obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool's ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. The risk of such defaults is generally higher in the case of mortgage pools that include so-called "subprime" mortgages. An unexpectedly high or low rate of prepayments on a pool's underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk of non-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. There are a number of important differences among the agencies and the instrumentalities of the U.S. government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guaranty is backed by the full-faith and credit of the United States. GNMA is a wholly-owned U.S. government corporation within the Department of Housing and Urban Development. GNMA certificates are also supported by the authority of the GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of FNMA and are not backed by or entitled to the full faith and credit of the United States. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of the principal and interest by FNMA. Mortgage-related securities issued by FHLMC include FHLMC mortgage participation certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United States, organized pursuant to an Act of Congress, which is owned entirely by the Federal Home Loan banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When 29 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable. Collateralized Mortgage Obligations Mortgage-related securities in which the Funds may invest may also include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations issued generally by finance subsidiaries or trusts that are secured by mortgage-backed certificates, including, in many cases, certificates issued by government-related guarantors, including GNMA, FNMA and FHLMC, together with certain funds and other collateral. Although payment of the principal of and interest on the mortgage-backed certificates pledged to secure the CMOs may be guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other governmental agency, or by any other person or entity. The issuers of the CMOs typically have no significant assets other than those pledged as collateral for the obligations. CMOs are issued in multiple classes. Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the mortgage loans or the mortgage assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis. The principal of and interest on the mortgage assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the mortgage assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full. Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the mortgage assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class. Stripped Mortgage Securities Certain Funds may invest in stripped mortgage securities. Stripped mortgage securities are derivative multiclass mortgage securities. Stripped mortgage securities may be issued by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped mortgage securities have greater volatility than other types of mortgage securities. Although stripped mortgage securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, stripped mortgage securities are generally illiquid. Stripped mortgage securities are structured with two or more classes of securities that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage security will have at least one class receiving only a small portion of the interest and a larger portion of the principal from the mortgage assets, while the other class will receive primarily interest and only a small portion of the principal. In the most extreme case, one class will receive all of the interest ("IO" or interest-only), while the other class will receive all of the principal ("PO" or principal-only class). The yield to maturity on IOs, POs and other mortgage-backed securities that are purchased at a substantial premium or discount generally are extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on such securities' yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities have received the highest rating by an NRSRO. 30 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- In addition to the stripped mortgage securities described above, certain Funds may invest in similar securities such as Super POs and Levered IOs which are more volatile than POs, IOs and IOettes. Risks associated with instruments such as Super POs are similar in nature to those risks related to investments in POs. IOettes represent the right to receive interest payments on an underlying pool of mortgages with similar risks as those associated with IOs. Unlike IOs, the owner also has the right to receive a very small portion of the principal. Risks connected with Levered IOs and IOettes are similar in nature to those associated with IOs. Such Funds may also invest in other similar instruments developed in the future that are deemed consistent with its investment objective, policies and restrictions. POs may generate taxable income from the current accrual of original issue discount, without a corresponding distribution of cash to the Fund. Certain Funds may also purchase stripped mortgage-backed securities for hedging purposes to protect the Fund against interest rate fluctuations. For example, since an IO will tend to increase in value as interest rates rise, it may be utilized to hedge against a decrease in value of other fixed-income securities in a rising interest rate environment. With respect to IOs, if the underlying mortgage securities experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully its initial investment in these securities even if the securities are rated in the highest rating category by an NRSRO. Stripped mortgage-backed securities may exhibit greater price volatility than ordinary debt securities because of the manner in which their principal and interest are returned to investors. The market value of the class consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. The yields on stripped mortgage-backed securities that receive all or most of the interest are generally higher than prevailing market yields on other mortgage-backed obligations because their cash flow patterns are also volatile and there is a greater risk that the initial investment will not be fully recouped. The market for CMOs and other stripped mortgage-backed securities may be less liquid if these securities lose their value as a result of changes in interest rates; in that case, a Fund may have difficulty in selling such securities. OPTIONS Certain Funds (other than the Money Market Fund) may write (or sell) put and call options on the securities that the Fund is authorized to buy or already holds in its portfolio. These option contracts may be listed for trading on a national securities exchange or traded over-the-counter. Certain Funds may also purchase put and call options. A call option gives the purchaser of the option the right to buy, and the writer has the obligation to sell, the underlying security or foreign currency at the stated exercise price at any time prior to the expiration of the option, regardless of the market price or exchange rate of the security or foreign currency, as the case may be. The premium paid to the writer is consideration for undertaking the obligations under the option contract. A put option gives the purchaser the right to sell the underlying security or foreign currency at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price or exchange rate of the security or foreign currency, as the case may be. Put and call options purchased by the Funds are valued at the last sale price, or in the absence of such a price, at the mean between bid and asked price. When a Fund writes an option, an amount equal to the net premium (the premium less the commission) received by the Fund is included in the liability section of the Fund's statement of assets and liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked-to-market to reflect the current value of the option written. The current value of the traded option is the last sale price or, in the absence of a sale, the average of the closing bid and asked prices. If an option expires on the stipulated expiration date or if the Fund enters into a closing purchase transaction, it will realize a gain (or a loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold) and the deferred credit related to such option will be eliminated. If an option is exercised, the Fund may deliver the underlying security in the open market. In either event, the proceeds of the sale will be increased by the net premium originally received and the Fund will realize a gain or loss. In order to close out a call option it has written, the Fund will enter into a "closing purchase transaction" (the purchase of a call option on the same security or currency with the same exercise price and expiration date as the call option which such Fund previously has written). When the portfolio security or currency subject to a call option is sold, the Fund will effect a closing purchase transaction to close out an existing call option on that security or currency. If such Fund is unable to effect a closing purchase transaction, it will not be able to sell the underlying 31 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- security or currency until the option expires or that Fund delivers the underlying security or currency upon exercise. In addition, upon the exercise of a call option by the option holder, the Fund will forego the potential benefit represented by market depreciation over the exercise price. A Fund may sell "covered" put and call options as a means of hedging the price risk of securities in the Fund's portfolio. The sale of a call option against an amount of cash equal to the put's potential liability constitutes a "covered put." Over-the-counter options ("OTC options") differ from exchange-traded options in several respects. They are transacted directly with dealers and not with a clearing corporation, and there is a risk of non-performance by the dealer. OTC options are available for a greater variety of securities and for a wider range of expiration dates and exercise prices than exchange-traded options. Because OTC options are not traded on an exchange, pricing is normally done by reference to information from a market marker. This information is carefully monitored by the Subadviser and verified in appropriate cases. OTC options are subject to the Funds' 15% (or 10% for certain Funds) limit on investments in securities which are illiquid or not readily marketable (see "Investment Restrictions"), provided that OTC option transactions by a Fund with a primary U.S. Government securities dealer which has given the Fund an absolute right to repurchase according to a "repurchase formula" will not be subject to such 15% limit. Certain Funds (other than the Money Market Fund) may also purchase or sell index options. Index options (or options on securities indices) are similar in many respects to options on securities except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. Because index options are settled in cash, a call writer cannot determine the amount of its settlement obligations in advance and, unlike call writing on specific securities, cannot provide in advance for, or cover, its potential settlement obligations by acquiring and holding the underlying securities. A Fund may be required to segregate assets or provide an initial margin to cover index options that would require it to pay cash upon exercise. PREFERRED STOCKS Shareholders of preferred stocks normally have the right to receive dividends at a fixed rate, when and as declared by the issuer's board of directors, but do not participate in other amounts available for distribution by the issuing corporation. Dividends on the preferred stock may be cumulative, and all cumulative dividends usually must be paid prior to common shareholders receiving any dividends. Because preferred stock dividends must be paid before common stock dividends, preferred stocks generally entail less risk than common stocks. Upon liquidation, preferred stocks are entitled to a specified liquidation preference, which is generally the same as the par or stated value, and are senior in right of payment to common stock. Preferred stocks are, however, equity securities in the sense that they do not represent a liability of the issuer and, therefore, do not offer as great a degree of protection of capital or assurance of continued income as investments in corporate debt securities. Preferred stocks are generally subordinated in right of payment to all debt obligations and creditors of the issuer, and convertible preferred stocks may be subordinated to other preferred stock of the same issuer. REAL ESTATE INVESTMENT TRUSTS (REITs) Certain Funds may invest in equity or debt REITs. Equity REITs are trusts that sell shares to investors and use the proceeds to invest in real estate or interests in real estate. Debt REITs invest in obligations secured by mortgages on real property or interests in real property. A REIT may focus on particular types of projects, such as apartment complexes or shopping centers, or on particular geographic regions, or both. An investment in a REIT may be subject to certain risks similar to those associated with direct ownership of real estate, including: declines in the value of real estate; risks related to general and local economic conditions, overbuilding and competition; increases in property taxes and operating expenses; and variations in rental income. Also, REITs may not be diversified. A REIT may fail to qualify for pass-through tax treatment of its income under the Internal Revenue Code of 1986, as amended (the "Code") and may also fail to maintain its exemption from registration under the 1940 Act. Also, 32 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- REITs (particularly equity REITs) may be dependent upon management skill and face risks of failing to obtain adequate financing on favorable terms. REPURCHASE AGREEMENTS Securities held by certain Funds may be subject to repurchase agreements. Under the terms of a repurchase agreement, a Fund would acquire securities from member banks of the Federal Deposit Insurance Corporation and registered broker-dealers which a Subadviser deems creditworthy, subject to the seller's agreement to repurchase such securities at a mutually agreed upon date and price. The repurchase price would generally equal the price paid by a Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller under a repurchase agreement will be required to maintain at all times the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). If the seller were to default on its repurchase obligations or become insolvent, the Fund holding such obligation would suffer a loss to the extent that the proceeds from the sale of the underlying portfolio securities were less than the repurchase price under the agreement, or to the extent that the disposition of such securities by the Fund were delayed pending court action. Additionally, there is no controlling legal precedent confirming that a Fund would be entitled, as against the claim by such seller or its receiver or trustee in bankruptcy, to retain the underlying securities, although the Board of Trustees believes that, under the regular procedures normally in effect for the custody of a Fund's securities subject to repurchase agreements, and under federal laws, a court of competent jurisdiction would rule in favor of the Trust if presented with the question. Securities subject to repurchase agreements will be held by the Trust's Custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by a Fund under the 1940 Act. REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS Certain Funds may borrow money by entering into reverse repurchase agreements and, dollar roll agreements in accordance with that Fund's investment restrictions. Pursuant to such agreements, a Fund would sell portfolio securities to financial institutions such as banks and broker-dealers and agree to repurchase the securities, or substantially similar securities in the case of a dollar roll agreement, at a mutually agreed-upon date and price. A dollar roll agreement is identical to a reverse repurchase agreement except for the fact that substantially similar securities may be repurchased. At the time a Fund enters into a reverse repurchase agreement or a dollar roll agreement, it will segregate assets such as U.S. government securities or other liquid high-grade debt securities consistent with the Fund's investment restrictions having a value equal to the Fund's obligation. Reverse repurchase agreements and dollar roll agreements involve the risk that the market value of the securities sold by a Fund may decline below the price at which a Fund is obligated to repurchase the securities. Reverse repurchase agreements and dollar roll agreements are considered to be borrowings by a Fund under the 1940 Act and, therefore, a form of leverage. A Fund may experience a negative impact on its net asset value if interest rates rise during the term of a reverse repurchase agreement or dollar roll agreement. A Fund generally will invest the proceeds of such borrowings only when such borrowings will enhance a Fund's liquidity or when the Fund reasonably expects that the interest income to be earned from the investment of the proceeds is greater than the interest expense of the transaction. RISKS OF TECHNIQUES INVOLVING LEVERAGE Use of leveraging involves special risks and may involve speculative investment techniques. Certain Funds may borrow for other than temporary or emergency purposes, lend their securities, enter reverse repurchase agreements, and purchase securities on a when issued or forward commitment basis. In addition, certain Funds may engage in dollar roll transactions. Each of these transactions involve the use of "leverage" when cash made available to the Fund through the investment technique is used to make additional portfolio investments. The Funds use these investment techniques only when the Subadvisers, as applicable, believe that the leveraging and the returns available to the Fund from investing the cash will provide shareholders a potentially higher return. Leverage exists when a Fund achieves the right to a return on a capital base that exceeds the investment the Fund has invested. Leverage creates the risk of magnified capital losses which occur when losses affect an asset base, enlarged by borrowings or the creation of liabilities, that exceeds the equity base of the Fund. Leverage may involve 33 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- the creation of a liability that requires the Fund to pay interest (for instance, reverse repurchase agreements) or the creation of a liability that does not entail any interest costs (for instance, forward commitment transactions). The risks of leverage include a higher volatility of the net asset value of a Fund's shares and the relatively greater effect on the net asset value of the shares caused by favorable or adverse market movements or changes in the cost of cash obtained by leveraging and the yield obtained from investing the cash. So long as a Fund is able to realize a net return on its investment portfolio that is higher than interest expense incurred, if any, leverage will result in higher current net investment income being realized by such Fund than if the Fund were not leveraged. On the other hand, interest rates change from time to time as does their relationship to each other depending upon such factors as supply and demand, monetary and tax policies and investor expectations. Changes in such factors could cause the relationship between the cost of leveraging and the yield to change so that rates involved in the leveraging arrangement may substantially increase relative to the yield on the obligations in which the proceeds of the leveraging have been invested. To the extent that the interest expense involved in leveraging approaches the net return on a Fund's investment portfolio, the benefit of leveraging will be reduced, and, if the interest expense on borrowings were to exceed the net return to shareholders, such Fund's use of leverage would result in a lower rate of return than if the Fund were not leveraged. Similarly, the effect of leverage in a declining market could be a greater decrease in net asset value per share than if a Fund were not leveraged. In an extreme case, if a Fund's current investment income were not sufficient to meet the interest expense of leveraging, it could be necessary for such Fund to liquidate certain of its investments at an inappropriate time. The use of leverage may be considered speculative. SHORT SALES AGAINST THE BOX Certain Funds may engage in short sales against the box. In a short sale, the Fund sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. A Fund may engage in a short sale if at the time of the short sale the Fund owns or has the right to obtain without additional cost an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." It may be entered into by a Fund to, for example, lock in a sale price for a security the Fund does not wish to sell immediately. If a Fund engages in a short sale, the proceeds of the short sale are retained by the broker pursuant to applicable margin rules. Additionally, the collateral for the short position will be segregated in an account with the Fund's custodian or qualified sub-custodian. The segregated assets are pledged to the selling broker pursuant to applicable margin rules. If the broker were to become bankrupt, a Fund could experience losses or delays in recovering gains on short sales. To minimize this risk, a Fund will enter into short sales against the box only with brokers deemed by the Subadviser to be creditworthy. No more than 10% of the Fund's net assets (taken at current value) may be held as collateral for short sales against the box at any one time. The Fund may make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security). In such case, any future losses in the Fund's long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box, but the Fund will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. If the Fund effects a short sale of securities at a time when it has an unrealized gain on the securities, it may be required to recognize that gain as if it had actually sold the securities (as a "constructive sale") on the date it effects the short sale. However, such constructive sale treatment may not apply if the Fund closes out the short sale with securities other than the appreciated securities held at the time of the short sale and if certain other conditions are satisfied. Uncertainty regarding the tax consequences of effecting short sales may limit the extent to which the Fund may effect short sales. 34 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SMALL COMPANY STOCKS Funds that invest significantly in securities issued by small-cap companies are subject to capitalization risk. These securities may present additional risk because they have less predictable earnings or no earnings, more volatile share prices and are less liquid than securities issued by large-cap companies. These securities may also fluctuate in value more than those of larger, more established companies and, as a group, may suffer more severe price declines during periods of generally declining stock prices. SPECIAL SITUATION COMPANIES Certain Funds may invest in "special situation companies." Special situation companies include those involved in an actual or prospective acquisition or consolidation; reorganization; recapitalization; merger, liquidation or distribution of cash, securities or other assets; a tender or exchange offer; a breakup or workout of a holding company; or litigation which, if resolved favorably, would improve the value of the company's stock. If the actual or prospective situation does not materialize as anticipated, the market price of the securities of a "special situation company" may decline significantly. Therefore, an investment in a Fund that invests a significant portion of its assets in these securities may involve a greater degree of risk than an investment in other mutual funds that seek long-term growth of capital by investing in better-known, larger companies. The Subadviser of such a Fund believes, however, that if it analyzes "special situation companies" carefully and invests in the securities of these companies at the appropriate time, the Fund may achieve capital growth. There can be no assurance however, that a special situation that exists at the time the Fund makes its investment will be consummated under the terms and within the time period contemplated, if it is consummated at all. STRUCTURED NOTES Structured notes are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities include structured notes as well as securities other than debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities may be very volatile. The terms of the structured and indexed securities may provide that in certain circumstances no principal is due at maturity and therefore, may result in a loss of invested capital. Structured and indexed securities may be positively or negatively indexed, so that appreciation of the reference may produce an increase or a decrease in the interest rate or the value of the structured or indexed security at maturity may be calculated as a specified multiple of the change in the value of the reference; therefore, the value of such security may be very volatile. Structured and indexed securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference. Structured or indexed securities may also be more volatile, less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities. To the extent a Fund invests in these securities, they will be analyzed in the overall assessment of the effective duration of the Fund's portfolio in an effort to monitor the Fund's interest rate risk. SWAP AGREEMENTS Certain Funds may enter into swap agreements for the purpose of attempting to obtain a particular desired return at a lower cost to the Fund than if the Fund had invested directly in a security that yielded or produced that desired return. These instruments also may be used for tax and/or cash management purposes. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested in a particular security, or at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations which the parties to a swap agreement have agreed to exchange. The Fund's obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement. The Fund's obligations under a swap agreement will be accrued daily (offset against any 35 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of cash or cash equivalents (such as U.S government securities, or high grade debt obligations), to limit any potential leveraging of the Fund's portfolio. Credit Default Swaps: Certain Funds may also enter into credit default swap agreements. The credit default swap agreement may have as reference obligations one or more securities that are not currently held by the Fund. The protection "buyer" in a credit default contract is generally obligated to pay the protection "seller" an upfront or a periodic stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the "par value" (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. A Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap. Credit default swap agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. The Fund's obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the Fund). In connection with credit default swaps in which a Fund is the buyer, the Fund will segregate or "earmark" cash or assets determined to be liquid, or enter into certain offsetting positions, with a value at least equal to the Fund's exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a Fund is the seller, the Fund will segregate or "earmark" cash or assets determined to be liquid, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or "earmarking" will ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and will limit any potential leveraging of the Fund's portfolio. Such segregation or "earmarking" will not limit the Fund's exposure to loss. Whether a Fund's use of swap agreements will be successful in furthering its investment objective will depend on the ability of the Subadviser correctly to predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two-party contracts and may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The Subadviser will cause the Fund to enter into swap agreements only with counterparties that would be eligible for consideration as repurchase agreement counterparties under the Fund's repurchase agreement guidelines. Certain positions adopted by the Internal Revenue Service may limit the Fund's ability to use swap agreements in a desired tax strategy. The swap market is a relatively new market and is largely unregulated. It is possible that developments in the swap market and the laws relating to swaps, including potential government regulation, could adversely affect the Fund's ability to terminate existing swap agreements, to realize amounts to be received under such agreements, or to enter into swap agreements, or could have adverse tax consequences. TAXABLE AND TAX EXEMPT MUNICIPAL SECURITIES Certain Funds may invest in municipal securities. Municipal securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of 36 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- loans to other public institutions and facilities. Private activity bonds that are issued by or on behalf of public authorities to finance various privately-operated facilities are included within the term municipal securities, only if the interest paid thereon is exempt from federal taxes. Other types of municipal securities include short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of short-term tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues. Project Notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its Project Notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will lend the issuer an amount equal to the principal of and interest on the Project Notes. The two principal classifications of municipal securities consist of "general obligation" and "revenue" issues. There are, of course, variations in the quality of municipal securities, both within a particular classification and between classifications, and the yields on municipal securities depend upon a variety of factors, including the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. Ratings represent the opinions of an NRSRO as to the quality of municipal securities. It should be emphasized, however, that ratings are general and are not absolute standards of quality, and municipal securities with the same maturity, interest rate and rating may have different yields, while municipal securities of the same maturity and interest rate with different ratings may have the same yield. Subsequent to purchase, an issue of municipal securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase. The Subadviser will consider such an event in determining whether the Fund should continue to hold the obligation. An issuer's obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the federal bankruptcy code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions. U.S. GOVERNMENT OBLIGATIONS Certain Funds may invest in obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, including bills, notes and bonds issued by the U.S. Treasury. Obligations of certain agencies and instrumentalities of the U.S. government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of Fannie Mae ("FNMA"), are supported by the right of the issuer to borrow from the Treasury; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation ("FHLMC"), are supported only by the credit of the instrumentality. No assurance can be given that the U.S. government would provide financial support to U.S. government-sponsored agencies or instrumentalities, such as FNMA, or the FHLMC, since it is not obligated to do so by law. These agencies or instrumentalities are supported by the issuer's right to borrow specific amounts from the U.S. Treasury, the discretionary authority of the U.S. government to purchase certain obligations from such agencies or instrumentalities, or the credit of the agency or instrumentality. VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND NOTES Certain Funds may, from time to time, buy variable rate demand notes issued by corporations, bank holding companies and financial institutions and similar taxable and tax-exempt instruments issued by government agencies and instrumentalities. These securities will typically have a maturity in the 5 to 20 year range but carry with them the right of the holder to put the securities to a remarketing agent or other entity on short notice, typically seven days or less. The obligation of the issuer of the put to repurchase the securities is backed up by a letter of credit or other 37 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- obligation issued by a financial institution. The purchase price is ordinarily par plus accrued and unpaid interest. Ordinarily, the remarketing agent will adjust the interest rate every seven days (or at other intervals corresponding to the notice period for the put), in order to maintain the interest rate at the prevailing rate for securities with a seven-day maturity. Variable amount master demand notes in which certain Funds may invest are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between a Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, a Fund may demand payment of principal and accrued interest at any time. While the notes are not rated by credit rating agencies, issuers of variable amount master demand notes (which are normally manufacturing, retail, financial and other business concerns) must satisfy the same criteria set forth above for commercial paper. The Subadviser will consider the earning power, cash flow, and other liquidity ratios of such notes and will continuously monitor the financial status and ability to make payment on demand. In determining dollar weighted average maturity, a variable amount master demand note will be deemed to have a maturity equal to the longer of the period of time remaining until the next interest rate adjustment or the period of time remaining until the principal amount can be recovered from the issuer through demand. WARRANTS AND RIGHTS Certain Funds may, from time to time, invest in warrants. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Of course, since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of a warrant, the current market value of the underlying security, the life of the warrant and various other investment factors. Rights are similar to warrants in they represent the right to buy common shares, however, in contrast, rights have a subscription price lower than the current market of the common stock and a life of two to four weeks. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES Certain Funds may purchase securities on a "when-issued" or "delayed delivery" basis. A Fund will engage in when-issued and delayed delivery transactions only for the purpose of acquiring portfolio securities consistent with its investment objectives and policies, not for investment leverage, although such transactions represent a form of leveraging. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve risk that the yield obtained in the transaction will be less than that available in the market when the delivery takes place. A Fund will not pay for such securities or start earning interest on them until they are received. When a Fund agrees to purchase securities on a "when-issued" or "delayed delivery" basis, the Fund will segregate or "earmark" cash or assets determined to be liquid equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in the value based upon changes in the general level of interest rates. In when-issued and delayed delivery transactions, a Fund relies on the seller to complete the transaction; the seller's failure to do so may cause such Fund to miss a price or yield considered to be advantageous. If a Fund sells a "when-issued" or "delayed delivery" security before a delivery, any gain would be taxable. ZERO COUPON AND PAY-IN-KIND SECURITIES Certain Funds may invest in zero coupon bonds and pay-in-kind securities. Zero coupon bonds (which do not pay interest until maturity) and pay-in-kind securities (which pay interest in the form of additional securities) may be 38 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- more speculative and may fluctuate more in value than securities which pay income periodically and in cash. In addition, although a Fund receives no periodic cash payments from such investments, applicable tax rules require the Fund to accrue and pay out its income from such securities annually as income dividends. 39 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT RESTRICTIONS Fundamental Restrictions The investment objective of the Money Market Fund may not be changed without a vote of the holders of a majority of the Fund's outstanding shares. In addition, the following fundamental investment restrictions may be changed with respect to a particular Fund only by the vote of a majority of the outstanding shares of that Fund (as defined under "Additional Information -- Vote of a Majority of the Outstanding Shares" in this Statement of Additional Information). All other investment restrictions described in the Prospectus or this Statement of Additional Information may be changed by the Board of Trustees. No Fund may: 1. Act as an underwriter of securities within the meaning of the 1933 Act except insofar as it might be deemed to be an underwriter upon the disposition of portfolio securities acquired within the limitation on purchases of illiquid securities and except to the extent that the purchase of obligations directly from the issuer thereof in accordance with its investment objective, policies and limitations may be deemed to be underwriting. 2. Invest in commodities, including commodity contracts, except that as consistent with its investment objective and policies the Fund may: (a) purchase and sell options, forward contracts, futures contracts, including without limitation those relating to indices; (b) purchase and sell options on futures contracts or indices; and (c) purchase publicly traded securities of companies engaging in whole or in part in such activities. This restriction shall not prohibit the funds, subject to restrictions described in the Prospectuses and elsewhere in this Statement of Additional Information, from purchasing, selling or entering into foreign currency forward contracts, foreign currency options, or any interest rate, securities-related or foreign currency-related hedging instrument, including swap agreements and other derivative instruments, subject to compliance with any applicable provisions of the federal securities or commodities laws. 3. Purchase or sell real estate, except that it may purchase securities of issuers which deal in real estate and may purchase securities which are secured by interests in real estate (including REITs). 4. Purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that the Columbia Technology Fund may concentrate in technology industries and the VK Global Real Estate Fund may concentrate in equity securities of companies in the real estate industry, and with respect to all other Funds: (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. government, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions, and repurchase agreements secured by such instruments; (b) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents; (c) utilities will be divided according to their services, for example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry; and (d) personal credit and business credit businesses will be considered separate industries. Note: The Target Double Play Fund, TargetPLUS Balanced Fund, TargetPLUS Equity Fund, TargetPLUS Growth Fund, and TargetPLUS Moderate Fund are not subject to this limitation because they employ passive quantitative investment strategies. 5. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. government or its agencies or instrumentalities and securities issued by other investment companies, if, immediately after such purchase, more than 5% of the value of the Fund's total assets would be invested in such issuer, except as permitted by Rule 2a-7 under the 1940 Act, or the Fund would hold more than 10% of any class of securities of the issuer or more than 10% of the outstanding voting securities of the issuer, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations. 40 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NOTE: The LM Value Fund, Target Double Play Fund, VK Global Franchise Fund and the VK Global Real Estate Fund are not subject to these limitations since they are classified as non-diversified investment companies. As non-diversified investment companies, these Funds are nonetheless required, pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to meet certain diversification requirements in order to qualify as regulated investment companies for federal income tax purposes. To so qualify, the Funds must diversify their holdings so that, at the close of each quarter of their taxable year, (a) at least 50% of the value of their total assets is represented by cash, cash items, securities issued by the U.S. Government, its agencies and instrumentalities, the securities of other regulated investment companies, and other securities limited generally with respect to any one issuer to an amount not more than 5% of the total assets of the respective Funds and not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of their total assets is invested in the securities of any issuer (other than securities issued by the U.S. government, it agencies or instrumentalities or the securities of other regulated investment companies), or in two or more issuers that each respective Fund controls and that are engaged in the same or similar trades or businesses. The Code also imposes certain diversification requirements on the investment of segregated accounts underlying variable annuity and life insurance contracts. The non-diversified Funds also will remain subject to these diversification requirements. 6. Make loans, except that a Fund may purchase and hold debt instruments and enter into repurchase agreements in accordance with its investment objective and polices and may lend portfolio securities in an amount not exceeding one-third of its assets. 7. Issue senior securities except to the extent permitted under the 1940 Act or any rule, order or interpretation thereunder. 8. a) Borrow money (not including reverse repurchase agreements or dollar roll agreements), except that a Fund may borrow from banks for temporary or emergency purposes, and then only up to 30% of its total assets at the time of borrowing, and provided that such bank borrowings and reverse repurchase agreements and dollar roll agreements do not exceed in the aggregate one-third of the Fund's total assets less liabilities other than the obligations represented by the bank borrowings, reverse repurchase agreements and dollar roll agreements at the time of borrowing. b) Mortgage, pledge or hypothecate and assets except in connection with a bank borrowing in amounts not to exceed 30% of the Fund's net assets. As a non-fundamental policy, the following funds have more restrictive limits as follows: Money Market Fund 10% (with respect to 8a only) Schroder International Small Cap Fund 15% VK Equity and Income Fund 5% VK Global Real Estate Fund 10% (with respect to 8b only) NOTE: As a non-fundamental policy which may be changed without the vote of shareholders, no Fund will purchase securities while its outstanding borrowings (including reverse repurchase agreements) are in excess of 5% of its total assets. Securities which are segregated, held in escrow, or in separate accounts in connection with a Fund's investment practices described in the Funds' Prospectus or Statement of Additional Information are not deemed to be pledged for purposes of this limitation. For purposes of the above investment restrictions, the Funds treat all supranational organizations as a single industry and each foreign government (all of its agencies) as a separate industry. In addition, a security is considered to be issued by the government entity (or entities) whose assets and revenues back the security. Non-Fundamental Restrictions In addition, the Funds are subject to the following non-fundamental limitations, which may be changed without the vote of shareholders. No Fund may: 1. Write or sell put options, call options, straddles, spreads, or any combination thereof, except as consistent with a Fund's investment objective and policies for transactions in options on securities or indices of securities, futures contracts and options on futures contracts and in similar investments. 41 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. Purchase securities on margin, make short sales of securities or maintain a short position, except that, as consistent with a Fund's investment objective and policies, (a) this investment limitation shall not apply to the Fund's transactions in futures contracts and related options, options on securities or indices of securities and similar instruments, (b) it may obtain short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (c) the Funds identified as being permitted to engage in short sales against the box in the preceding table labeled Type of Investment or Technique. 3. Purchase securities of companies for the purpose of exercising control. 4. Except as noted otherwise elsewhere in this SAI, invest more than 15% (10% with respect to the Money Market Fund, Oppenheimer Main Street Fund, VK Comstock Fund, and VK Equity and Income Fund) of its net assets in illiquid securities. 5. Invest in shares of other mutual funds in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act. Except for the Funds' policy on illiquid securities and borrowing, if a percentage limitation is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in the value of a Fund's portfolio securities will not constitute a violation of such limitation for purposes of the 1940 Act. PORTFOLIO TURNOVER The portfolio turnover rate for each of the Funds is calculated by dividing the lesser of a Fund's purchases or sales of portfolio securities for the year by the monthly average value of the securities. The SEC requires that the calculation exclude all securities whose maturities at the time of acquisition are one year or less. The portfolio turnover rates for the Funds of the Trust may vary greatly from year to year as well as within a particular year, and may also be affected by cash requirements for redemption of shares. High portfolio turnover rates will generally result in higher transaction costs to a Fund, including brokerage commissions. Portfolio turnover rates are set forth in the Financial Highlights of the Prospectus. If a particular Fund changes subadvisers in any given year, the fund may experience a significant variation in the turnover rate due to the replacement of existing holdings by the new subadviser. For the year ended December 31, 2007, (i) the PIMCO Fundamental IndexPLUS Total Return Fund experienced significant variation in turnover because fiscal year 2007 was the Fund's first full year of operations and PIMCO's investment strategies involve frequent and active trading, especially in periods of market volatility; and (ii) Schroder Emerging Markets Equity Fund and Turner Quantitative Cap Growth Fund experienced significant variation in turnover rates, as reflected in the Financial Highlights section of the prospectus, due to subadviser changes which took place on December 10, 2007 and June 26, 2007, respectively. For the year ended December 31, 2006, the Columbia Technology Fund and the OCC Opportunity Fund experienced significant variation in their turnover rates, as reflected in the Financial Highlights section of the prospectus due to subadviser changes which took place on July 7, 2006 and August 28, 2006 respectively. For the year ended December 31, 2005, the OCC Value Fund experienced significant variation in their turnover rates, as reflected in the Financial Highlights section of the prospectus, due to a subadviser change which took place on September 16, 2005. - -------------------------------------------------------------------------------- OTHER FUND POLICIES DISCLOSURE OF PORTFOLIO HOLDINGS The Board has adopted policies and procedures regarding the disclosure of portfolio holdings in order to assist the Funds in preventing the misuse of material nonpublic information and to ensure that shareholders and other interested parties continue to receive portfolio information on a uniform basis. The chief compliance officer of the Trust oversees application of the policies and provides the Board with periodic reports regarding the Funds' compliance with the policies. In general, the Trust has instructed all third-party service providers and Allianz Investment Management, LLC its investment adviser, that no information regarding portfolio holdings may be disclosed to any unaffiliated third party except as follows. 42 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Complete portfolio holdings will be included in the Funds' annual and semi-annual reports. The annual and semi-annual reports are mailed to all shareholders, and are filed with the SEC. The Funds file their complete portfolio holdings with the SEC within 60 days after the end of their first and third quarters on Form N-Q. Copies of the Funds' annual and semi-annual reports and Forms N-Q are available: 1) free on the EDGAR Database on the SEC's website at www.sec.gov; 2) for review or copying, copies subject to a duplication fee, at the SEC's Public Reference Room in Washington, D.C.; 3) by e-mailing your request to publicinfo@sec.gov; or 4) by writing the SEC's Public Reference Section, 100 F Street NE, Washington, D.C. 20549. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Approximately 21 to 45 days after the end of each quarter, the Funds' distributor posts on the Funds' website (www.allianzlife.com) and publishes a fact sheet on each of the Funds which lists the Fund's top holdings (generally, the top 10 to 15 holdings) at quarter-end. Information concerning the target allocation of the Funds' assets to the various Permitted Underlying Funds that is more current than that in reports or other filings filed electronically with the SEC may be disclosed in certain printed materials, provided that the information is posted on the Funds' website one day prior to the use of such printed materials. The Funds may disclose their portfolio holdings to mutual fund databases and rating services (such as Lipper and Morningstar) on a quarterly basis, but no sooner than 30 days after the end of the relevant quarter. The disclosure of portfolio holdings to databases and rating services is generally made for the purpose of obtaining ratings for the Funds and making available to the public the same portfolio holdings information as is typically provided for other rated mutual funds. Any disclosure to mutual fund databases and rating services shall be made subject to a confidentiality agreement or provisions limiting the use of such information to the approved purposes. In order to assure that any disclosure of portfolio holdings is in the best interests of shareholders, and to prevent any conflicts of interest between the Funds' shareholders, investment adviser, principal underwriter, or any affiliated person of the Funds, the Funds' policies regarding the disclosure of portfolio holdings include the provision that the Funds' investment adviser (Allianz Investment Management LLC) and affiliates have access to portfolio composition and performance on a real-time basis, but only for legitimate business purposes. Any recipient of such information is subject to a duty of confidentiality, including a duty not to trade on the non-public information. The Funds' administrator, fund accountant, transfer agent, custodian, proxy voting service, and certain consultants and providers of software used to analyze portfolio performance may be given access to portfolio information, on a current basis, in connection with services provided by them. All of these latter entities are subject to confidentiality and non-use agreements and may not disclose (or use information on) portfolio holdings without the express written approval of the Chief Compliance Officer of the Trust. The Fund's independent registered public accountant also has access from time to time to the Fund's portfolio holdings in connection with performing the audit and related functions. In addition, the President of the Trust, in consultation with the Chief Compliance Officer of the Trust, may authorize the release of information regarding portfolio holdings upon a determination that such release is in the best interests of the shareholders of the relevant Fund or Funds. No compensation or any other consideration is received by the Funds, the Manager, or any other party in connection with disclosure of portfolio holdings. On a quarterly basis, the Board will receive a report of portfolio holdings disclosures and will monitor such disclosures to ascertain that no conflicts exist and that any disclosures of information about portfolio holdings are in the best interests of Fund shareholders. There is no assurance that the Funds' policies on holdings information will protect the fund from the potential misuse of holdings by individuals or firms in possession of that information. 43 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ADDITIONAL PURCHASE AND REDEMPTION INFORMATION The shares of the Trust's Funds are sold on a continuous basis by the Trust's distributor, Allianz Life Financial Services, LLC (the "Distributor "or "ALFS"), an affiliate of the Manager, and the Distributor has agreed to use appropriate efforts to solicit all purchase orders. NET ASSET VALUE As indicated in the Prospectus, the net asset value of each class of each Fund is determined and the shares of each Fund are priced as of the valuation times defined in the Prospectus (see "Shareholder Information -- Pricing of Fund Shares") on each Business Day of the Trust. A "Business Day" is a day on which the New York Stock Exchange (the "NYSE") is open for trading. Currently, the NYSE will not be open in observance of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. VALUATION OF THE MONEY MARKET FUND The Money Market Fund has elected to use the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an instrument at its cost initially and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. This method may result in periods during which value, as determined by amortized cost, is higher or lower than the price a Fund would receive if it sold the instrument. The value of securities in the Money Market Fund can be expected to vary inversely with changes in prevailing interest rates. Pursuant to Rule 2a-7, the Money Market Fund will maintain a dollar-weighted average maturity appropriate to the Fund's objective of maintaining a stable net asset value per share, provided that the Fund will not purchase any security with a remaining maturity of more than 397 days (thirteen months) (securities subject to repurchase agreements may bear longer maturities) nor will it maintain a dollar-weighted average maturity which exceeds 90 days. The Board of Trustees has also undertaken to establish procedures reasonably designed, taking into account current market conditions and the investment objective of the Fund, to stabilize the net asset value per share of the Fund for purposes of sales and redemptions at $1.00. These procedures include review by the Trustees, at such intervals as they deem appropriate, to determine the extent, if any, to which the net asset value per share of the Fund calculated by using available market quotations deviates from $1.00 per share. In the event such deviation exceeds 0.5%, Rule 2a-7 requires that the Board of Trustees promptly consider what action, if any, should be initiated. If the Trustees believe that the extent of any deviation from the Fund's $1.00 amortized cost price per share may result in material dilution or other unfair results to new or existing investors, they will take such steps as they consider appropriate to eliminate or reduce, to the extent reasonably practicable, any such dilution or unfair results. These steps may include selling portfolio instruments prior to maturity, shortening the dollar-weighted average maturity, withholding or reducing dividends, reducing the number of the Fund's outstanding shares without monetary consideration, or utilizing a net asset value per share determined by using available market quotations. As permitted by Rule 2a-7 and the procedures adopted by the Board, certain of the Board's responsibilities under the Rule may be delegated to the Subadviser. VALUATION OF THE NON-MONEY MARKET FUNDS Portfolio securities, the principal market for which is a securities exchange, will be valued at the closing sales price on that exchange on the day of computation or, if there have been no sales during such day, at the latest bid quotation. Portfolio securities, the principal market for which is not a securities exchange, will be valued at their latest bid quotation in such principal market. In either case, if no such bid price is available then such securities will be valued in good faith at their respective fair market values using methods by or under the supervision of the Board of Trustees. Portfolio securities with a remaining maturity of 60 days or less will be valued either at amortized cost or original cost plus accrued interest, which approximates current value. Portfolio securities which are primarily traded on foreign exchanges may be valued with the assistance of a pricing service and are generally valued at the preceding closing values of such securities on their respective exchanges, except that when an occurrence subsequent to the time a foreign security is valued is likely to have changed such 44 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- value, then the fair value of those securities may be determined by consideration of other factors by or under the direction of the Board of Trustees. The value of the foreign securities held by the following Funds is currently determined daily with the assistance of a pricing service: AIM International Equity Fund, NACM International Fund, Schroder Emerging Markets Equity Fund, Oppenheimer Global Fund, Oppenheimer International Growth Fund, Schroder International Small Cap Fund, VK Global Franchise Fund, and VK Global Real Estate Fund. Over-the-counter securities are valued on the basis of the bid price at the close of business on each business day; however securities that are traded on NASDAQ are valued at the official closing price reported by NASDAQ. Notwithstanding the above, bonds and other fixed-income securities are valued by using market quotations and may be valued on the basis of prices provided by a pricing service approved by the Board of Trustees. All assets and liabilities initially expressed in foreign currencies will be converted into U.S. dollars at the mean between the bid and asked prices of such currencies against U.S. dollars as last quoted by any major bank. All other assets and securities, including securities for which market quotations are not readily available, will be valued at their fair value as determined in good faith under the general supervision of the Board of Trustees. REDEMPTION IN KIND Although the Funds intend to pay share redemptions in cash, the Funds reserve the right to make payment in whole or in part in securities rather than cash, known as "redemption in kind." This could occur under extraordinary circumstances, such as a very large redemption that could affect Fund operations (for example, more than $250,000 or 1% of a Fund's net assets). If the Fund deems it advisable for the benefit of all shareholders, redemption in kind will consist of securities equal in market value to the accumulation unit value allocated under your variable contract to the subaccount that invests in the Fund. When these securities are converted to cash, the associated brokerage charges will be deducted from the assets of the subaccount. 45 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MANAGEMENT OF THE TRUST TRUSTEES AND OFFICERS Overall responsibility for management of the Trust rests with its Board of Trustees, who are elected by the shareholders of the Trust. In addition to serving on the Board of Trustees of the VIP Trust, each Trustee serves on the Board of the Allianz Variable Insurance Products Fund of Funds Trust ("FOF Trust"). The Trustees elect the officers of the Trust to supervise its day-to-day operations. Subject to the provisions of the Declaration of Trust, the Board of Trustees manages the business of the Trust and the Trustees have all powers necessary or convenient to carry out this responsibility including the power to engage in transactions of all kinds on behalf of the Trust. The Board of Trustees is responsible for oversight of the officers and may elect and remove, with or without cause, such officers as they consider appropriate. The Board of Trustees has established certain standing committees to assist in the oversight of the Trust. o The Audit Committee, made up of Mr. Burnim, Ms. Ettestad, Mr. Gelfenbien, Ms. Leonardi, Mr. Lewis, Mr. McClean and Mr. Reeds, met four times during the last fiscal year. Mr. Reeds serves as chairman of the Audit Committee. The functions of the Audit Committee include advising the full Board of Trustees with respect to accounting, auditing and financial matters affecting the Trust. o The Investment Committee, made up of Mr. Burnim, Ms. Ettestad, Mr. Gelfenbien, Ms. Leonardi, Mr. Lewis, Mr. McClean and Mr. Reeds, met four times during the last fiscal year. Mr. Gelfenbien and Mr. McLean serve as co-chairmen of the Investment Committee. The functions of the Investment Committee include evaluating and supervising the Manager and Subadvisers to the various investment portfolios of the Trust. o The Nominating and Corporate Governance Committee, made up of Mr. Burnim, Ms. Ettestad, Mr. Gelfenbien, Ms. Leonardi, Mr. Lewis, Mr. McClean and Mr. Reeds, met four times during the last fiscal year. Ms. Ettestad and Ms. Leonardi serve as co-chairpersons of the Investment Committee The Nominating and Corporate Governance Committee advises the Board of Trustees with respect to the selection and nomination of candidates for election to the Board of Trustees. The Nominating Committee does not consider nominees recommended by shareholders of the Trust. o The Valuation and Investment Policy Committee, made up of Mr. Kletti, Darin Egbert, Brian Muench, Michael J. Tanski and Bradley K. Quello, met 12 times during the last fiscal year. The Valuation and Investment Policy Committee monitors the valuation of portfolio securities and other investments of the Funds and, when the Board is not in session, the Pricing Subcommittee of the Valuation and Investment Policy Committee determines the fair value of illiquid and other holdings. The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, their addresses, ages, their positions held with the Trust, their terms of office with the Trust and length of time served, their principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and their other directorships held are as follows:
NON-INTERESTED TRUSTEES(1) Positions Number of Other Held with Term of Portfolios Directorships Allianz VIP Office(2)/ Overseen for Held Outside and VIP FOF Length of Principal Occupation(s) Allianz VIP and the Name, Address, and Age Trust Time Served During Past 5 Years VIP FOF Trust Fund Complex - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Peter R. Burnim, Age 61 Trustee Since 2/07 Managing Director iQ Venture 39 None 5701 Golden Hills Partners, Inc.; EVP Drive Minneapolis, MN Northstar Companies 55416 2002-2005; Senior Officer Citibank and Citicorp for over 25 years. Sterling Centrecorp, Inc. Board; Highland Financial Holdings Boards. - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Peggy L. Ettestad, Trustee Since 2/07 Senior Managing Director, 39 None Age 50 Residential Capital LLC 5701 Golden Hills 2003-present; Chief Drive Minneapolis, MN Operations Officer, 55416 Transamerica Reinsurance 2002-2003 - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Roger Gelfenbien, Trustee Since 10/99 Retired; Partner of 39 Webster Age 64 Accenture from 1983 to Financial 5701 Golden Hills August 1999. Phoenix Edge Drive Minneapolis, MN Funds 55416 (32 Funds) - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Claire R. Leonardi, Trustee Since 2/04 General Partner of Fairview 39 University of Age 52 Capital, L.P., a venture CT Health 5701 Golden Hills capital fund-of-funds, 9/94 Center Drive Minneapolis, MN to present. 55416 - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Dickson W. Lewis, Trustee Since 2/04 Director of Sales, Lifetouch 39 None Age 59 National School Studios, 5701 Golden Hills 2006 to present. Vice Drive Minneapolis, MN President/ General Manager 55416 of Jostens, Inc., a manufacturer of school products, 2002 to 2006; Senior Vice President of Fortis Group, a Life insurance and Securities company, 1997 to 2002; Consultant to Hartford Insurance Co., 2001. - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Peter W. McClean, Trustee Since 2/04 Retired; President and CEO 39 Cyrus Age 64 of Measurisk, LLC, a market Reinsurrance; 5701 Golden Hills risk information company, MoA Drive Minneapolis, MN 2001 to 2003; Chief Risk Hospitality; 55416 Management Officer at Bank Energy Of Bermuda Ltd., April 1996 Capital, LLC to August 2001. Advisory Board - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- Arthur C. Reeds III, Trustee Since 10/99 Retired Senior Investment 39 Connecticut Age 64 Officer, Hartford Foundation Water 5701 Golden Hills for Public Giving from Service, Inc. Drive Minneapolis, MN September 2000 to January, 55416 2003; Chairman, Chief Executive and President of Conning Corp., a money manager, from September 1999 to March 2000; Investment Consultant from 1997 to September 1999. - ------------------------ -------------- ------------- ------------------------------ ----------------- --------------- 47 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- INTERESTED TRUSTEES(3) Positions Number of Other Held with Term of Portfolios Directorships Allianz VIP Office**/ Overseen for Held Outside and VIP FOF Length of Principal Occupation(s) Allianz VIP and the Name, Address, and Age Trust Time Served During Past 5 Years VIP FOF Trust Fund Complex - ------------------------- -------------- -------------- ---------------------------- ----------------- --------------- - ------------------------- -------------- -------------- ---------------------------- ----------------- --------------- Jeffrey Kletti, Age 42 Chairman of Since 2/04 President, Allianz 39 None 5701 Golden Hills Drive the Board Investment Management LLC, Minneapolis, MN 55416 and President 2005 to present; formerly Senior Vice President, 2000 to 2005. - ------------------------- -------------- -------------- ---------------------------- ----------------- --------------- - ------------------------- -------------- -------------- ---------------------------- ----------------- --------------- Robert DeChellis, Age 41 Trustee Since 3/08 President, Allianz Life 39 None 5701 Golden Hills Drive Financial Services, LLC, Minneapolis, MN 55416 March 2007 to present, formerly Sr VP of Marketing and Product Innovation July 2006 to March 2007; Executive Vice President, Travelers Life from October 2004 to December 2005; Executive Vice President, Jackson National Life Distributors, Inc. from August 2002 to October 2004. - ------------------------- -------------- -------------- ---------------------------- ----------------- --------------- OFFICERS Term of Positions Held with Office(2)/ Allianz VIP and Length of Time Name, Address, and Age VIP FOF Trust Served Principal Occupation(s) During Past 5 Years - ------------------------ --------------------- ---------------- ----------------------------------------------------- Michael Radmer, Age 63 Secretary Since 2/02 Partner, Dorsey and Whitney LLP since 1976. Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 - ------------------------ --------------------- ---------------- ----------------------------------------------------- - ------------------------ --------------------- ---------------- ----------------------------------------------------- Troy Sheets, Age 36 Treasurer, Since 9/02 Vice President of Financial Services of Citi Fund Citi Fund Services Principal Services Ohio, Inc. from 2002 to present; Audit Ohio, Inc. Accounting Officer Manager with KPMG LLP from 1998-2002. 3435 Stelzer Road and Principal Columbus, OH 43219 Financial Officer - ------------------------ --------------------- ---------------- ----------------------------------------------------- - ------------------------ --------------------- ---------------- ----------------------------------------------------- Stephen G. Simon , Age Chief Compliance Since 11/06 Chief Compliance Officer, Allianz Investment 39 Officer(4) and Management LLC, July 2004 to present; President, 5701 Golden Hills Anti-MoneyLaundering Simon Compliance Consulting Ltd, May 2004 to July Drive Minneapolis, MN Compliance Officer 2004; Compliance Counsel, Advantus Capital 55416 Management, Inc., January 2002 to May 2004. - ------------------------ --------------------- ---------------- ----------------------------------------------------- - ------------------------ --------------------- ---------------- ----------------------------------------------------- Brian Muench, Age 37 Vice President Since 2/06 Vice President, Allianz Investment Management LLC 5701 Golden Hills from December 2005 to present; Assistant Vice Drive Minneapolis, MN President, Investments, Allianz Life from February 55416 2002 to November 2005. (1) Member of the Audit Committee. (2) Indefinite. (3) Is an "interested person", as defined by the 1940 Act, due to employment by Allianz. (4) The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust's Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust.
48 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The following table sets forth the dollar range of equity securities beneficially owned by each Trustee as of December 31, 2007.
Aggregate Dollar Range of Equity Securities in All Registered Investment Dollar Range of Equity Companies Overseen by Trustee in Family Name of Director Securities in each Fund of Investment Companies - -------------------------------- ------------------------ ------------------------------------------ Peter R. Burnim None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Peggy L. Ettestad None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Roger A. Gelfenbien None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Jeffrey Kletti None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Claire R. Leonardi None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Dickson W. Lewis None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Peter W. McClean None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Arthur C. Reeds III None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------ - -------------------------------- ------------------------ ------------------------------------------ Robert DeChellis None None 5701 Golden Hills Drive Minneapolis, MN 55416 - -------------------------------- ------------------------ ------------------------------------------
The following table sets forth any ownership by a non-interested Trustee or their immediate family members as to each class of securities of an investment advisor or principal underwriter of the Trust, or a person directly or indirectly controlling, controlled by, or under common control with an investment advisor or principal underwriter of the Trust as of December 31, 2007.
Name of Owners and Relationships Value of Name to Director Company Title of Class Securities Percent of Class Peter R. Burnim N/A N/A None N/A N/A Peggy L. Ettestad N/A N/A None N/A N/A Roger A. Gelfenbien N/A N/A None N/A N/A Arthur C. Reeds III N/A N/A None N/A N/A Claire R. Leonardi N/A N/A None N/A N/A Dickson W. Lewis N/A N/A None N/A N/A Peter W. McClean N/A N/A None N/A N/A The following table sets forth total compensation paid to Trustees for the fiscal year ended December 31, 2007. Except as disclosed below, no executive officer or person affiliated with the Trust received compensation from the Trust for the fiscal year ended December 31, 2007, in excess of $120,000. Trustees who are affiliated with the Distributor or the Manager do not receive compensation from the Trust but all Trustees are reimbursed for all out-of-pocket expenses relating to attendance at meetings. - -------------------------------------------------------------------------------- 49 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPENSATION TABLE 1/1/2007 THROUGH 12/31/2007 Pension or Retirement Aggregate Benefits Accrued as Estimated Annual Compensation from Part of the Trust's Benefits Upon Total Compensation Name of Trustee the Trust Expenses Retirement from the Trusts NON-INTERESTED TRUSTEES Peter R. Burnim $51,439 $0 N/A $65,000 Harrison W. Conrad Jr. $17,566 $0 N/A $22,000 Peggy L. Ettestad $51,439 $0 N/A $65,000 Roger A. Gelfenbien $58,625 $0 N/A $74,000 Arthur C. Reeds III $58,625 $0 N/A $74,000 Peter W. McClean $58,625 $0 N/A $74,000 Claire R. Leonardi $58,625 $0 N/A $74,000 Dickson W. Lewis $58,625 $0 N/A $74,000 INTERESTED TRUSTEE Jeffrey Kletti $0 $0 N/A $0 Robert DeChellis $0 $0 N/A $0
TRUSTEE HOLDINGS As of March 31, 2008, the Trustees and Officers of the Trust, individually and as a group, owned none of the shares of any Fund of the Trust. 50 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of March 31, 2008, the following persons were known by the Trust to own beneficially, 5% or more shares of the Funds: Percent of the Class Total Assets Held by Fund/Shareholder Shareholder* - ------------------------------------------------------------ ---------------- AIM International Equity Fund............................... 98.33% Columbia Technology Fund.................................... 97.56% Davis NY Venture Fund....................................... 97.41% Dreyfus Founders Equity Growth Fund......................... 98.33% Dreyfus Premier Small Cap Value Fund........................ 95.99% Franklin Small Cap Value Fund............................... 98.14% Fusion Balanced Fund........................................ 97.20% Fusion Growth Fund.......................................... 97.80% Fusion Moderate Fund........................................ 97.45% Jennison 20/20 Focus Fund................................... 98.16% Jennison Growth Fund........................................ 96.78% LM Growth Fund 97.17% LM Value Fund 97.31% LMP Large Cap Growth Fund................................... 97.79% Money Market Fund .......................................... 96.66% NACM International Market Fund.............................. 98.64% Neuberger Berman Regency Fund............................... 97.63% OCC Opportunity Fund........................................ 97.66% OCC Value Fund 98.27% Oppenheimer Global Fund..................................... 96.78% Oppenheimer International Growth Fund....................... 97.73% Oppenheimer Main Street Fund................................ 96.53% PIMCO Total Return Fund..................................... 98.06% S&P 500 Index Fund.......................................... 97.49% Schroder Emerging Markets Equity Fund....................... 92.48% Schroder International Small Cap Fund....................... 96.85% Small Cap Stock Index Fund.................................. 96.16% Target Double Play Fund..................................... 99.53% TargetPLUS Balanced Fund.................................... 96.73% TargetPLUS Equity Fund...................................... 98.13% TargetPLUS Growth Fund...................................... 98.56% TargetPLUS Moderate Fund.................................... 97.55% Turner Quantitative Small Cap Growth Fund................... 97.22% VK Comstock Fund .......................................... 98.55% VK Equity And Income Fund................................... 99.27% VK Global Franchise Fund.................................... 98.31% VK Global Real Estate Fund.................................. 97.72% VK Growth and Income Fund................................... 98.65% VK Midcap Growth Fund....................................... 96.38% * Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55440 The Manager may be presumed to control both the Trust and each of the Funds because it and its affiliates possess or share investment or voting power with respect to more than 25% of the total shares outstanding of the Trust and substantially all of the Funds. All of the outstanding shares of the Funds are owned by Allianz Life Variable Account A, Allianz Life Variable Account B, and Allianz Life of NY Variable Account C (the "Separate Accounts") or otherwise by Allianz Life Insurance Company of North America or Allianz Life Insurance Company of New 51 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- York. As a result, the Manager may have the ability to elect the Trustees, approve the investment management agreement and the distribution agreement for each of the Funds and to control any other matters submitted to the shareholders of the Funds for their approval or ratification, subject to any pass-through voting rights of owners of variable insurance Contracts with an investment in a Fund. THE MANAGER Subject to the general supervision of the Trust's Board of Trustees and in accordance with each Fund's investment objectives and restrictions, investment advisory services are provided to the Funds by the Manager. The Manager manages each Fund pursuant to an Investment Management Agreement (the "Management Agreement") with the Trust in respect of each such Fund, and subject to the investment policies described herein and in the Prospectus for the Funds. The Manager is a registered investment adviser and a Minnesota limited liability company located at 5701 Golden Hills Drive, Minneapolis, MN 55416. Allianz Life Insurance Company of North America ("Allianz Life") is the sole owner of the Manager. For the services provided and the expenses assumed pursuant to the Management Agreement each of the Trust's Funds pays a fee, computed daily and paid monthly, at an annual rate calculated as a percentage of the average daily net assets of that Fund according to the following schedule: Name of Fund Management Fee AIM International Equity Fund 0.90% Columbia Technology Fund 0.80% (1) Davis NY Venture Fund 0.75% Dreyfus Founders Equity Growth Fund 0.77% Dreyfus Premier Small Cap Value Fund 0.90% Franklin Small Cap Value Fund 0.75% Jennison 20/20 Focus Fund 0.77% Jennison Growth Fund 0.80% LM Growth Fund 0.85% LM Value Fund 0.75% LMP Large Cap Growth Fund 0.80% Money Market Fund 0.35% NACM International Fund 0.85% Neuberger Berman Regency Fund 0.75% OCC Opportunity Fund 0.85% OCC Value Fund 0.75% Oppenheimer Global Fund 0.90% Oppenheimer International Growth Fund 0.73% (2) Oppenheimer Main Street Fund 0.80% PIMCO Total Return Fund 0.75% S&P 500 Index Fund 0.17% Schroder Emerging Markets Equity Fund 1.23% Schroder International Small Cap Fund 1.00% Small Cap Stock Index Fund 0.26% Target Double Play Fund 0.60% TargetPLUS Balanced Fund 0.52% TargetPLUS Equity Fund 0.60% TargetPLUS Growth Fund 0.52% TargetPLUS Moderate Fund 0.52% Turner Quantitative Small Cap Growth Fund 0.85% VK Comstock Fund 0.72% (3) VK Equity and Income Fund 0.75% 52 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- VK Global Franchise Fund 0.95% VK Global Real Estate Fund 0.90% VK Growth and Income Fund 0.75% (3) VK Mid Cap Growth Fund 0.80% (3) Average Net Assets in Millions (M)
(1) Up to $10M $10M to $20M $20M to $40M $40M to $60M $60M and More Columbia Technology Fund 1.00% 0.875% 0.750% 0.750% 0.750% - -------------------------------------------------------------------------------- Average Net Assets in Millions (M) (3) Up to $50M $50M to $200M $200M to $500M $500M and More Oppenheimer International Growth Fund 0.875% 0.715% 0.625% 0.600% - -------------------------------------------------------------------------------- Average Net Assets in Millions (M) (4) Up to $100M $100M to $250M $250M to $500M $500M and More VK Comstock Fund 0.775% 0.750% 0.725% 0.675% VK Growth and Income Fund 0.775% 0.750% 0.725% 0.675% VK Mid Cap Growth Fund 0.850% 0.800% 0.775% 0.750%
The Manager and the Funds listed below have entered into a written agreement whereby the Manager has voluntarily reduced the management fee through April 30, 2009, to the following:
Name of Fund Management Fee Davis NY Venture Fund.................... 0.75% on the first $100 million of assets, and 0.70% on assets above $100 million Dreyfus Founders Equity Growth Fund...... 0.70% Dreyfus Premier Small Cap Value Fund..... 0.85% First TrustTarget Double Play Fund....... 0.45% Jennison 20/20 Focus Fund................ 0.75% on the first $100 million of assets, and 0.70% on assets above $100 million LMP Large Cap Growth Fund................ 0.80% on the first $100 million of assets, 0.75% on the next $100 million, and 0.70% on assets above $200 million Legg Mason Growth Fund................... 0.80% OCC Value Fund 0.75% on the first $250 million of assets, 0.70% on the next $250 million, and 0.65% on assets above $500 million Oppenheimer Global Fund.................. 0.80% Oppenheimer Main Street Fund............. 0.75% Schroder Emerging Markets Equity Fund.... 0.95% TargetPLUS Equity Fund................... 0.45% VK Equity and Income Fund................ 0.70% on the first $100 million of assets, 0.675% on the next $100 million, and 0.65% on assets above $200 million VK Global Franchise Fund................. 0.95% on the first $100 million of assets, 0.90% on the next $100 million, and 0.85% on assets above $200 million VK Comstock Fund......................... 0.75% on the first $100 million of assets, 0.70% on the next $400 million, and 0.65% on assets above $500 million VK Growth and Income Fund................ 0.675% on the first $100 million of assets and 0.65% on assets above $100 million VK Mid Cap Growth Fund................... 0.80% on the first $100 million of assets and 0.75% on assets above $100 million
- -------------------------------------------------------------------------------- The Manager may periodically elect to voluntarily reduce all or a portion of its fee with respect to any Fund in order to increase the net income of one or more of the Funds available for distribution as dividends. In this regard, the Manager has entered into an expense limitation agreement with certain of the Funds (each an "Expense Limitation 53 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Agreement"). Pursuant to the Expense Limitation Agreements, the Manager has agreed to waive or limit its fees and to assume other expenses to the extent necessary to limit the total annual operating expenses of each Fund to the limits described below. The operating expenses covered by the Expense Limitation Agreement includes fees deducted from Fund assets such as audit fees and payments to independent trustees but does not include the operating expenses of other investment companies in which the Funds may invest ("acquired fund fees and expenses"). Please note that the waiver of such fees will cause the total return and yield of a fund to be higher than they would otherwise be in the absence of such a waiver. The Manager may request and receive reimbursement ("recoupment") from the Fund for expenses previously paid by the Manager, which may include waived management fees, provided that such reimbursement will not cause the Fund to exceed any limits in effect at the time of such reimbursement. The Fund's ability to reimburse the Manager in this manner only applies to expenses paid by the Manager within the three fiscal years prior to the date of such reimbursement. Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by the Manager is not permitted. The Manager has contractually agreed to pay fund expenses, which may include waiving management fees, through April 30, 2009, in order to limit annual fund operating expenses for certain of the Funds of the Trust as follows: Expense Limitation for Name of Fund Fund Class 1 Class 2 AIM International Equity Fund N/A 1.45% Columbia Technology Fund N/A 1.35% Davis NY Venture Fund 0.95% 1.20% Dreyfus Founders Equity Growth Fund N/A 1.20% Dreyfus Premier Small Cap Value Fund 1.10% 1.35% Franklin Small Cap Value N/A 1.35% Jennison 20/20 Focus Fund N/A 1.20% Jennison Growth Fund N/A 1.20% LM Growth N/A 1.30% LM Value Fund N/A 1.20% LMP Large Cap Growth Fund N/A 1.20% Money Market Fund N/A 0.87% NACM International Fund N/A 1.45% Neuberger Berman Regency Fund N/A 1.30% OCC Opportunity Fund N/A 1.35% OCC Value Fund N/A 1.20% Oppenheimer Global Fund 1.14% 1.39% Oppenheimer International Growth Fund N/A 1.45% Oppenheimer Main Street Fund 0.95% 1.20% PIMCO Total Return Fund N/A 1.20% Schroder Emerging Markets Equity Fund 1.40% 1.65% Schroder International Small Cap Fund N/A 1.65% S&P 500 Index Fund 0.24% 0.49% Small Cap Stock Index Fund N/A 0.58% Target Double Play Fund N/A 0.79% TargetPLUS Balanced Fund N/A 0.89% TargetPLUS Equity Fund N/A 0.79% TargetPLUS Growth Fund N/A 0.89% TargetPLUS Moderate Fund N/A 0.89% Turner Quantitative Small Cap Growth N/A Fund 1.35% VK Comstock Fund N/A 1.20% VK Equity and Income Fund N/A 1.20% 54 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- VK Global Franchise Fund N/A 1.39% VK Global Real Estate Fund N/A 1.35% VK Growth and Income Fund N/A 1.20% VK Mid Cap Growth Fund N/A 1.30% Pursuant to the Management Agreement, the Funds will pay all expenses not assumed by the Manager. Among other expenses, each Fund pays its taxes (if any), brokerage commissions on portfolio transactions, interest, the cost of transfer and dividend disbursement, administration of shareholder accounts, custodial fees, expenses of registering and qualifying shares for sale after the initial registration, auditing and legal expenses, fees and expenses of unaffiliated trustees, and costs of shareholder meetings. Unless sooner terminated, the Management Agreement continues in effect as to a particular Fund for an initial period of two years and thereafter for successive one-year periods if such continuance is approved at least annually (i) by the Trust's Board of Trustees or by vote of a majority of the outstanding voting securities of such Fund and (ii) by vote of a majority of the Trustees who are not parties to the Management Agreement, or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for such purpose. The Management Agreement is terminable as to a particular Fund at any time on 60 days' prior written notice without penalty by the Trustees, by vote of a majority of outstanding shares of that Fund, or by the Manager as applicable. The Agreement also terminates automatically in the event of any assignment, as defined in the 1940 Act. The Management Agreement provides that the Manager shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of its duties, except a loss suffered by a Fund resulting from a breach of fiduciary duty with respect to its receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Manager as applicable in the performance of its duties, or from reckless disregard of its duties and obligations thereunder. The Funds' management fees for the last 3 fiscal years that were earned, recouped, and waived were as follows:
Period Ended December 31, 2007 December 31, 2006 December 31, 2005 - -------------------- --------------------------------- --------------------------------- -------------------------------- Management Management Management Management Management Management Fees Fees Fees Fees Fees Fees Fund Earned Recoupment Waived Earned Recoupment* Waived Earned Recoupment* Waived - -------------------- ----------- --------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- - -------------------- ----------- --------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- AIM International 224,965 -- 896,971 -- 54,174 Equity Fund 3,129,382 86,330 -- 2,086,629 Columbia Technology Fund 550,788 -- -- 421,291 52,540 -- 365,282 31,207 -- Davis NY Venture Fund 4,329,309 -- 20,102 3,272,533 96,770 -- 1,780,830 109,437 -- Dreyfus Founders Equity Growth Fund 1,368,602 68,572 57,974 746,089 4,064 -- 654,136 -- 19,617 Dreyfus Premier Small Cap Value 655,886 -- 36,439 Fund 593,078 45,152 22,422 396,783 -- 28,549 Franklin Small Cap Value Fund 3,100,620 -- -- 2,509,042 -- -- 1,441,046 -- -- Jennison 20/20 Focus Fund 2,721,053 -- 166,040 1,895,577 9,926 105,697 332,860 -- 9,896 Jennison Growth 426,006 7,086 -- Fund 355,313 1,361 -- 80,720 -- 8,417 LM Growth Fund 1,120,603 -- 65,919 741,987 93,510 29,351 471,900 940 -- LM Value Fund 3,081,954 -- -- 2,505,880 49,392 -- 1,248,367 62,920 -- 55 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- LMP Large Cap Growth Fund 2,236,548 14,175 10,110 1,975,200 134,109 -- 1,381,451 -- 18,358 Money Market Fund 1,886,762 -- -- 1,464,293 -- -- 1,025,438 -- -- NACM International Fund 440,381 -- 28,713 -- -- -- -- -- -- Neuberger Berman Regency Fund 665,007 -- -- 240,836 -- -- -- -- -- OCC Opportunity Fund 1,543,736 -- -- 1,297,821 9,442 -- 1,027,842 95,527 -- OCC Value Fund 2,266,438 -- 72,193 1,620,649 84,339 -- 1,737,786 102,220 -- Oppenheimer Global Fund 2,048,862 -- 227,650 1,654,889 -- 127,440 1,037,746 13,273 -- Oppenheimer International Growth Fund 1,801,978 -- -- 1,103,018 187,050 -- 495,424 -- 35,601 Oppenheimer Main Street Fund 1,098,981 70,722 68,688 879,777 19,790 37,736 680,967 -- 70,153 PIMCO Total Return Fund 530,546 -- 9,903 260,358 -- -- -- -- -- Schroder Emerging Markets Equity Fund 1,944,571 -- 495,364 486,438 -- 384,205 -- -- -- Schroder International 544,155 -- -- Small Cap Fund -- -- -- -- -- -- S&P 500 Index Fund 28,363 -- 39,552 -- -- -- -- -- -- Small Cap Stock Index Fund 38,486 -- 42.556 -- -- -- -- -- -- Target Double Play Fund 256,720 -- 101,375 7 -- 2 -- -- -- TargetPLUS Balanced Fund 24,646 -- 19,255 -- -- -- -- -- -- TargetPLUS Equity Fund 264,981 -- 155,797 16 -- 5 -- -- -- TargetPLUS Growth Fund 74,452 -- 23,626 -- -- -- -- -- -- TargetPLUS Moderate Fund 42,856 -- 20,346 -- -- -- -- -- -- Turner Quantitative Small Cap Growth Fund 670,144 -- -- 632,698 -- -- 129,681 -- -- VK Comstock Fund 5,255,560 -- 218,603 4,542,586 10,171 131,874 3,404,958 210,315 -- VK Equity and Income Fund 1,849,241 -- 127,350 1,421,303 -- 65,923 930,930 4,487 -- VK Global Franchise Fund 4,101,846 -- 22,517 2,953,459 -- -- 1,823,523 51,078 -- VK Global Real Estate Fund 1,504,206 -- 27,734 484,295 -- 65,477 -- -- -- 56 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- VK Growth and Income Fund 2,761,580 -- 339,129 2,524,541 235,230 213,204 2,026,812 87,403 -- VK Mid Cap Growth Fund 3,215,123 -- 158,650 2,247,603 131,230 88,696 1,203,072 65,809 --
* Recoupment of prior expenses reimbursed by the Manager is included in the amount shown under Management Fees Earned. Pursuant to separate agreements effective November 1, 2006 between the Funds and the Manager, the Manager provides a Chief Compliance Officer ("CCO") and certain compliance oversight and filing services to the Trust. Under these agreements, the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $50.00 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Operations as "Administrative and compliance service fees" in the Funds' annual and semiannual reports. The Manager and the Funds have also entered into an administrative services agreement whereby the Manager provides certain compliance oversight services and certain services in connection with the filing of documents with the SEC on behalf of the Funds. The fees paid to the Manager for the compliance oversight services are based on the Manager's expenses for personnel who provide these services. The fees for the filing services are calculated on an hourly rate. THE SUBADVISERS The Manager has entered into agreements (the "Subadvisory Agreements") with various Subadvisers with respect to each Fund managed by the Manager. Subadvisers are selected through a rigorous portfolio manager selection process which includes researching each potential Subadviser's asset class, track record, organizational structure, management team, compliance philosophy and operational structure, consistency of performance, and assets under management. The Manager chooses a small group of potential Subadvisers it considers to be most qualified based on its evaluation, including a quantitative and qualitative analysis. Out of the small group of potential Subadvisers, the Manager then selects the firm it determines to be the most qualified. The Manager's selection is then subject to approval by the Board of Trustees, including a majority of the Trustees who are not "interested persons" of the Trust. Each Subadviser's performance on behalf of a Fund is monitored by the Manager, taking into consideration investment objectives and policies and level of risk. The Manager brings comprehensive monitoring and control to the investment management process. The Trust and the Manager were issued an exemptive order from the Securities and Exchange Commission in September 2002 which permits the Funds to obtain the services of one or more subadvisers without investor or shareholder approval. The exemptive order also permits the terms of Subadvisory Agreements to be changed and the employment of subadvisers to be continued after events that would otherwise cause an automatic termination of a Subadvisory Agreement, in each case without shareholder approval if those changes or continuation are approved by the Trust's Board of Trustees. If a subadviser were added or changed without shareholder approval, the Prospectus would be revised and shareholders notified. Highly disciplined manager evaluation on both a quantitative and qualitative basis is an ongoing process. The Manager's investment committee gathers and analyzes performance data. Performance attribution, risk/return ratios and purchase/sale assessments are prepared monthly and, each quarter, a more comprehensive review is completed 57 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- which consists of subadviser visits, fundamental analysis and statistical analysis. Extensive quarterly analysis is conducted to ensure that the Fund is being managed in line with the stated objectives. Semiannually, the investment committee reviews the back-up subadviser selection, regression analysis and universe comparisons. In addition to ongoing compliance monitoring, the Manager's compliance team performs quarterly compliance reviews and a more extensive annual compliance examination, including an on-site compliance visit. A number of "red flags" signal a more extensive and frequent manager review. These red flags consist of returns inconsistent with the investment objective, changes in leadership, ownership or portfolio managers, large changes in assets under management, changes to or deficiencies in compliance policies, practices or procedures, and changes in philosophy or discipline. The immediate response to any red flag is to assess the potential impact on the Subadviser's ability to meet investment objectives. The Manager monitors "back-up" subadvisers for each investment class so that, should a subadviser change be warranted, the transition can be effected on a timely basis. Under the Subadvisory Agreements, each Subadviser agrees to assume the obligations of the Manager to provide day-to-day investment decisions and other advisory services for a specific Fund or a portion of the assets of a specific Fund, as allocated by the Manager, if there is more than one Subadviser. For the VK Global Franchise Fund and the VK Global Real Estate Fund only, Van Kampen Asset Management has delegated some of its duties under the Subadvisory Agreement to certain of its affiliates. For the Schroder Emerging Markets Equity Fund and Schroder International Small Cap Fund only, Schroder Investment Management North America has delegated some of its duties under the Subadvisory Agreement to certain of its affiliates. The Manager has entered into an agreement with the First Trust Advisors L.P. whereby the Manager and certain of its affiliates will be prohibited from using, or causing another party to use, investment methodologies that are substantially similar to those described in the prospectus for the Target Double Play Fund, TargetPLUS Equity Fund, and the Equity Portfolios of the TargetPLUS Balanced Fund, TargetPLUS Growth Fund, and TargetPLUS Moderate Fund to manage any fund and the word "Target" to label an investment methodology in the event the Manager or the Funds fail to renew the Subadvisory Agreement with First Trust Advisors L.P. or if any portion of the assets of any or all of the Target Double Play Fund, TargetPLUS Equity Fund, and the Equity Portfolios of the TargetPLUS Balanced Fund, TargetPLUS Growth Fund, and TargetPLUS Moderate Fund are placed under the management of the Manager or another asset manager. The following table shows each Fund, its Subadviser and the rate paid based on average daily net assets of each Fund for such subadvisory services during the last fiscal period ended December 31, 2007.
Subadvisory Fund Subadviser Fee* AIM International Equity Fund Invesco Aim Capital Management, Inc. .65% Columbia Technology Fund Columbia Management Advisors, LLC .55% Davis NY Venture Fund Davis Selected Advisers, L.P. .41% Dreyfus Founders Equity Growth Fund Founders Asset Management LLC .47% Dreyfus Premier Small Cap Value Fund The Dreyfus Corporation .60% Franklin Small Cap Value Fund Franklin Advisory Services, LLC .56% Jennison 20/20 Focus Fund Jennison Associates LLC .48% Jennison Growth Fund Jennison Associates LLC .55% LM Growth Fund Legg Mason Capital Management, Inc. .53% LM Value Fund Legg Mason Capital Management, Inc. .39% LMP Large Cap Growth Fund ClearBridge Advisors, LLC .45% Money Market Fund BlackRock Institutional Management .17% Corporation NACM International Fund Nicholas-Applegate Capital Management .56% LLC (affiliated with the Manager) Neuberger Berman Regency Fund Neuberger Berman Management Inc. .50% OCC Opportunity Fund Oppenheimer Capital LLC .56% OCC Value Fund Oppenheimer Capital LLC .50% 58 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Oppenheimer Global Fund OppenheimerFunds, Inc. .48% Oppenheimer International Growth Fund OppenheimerFunds, Inc. .54% Oppenheimer Main Street Fund OppenheimerFunds, Inc. .44% PIMCO Total Return Fund Pacific Investment Management Company .54% LLC Schroder Emerging Markets Equity Fund Schroder Investment Management North .65% America Inc. Schroder International Small Cap Fund Schroder Investment Management North .76% America Inc. S&P 500 Index Fund The Dreyfus Corporation (affiliated .05% with Founders Asset Management LLC) Small Cap Stock Index Fund The Dreyfus Corporation (affiliated .05% with Founders Asset Management LLC) Target Double Play Fund First Trust Advisors L.P. .29% TargetPLUS Balanced Fund First Trust Advisors L.P. .34% TargetPLUS Equity Fund First Trust Advisors L.P. .29% TargetPLUS Growth Fund First Trust Advisors L.P. .35% TargetPLUS Moderate Fund First Trust Advisors L.P. .35% Turner Quantitative Small Cap Growth Fund Turner Investment Partners, Inc. .53% VK Comstock Fund Van Kampen Asset Management .37% VK Equity and Income Fund Van Kampen Asset Management .45% VK Global Franchise Fund Van Kampen Asset Management. .67% VK Global Real Estate Fund Van Kampen Asset Management. .65% VK Growth and Income Fund Van Kampen Asset Management .40% VK Mid Cap Growth Fund Van Kampen Asset Management .46%
* The Subadvisory Fee represents the annual fee based on the net asset value of the Fund and is accrued daily and payable monthly. The Subadvisory Fee rates for the Funds are listed below. For those Funds with multiple rates, when average daily net assets exceed the first breakpoint, multiple rates will apply, resulting in a blended rate. For example, if a rate of 0.50% applies to the first $500 million, and a rate of 0.45% applies thereafter, and a fund had $600 million in average daily net assets, then 0.50% would apply to the first $500 million and 0.45% would apply to the remaining $100 million in assets.
Fund Rate Average Daily Net Assets (for Breakpoints) First $500 million Thereafter AIM International Equity Fund...................... 0.650% 0.600% First $75 Next $75 Next $100 million million million Thereafter Columbia Technology Fund........................... 0.550% 0.500% 0.450% 0.425% First $100 million Thereafter Davis NY Venture Fund.............................. 0.450% 0.400% First $50 million Next $50 Million Thereafter Dreyfus Founders Equity Growth Fund................ 0.500% 0.400% 0.300% All Assets Dreyfus Premier Small Cap Value Fund............... 0.600% First $200 million Next $300 million Thereafter Franklin Small Cap Value Fund...................... 0.600% 0.520% 0.500% 59 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- First $100 Next $400 Next $500 million million million Thereafter Jennison Growth Fund............................... 0.550% 0.450% 0.400% 0.350% Jennison 20/20 Fund................................ 0.550% 0.450% 0.400% 0.350% First $250M Next $250M Thereafter LMP Large Cap Growth Fund.......................... 0.450% 0.400% 0.350% First $100 million Thereafter LM Growth Fund ................................. 0.550% 0.450% First $50 Next $50 Next $50 Next $50 million million million million Thereafter LM Value Fund ................................. 0.70% 0.45% 0.40% 0.35% 0.30% All Assets Money Market Fund ................................. 0.250% First $100 Next $400 Next $400 million million million Thereafter NACM International Fund............................ 0.550% 0.500% 0.450% 0.400% All Assets Neuberger Berman Regency Fund...................... 0.500% First $50 million Next $200 million Thereafter OCC Opportunity Fund............................... 0.600% 0.550% 0.500% First $250 Next $250 Next $250 million million million Thereafter OCC Value Fund 0.500% 0.450% 0.400% 0.350% First $10 million Next $90 million Thereafter Oppenheimer Global Fund............................ 0.600% 0.500% 0.450% Oppenheimer International Growth Fund.............. 0.650% 0.600% 0.500% Oppenheimer Main Street Fund....................... 0.500% 0.450% 0.400% All Assets PIMCO Total Return Fund............................ 0.540% All Assets Schroder Emerging Markets Equiity Fund............. 0.650% First $150 million Next $150 million Thereafter Schroder International Small Cap Fund.............. 0.750% 0.700% 0.600% First $150 million Next $850 million Thereafter S&P 500 Index Fund & Small Cap Stock Index Fund.... 0.050% 0.020% 0.010% First $250 million Thereafter Target Double Play Fund & TargetPLUS Equity Fund... 0.350% 0.300% TargetPLUS Balanced Fund, TargetPLUS Growth Fund, TargetPLUS Moderate Fund........................... First $250 million Thereafter Equity Portfolio............................... 0.350% 0.300% Fixed Income Portfolio -- Diversified Income Strategy 0.450% 0.450% Fixed Income Portfolio -- Total Return Strategy. 0.250% 0.250% 60 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- First $50 million Next $50 million Thereafter Turner Quantitative Small Cap Growth Fund.......... 0.500% 0.400% 0.350% First $100 Next $150 Next $250 million million million Thereafter VK Comstock Fund................................... 0.425% 0.400% 0.375% 0.325% All Assets VK Equity and Income Fund.......................... 0.450% First $300 million Next $300million Thereafter VK Global Franchise Fund+.......................... 0.700% 0.600% 0.500% All Assets VK Global Real Estate Fund......................... 0.650% First $100 Next $150 Next $250 million million million Thereafter VK Growth and Income Fund+......................... 0.425% 0.400% 0.375% 0.325% VK Mid Cap Growth Fund+............................ 0.500% 0.450% 0.425% 0.400%
+ The minimum fee payable per Fund is $100,000 per calendar year, commencing January 1, 2002. The table below presents the subadvisory fees earned by each of the funds for the last 3 fiscal years.
For the fiscal year or period ended: December 31, 2007 December 31, 2006 December 31, 2005 Subadvisory Subadvisory Subadvisory -------------------- --------------------- ------------------ Fund Fees Earned Fees Earned Fees Earned AIM International Equity Fund $2,265,121.71 $1,510,062 $648,122 Columbia Technology Fund 373,534.24 276,527 243,527 Davis NY Venture Fund 2,363,011.18 1,797,144 1,000,001 Dreyfus Founders Equity Growth Fund 779,308.13 502,990 441,102 Dreyfus Premier Small Cap Value Fund 437,023.54 395,772 264,542 Franklin Small Cap Value Fund 2,311,866.04 1,901,528 1,153,024 Jennison 20/20 Focus Fund 1,705,560.87 1,167,760 341,283 Jennison Growth Fund 293,100.29 244,626 82,788 LM Growth Fund 694,022.33 480,494 305,432 LM Value Fund 1,586,684.15 1,352,593 832,738 LMP Large Cap Growth Fund 1,244,973.48 1,107,781 949,991 Money Market Fund 925,447.33 777,865 732,449 NACM International Fund 287,956.54 NA NA Neuberger Berman Regency Fund 445,952.98 160,853 NA OCC Opportunity Fund 1,024,789.08 874,141 845,362 OCC Value Fund 1,485,704.15 1,080,542 1,158,431 Oppenheimer Global Fund 1,084,236.04 888,464 579,077 Oppenheimer International Growth Fund 1,340,795.95 822,367 357,583 Oppenheimer Main Street Fund 604,682.93 495,273 388,110 PIMCO Total Return Fund 383,735.14 187,607 NA S&P 500 Index Fund 8,266.83 NA NA Schroder Emerging Markets Equity Fund 1,102,326.01 273,564 NA Schroder International Small Cap Fund 419,708.51 NA NA Small Cap Stock Index Fund 7,405.77 NA NA Target Double Play Fund 148,426.80 4 NA 61 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- TargetPLUS Balanced Fund 17,300.87 NA NA TargetPLUS Equity Fund 152,098.49 10 NA TargetPLUS Growth Fund 30,000.70 NA NA TargetPLUS Moderate Fund 51,581.07 NA NA Turner Quantitative Small Cap Growth Fund 428,032.86 446,992 136,510 VK Comstock Fund 2,709,667.11 2,362,704 1,805,397 VK Equity and Income Fund 1,109,775.82 853,728 558,671 VK Global Franchise Fund 2,890,788.42 2,158,349 1,344,053 VK Global Real Estate Fund 1,089,658.10 351,203 NA VK Growth and Income Fund 1,469,882.42 1,348,679 1,091,318 VK Mid Cap Growth Fund 1,818,082.67 1,284,174 699,160
BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION BlackRock Institutional Management Corporation ("BlackRock"), was organized in 1977 to perform advisory services for investment companies and has its principal offices at 100 Bellevue Parkway, Wilmington, DE 19809. BlackRock is a wholly-owned, indirect subsidiary of BlackRock, Inc., one of the largest publicly traded investment management firms in the United States having, together with its affiliates, approximately $1.357 trillion in investment company and other assets under management as of December 31, 2007. BlackRock, Inc. is an affiliate of The PNC Financial Services Group, Inc. and Merrill Lynch & Co., Inc. CLEARBRIDGE ADVISORS, LLC ClearBridge Advisors, LLC ("ClearBridge"), located at 620 Eighth Avenue, New York, New York 10018-1405. ClearBridge is a wholly owned subsidiary of Legg Mason, Inc. At December 31, 2007, ClearBridge had $100.5 billion in assets under management. ClearBridge is a wholly owned subsidiary of Legg Mason, a financial services holding company, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202. COLUMBIA MANAGEMENT ADVISORS, LLC Columbia Management Advisors, LLC ("Columbia Advisors"), located at 100 Federal Street, Boston, Massachusetts 02110, is the Fund's Subadviser. At December 31, 2007, Columbia Advisors had $370.2 billion in assets under management. Columbia Advisors is an SEC-registered investment adviser and indirect, wholly-owned subsidiary of Bank of America Corporation. Its management experience covers all major asset classes, including equity securities, fixed income securities and money market instruments. In addition to serving as investment manager for mutual funds, Columbia Advisors acts as an investment manager for individuals, corporations, retirement plans, private investment companies and financial intermediaries.. DAVIS SELECTED ADVISERS. L.P. Davis Selected Advisers, L.P. ("Davis"), is located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. Davis is controlled by its general partner, Davis Investments, LLC. Davis Investments, LLC is a holding company with no business operations. Davis Investments, LLC is controlled by Christopher Davis as sole member. Christopher Davis' principal business over the last five years has been portfolio manager. Davis has been providing investment advice since 1969. At December 31, 2007, Davis managed $105 billion in assets. Davis commenced operations in 1969. THE DREYFUS CORPORATION The Dreyfus Corporation ("Dreyfus"), is located at 200 Park Avenue, New York, NY 10166. Founded in 1947, Dreyfus manages approximately $263 billion in 180 mutual fund portfolios as of December 31, 2007. Dreyfus is the primary mutual fund business of The Bank of New York Mellon Corporation, a global financial services company focused on helping clients more and manage their financial assets, operating in 34 countries and serving more than 62 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 100 markets. BNY Mellon has more than $23 trillion in assets under management, and it services more than $41 trillion in outstanding debt.. FIRST TRUST ADVISORS L.P. First Trust Advisors L.P. ("First Trust"), located at 1001 Warrenville Road, Suite 300, Lisle, Illinois 60532, is responsible for managing the investment strategies used by the AZL First Trust Target Double Play Fund, the AZL TargetPLUS Equity Fund and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") subject to the supervision of the Manager and the Board of Trustees. No one individual is primarily responsible for portfolio management decisions for the First Trust Portfolios. Investments are made under the direction of an investment committee (the "First Trust Investment Committee"). Robert F. Carey, CFA, Roger F. Testin, CFA, Jon C. Erickson, CFA, David G. McGarel, CFA, and Daniel J. Lindquist, CFA, comprise the First Trust Investment Committee of First Trust that is responsible for the day-to-day management of the First Trust Portfolios. First Trust and First Trust Portfolios L.P., an affiliate of First Trust, were established in 1991 and at March 31, 2008, had approximately $32.2 billion in assets under management and supervision, of which approximately $3.5 billion was invested in trusts serving as underlying funds for variable annuity and insurance contracts. FOUNDERS ASSET MANAGEMENT LLC Founders Asset Management LLC ("Founders") is a wholly owned subsidiary of MBSC Securities Corporation, which is a wholly owned subsidiary of Dreyfus. The Founders corporate offices are located at 210 University Boulevard, Suite 800, Denver, Colorado 80206. Founders and its predecessor companies have operated as investment advisers since 1938. Founders also serves as investment adviser or subadviser to other investment companies. FRANKLIN ADVISORY SERVICES, LLC Franklin Advisory Services, LLC ("Franklin"), One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024, is the Fund's investment Subadviser, and was founded in 1947. Together, at December 31, 2007, Franklin and its affiliates had over $643 billion in assets under management. INVESCO AIM CAPITAL MANAGEMENT, INC. Invesco Aim Capital Management, Inc. ("Aim") is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM has acted as an investment advisor since its organization in 1976 and, together with its affiliates, advises or manages over 225 investment portfolios. Assets under management by Aim and its affiliates at December 31, 2007, were $166 billion. JENNISON ASSOCIATES LLC Jennison Associates LLC ("Jennison"), 466 Lexington Avenue, New York, New York 10017, is a Delaware limited liability company and has been in the investment advisory business since 1969 (includes its predecessor, Jennison Associates Capital Corp.). Jennison is a direct, wholly owned subsidiary of Prudential Investment Management, Inc., which is a direct, wholly owned subsidiary of Prudential Asset Management Holding Company LLC, which is in turn a wholly owned subsidiary of Prudential Financial, Inc. At December 31, 2007, Jennison managed in excess of $86 billion in assets. LEGG MASON CAPITAL MANAGEMENT, INC. Legg Mason Capital Management, Inc. ("LMCM") is located at 100 Light Street, Baltimore, MD 21202, and was founded in 1982. At December 31, 2007, LMCM, together with its sister companies, Legg Mason Funds Management, Inc., and LMM LLC, had aggregate assets under management of $59.7 billion. 63 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NEUBERGER BERMAN MANAGEMENT INC. Neuberger Berman Management Inc. ("Neuberger Berman") is located at 605 Third Avenue 2nd Floor, New York, NY 10158-0180. Neuberger Berman engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $148.9 billion in total assets at December 31, 2007, and continue an asset management history that began in 1939. NICHOLAS-APPLEGATE CAPITAL MANAGEMENT LLC Nicholas-Applegate Capital Management LLC ("NACM"), organized under the laws of Delaware, is located at 600 West Broadway, Suite 2900, San Diego, California 92101. NACM was founded in 1984 and at December 31, 2007 managed approximately $15 billion in discretionary assets for numerous clients, including employee benefit plans, corporations, public retirement systems and unions, university endowments, foundations, and other institutional investors and individuals. NACM is affiliated with the Manager. OPPENHEIMER CAPITAL LLC Oppenheimer Capital LLC ("OCC") is a wholly owned subsidiary of Allianz Global Investors Holdings LLC, which is a wholly owned subsidiary of Allianz Global Investors U.S. Equities LLC. Allianz Global Investors U.S. Equities LLC is a wholly owned subsidiary of Allianz Global Investors of America L.P. OpCap is a Delaware limited liability company and is a registered investment adviser under the Advisers Act. Its principal place of business is 1345 Avenue of the Americas, 48th Floor, New York, New York 10105. At December 31, 2007, OpCap had aggregate assets under management of $22.5 billion. OpCap is affiliated with the Manager. OPPENHEIMERFUNDS, INC. OppenheimerFunds, Inc, ("OFI") is located at Two World Financial Center, 225 Liberty St., 11th Floor, New York, NY 10281-1008. OFI has been an investment adviser since January 1960. OFI had more than $260 billion in assets under management at December 31, 2007. OFI is wholly owned by Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts Mutual Life Insurance Company. PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO) Pacific Investment Management Company LLC (PIMCO) is located at 840 Newport Center Drive, Newport Beach, CA 92660. Organized in 1971, PIMCO provides investment management and advisory services to private accounts of institutional and individual clients and to mutual funds. At December 31, 2007, PIMCO had $746.3 billion in assets under management. PIMCO is affiliated with the Manager. Research Affiliates, LLC serves as Sub-Subadviser to the AZL PIMCO Fundamental IndexPLUS Total Return Fund. Research Affiliates, LLC is a California limited liability company, is located at 155 N. Lake Ave., Suite 900, Pasadena, CA 91101. The fees paid to Research Affiliates, LLC are not directly paid out of Fund assets. PIMCO pays Research Affiliates, LLC out of the subadvisory fees it receives to subadvise the Fund. At December 31, 2007, Research Affiliates, LLC had assets under management of $31 billion. SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. Schroder Investment Management North America Inc. ("Schroders"), 875 Third Avenue, 22nd Floor, New York, NY 10022-6225, has been a registered investment advisor, together with its predecessor, since 1968, and is part of a worldwide group of financial services companies that are together known as Schroders. Schroders currently serves as investment advisor to other mutual funds, and a broad range of institutional investors. At December 31, 2007, Schroders, together with its affiliated companies, managed approximately $277.0 billion in assets. Schroder Investment Management North America Ltd (Schroder Ltd), an affiliate of Schroders with headquarters located at 31 Gresham Street, London EC2V 7QA, England, serves as the sub-subadviser to the Fund and is responsible for day-to-day management of the Fund's assets. 64 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- TURNER INVESTMENT PARTNERS, INC. Turner Investment Partners, Inc. ("Turner"), located at 1205 Westlakes Drive, Suite 100, Berwyn, Pennsylvania 19312, is an employee-owned investment management firm founded by Robert E. Turner, Mark D. Turner and Christopher K. McHugh. Turner began managing assets, including institutional assets, in 1990. Turner offers a variety of growth, core and value equity investment strategies across all market capitalizations, totaling approximately $29.1 billion in assets under management at December 31, 2007. VAN KAMPEN ASSET MANAGEMENT Van Kampen Asset Management is a wholly owned subsidiary of Van Kampen Investments Inc. ("Van Kampen") and was founded in 1927. Van Kampen, together with its affiliated asset management companies, had approximately $589 billion under management or supervision at December 31, 2007. Van Kampen is a wholly owned subsidiary of MSAM Holdings II, Inc. which is a wholly owned subsidiary of Morgan Stanley. The offices of Van Kampen Asset Management are located at 522 Fifth Avenue, New York, NY 10036. OTHER MANAGED ACCOUNTS The following chart reflects information at December 31, 2007, regarding accounts other than the listed Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) registered investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rate as of the applicable date.
- -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Registered Other Pooled Investment Company Investment Accounts/ Vehicles/ Other Accounts/ Assets Under Assets Under Assets Under Fund Portfolio Manager Management Management Management - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- AIM International Equity Fund Shuxin Cao 9 / $10.67 billion 1 / $288.7 4,320 / $1.47 million billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Matthew W. Dennis 7 / $8.58 billion 6 / $1.0 billion 4,320 / $1.47 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Jason T. Holzer 9 / $10.59 billion 10 / $4.65 4,320 / $1.47 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Clas G. Olsson 7 / $5.78 billion 10 / $4.65 4,320 / $1.47 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 65 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Barrett K.Sides 7 / $7.63 billion 4 / $656.7 4,320 / $1.47 million billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Columbia Technology Fund Wayne M. Collette 11 / $27.0 billion 1 / $1.0 million 47 / $297.0 million additional account with performance based fees: 1 / $80.0 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Davis NY Venture Fund Christopher Davis 27 / $82.5 billion 11 / $1.2 132 / $12.7 billion billion Managed Money/Wrap accounts have been counted at the sponser level - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Kenneth Feinberg 25 / $82.2 billion 10 / $1.1 132 / $12.7 billion billion Managed Money/Wrap accounts have been counted at the sponser level - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Dreyfus Founders Equity Growth Fund John B. Jares 8 / $2.05 billion 0 / $0 1 / $107 million (Performance-based fee account) - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Dreyfus Premier Small Cap Value Fund Ronald P. Gala 9 / $1.38 billion 0 / $0 18 / $1.61 billion additional accounts with performance based fees: 4 / $476.1 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Adam T. Logan 5 / $1.30 billion 0 / $0 10 / $340.4 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 66 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Franklin Small Cap Value Fund William Lippman 14 / $8.3 billion 1 / $522 million 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Bruce Baughman, CPA 14 / $8.3 billion 1 / $522 million 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Margaret McGee 14 / $8.3 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Y. Dogan Sahin 0 / $0 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 8 / $11.5 million 2 / $2.9 million 0 / $0 Don Taylor, CPA - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Jennison 20/20 Focus Fund Spiros "Sig" Segalas 16 / $21.26 billion 2 / $281.0 9 / $2.19 billion million Accounts subject to performance fees: 3 / $175.2 million (portion managed by this portfolio manager) - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- David A. Kiefer 11 / $12.12 billion 3 / $1.02 5 / $162.5 million* billion Accounts subject to performance fees: 3 / $163.3 million (portion managed by this portfolio manager) - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 67 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Jennison Growth Fund Michael A. Del Balso 12 / $10.36 billion 5 / $1.34 11 / $1.11 billion* billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Kathleen A. 13 / $10.19 billion 3 / $310.4 43 / $5.41 billion Accounts subject million to performance fees: 1 / $1.10 billion (portion managed by this McCarragher portfolio manager) - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Spiros "Sig" Segalas 16 / $21.39 billion 2 / $281.0 9 / $2.19 billion Accounts subject to million performance fees: 3 / $175.2 million (portion managed by this portfolio manager) - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- LM Growth Fund Robert Hagstrom 5 / $2.7 billion 2 / $204.9 25 / $3.08 billion million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 6 / $4.7 billion 13 / $4.1 5 / $1.2 billion billion Pooled investment vehicles subject to performance LM Value Fund Mary Chris Gay based management fee: 1 / $295.3 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 3 / $4.49 billion 6 / $300 million 57,012 / $14.18 billion LMP Large Cap Growth Fund Alan Blake - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 68 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- NACM International Fund Horacio A. Valeiras 29/ $7.2 billion 16/ $2.1 billion 89/ $4.6 billion Accounts Accounts subject to subject to performance fees: performance 5 /$322.4 million fees: 4 /$621.4 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Steven Tael 4/ $1 billion 3/ $527.7 4/121.1 million million Accounts subject to performance fees: 1 /$138.3 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 4/ $1 billion 3/ $527.7 4/ $121.1 million million Accounts subject to performance Kunal Ghosh fees: 1 /$138.3 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Neuberger Berman Regency Fund S. Basu Mullick 12 / $8.18 billion 0 / $0 0 / $0 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- OCC Opportunity Fund Michael Corelli 1 / $276.5 million 0 / $0 2 / $6.1 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Eric Sartorius 0 / $0 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- OCC Value Fund Colin Glinsman 5 / 6.46 billion 1 / $16 million 21 / $2.2 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 15 / $27.83 billion 4 / $775.60 2 / $584.71 million Accounts subject million to performance fees: Oppenheimer Global Fund Rajeev Bhaman 1 / $39.87 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 6 / $5.31 billion 2 / $74.55 0 / $0 million Oppenheimer International Growth Fund George R.Evans - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 69 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Oppenheimer Main Street Fund Nikolaos D. Monoyios 23 / $30.22 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Marc Reinganum 9 / $17.03 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- PIMCO Total Return Fund William H. Gross 35 / $157.61 19 / $8.42 66 / $42.26 billion billion billion Accounts subject to Accounts performance fees: subject to 21 / $19.07 million performance fees: 3 / $836 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Schroder Emerging Markets Equity Allan Conway 1 / $27 million 12 / $3,849 2/ $205 million million Fund* - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Robert Davy 1 / $27 million 9 / $2.327 1 / $52 million million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- James Gotto 1 / $27 million 2 / $805 million 1 / $154 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Waj Hashmi 1 / $27 million 2 / $718 million 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Schroder International Small Cap Fund Matthew Dobbs 6 / $16.66 billion 7 / $2.27 5 / $3.28 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 12 / $14.74 billion 3 / $218.7 10 / $735.3 million million S&P 500 Index Fund and Small Cap Stock Index Fund Thomas Durante - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 70 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Target Double Play Fund, Robert F. Carey 56 / $4.64 billion 4 / $535 million 4,096 / $981 million TargetPLUS Equity Fund, Equity Portfolios of: TargetPLUS Balanced Fund TargetPLUS Growth Fund TargetPLUS Moderate Fund - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Roger F. Testin 56 / $4.64 billion 4 / $535 million 4,096 / $981 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 56 / $4.64 billion 4 / $535 million 4,096 / $981 million Jon C. Erickson - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 56 / $4.64 billion 4 / $535 million 4,096 / $981 million David G. McGarel - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 56 / $4.64 billion 4 / $535 million 4,096 / $981 million Daniel J. Lindquist - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Fixed Income Portfolios of: Chris Dialynas 12 / $3.25 billion 16 / $7.42 103 / 46.66 billion billion TargetPLUS Balanced Fund TargetPLUS Growth Fund TargetPLUS Moderate Fund - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Curtis Mewbourne 7 / $9.25 billion 24 / 5.43 39 / 7.50 billion billion Accounts subject to Accounts performance fees: subject to 6 / $2.24 billion performance fees: 1 / $233 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Turner Quantitative Small Cap David Kovacs 1/ $827,000 11 / $54 6 / $295 million Growth Fund million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Jennifer Clark 1 / $827,000 11 / $54 6/ $295 billion million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 71 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Comstock Fund Devin E. Armstrong 18 / $30.7 1 / $671 million 13,252 billion (includingseparate accounts managed under certain "wrap (as of July 16, 2007) fee programs") / $2.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- B. Robert Baker 18 / $30.7 1 / $671 million 13,252 billion (includingseparate accounts managed under certain "wrap fee programs") / $2.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 18 / $30.7 1 / $671 million billion 13,252 (includingseparate Jason Leder accounts managed under certain "wrap fee programs") / $2.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 18 / $30.7 1 / $671 million billion 13,252 (includingseparate Kevin Holt accounts managed under certain "wrap fee programs") / $2.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 18 / $30.7 1 / $671 million billion 13,252 (including separate accounts James N. Warwick managed under (as of July 16, 2007) certain "wrap fee programs") / $2.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Global Franchise Fund Hassan Elmasry 8 / $4.1 billion 6 / $4.2 billion 22 / 4.5 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Paras Dodhia 4 / $3.15 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 72 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Michael Allison 4 / $3.15 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Jayson Vowles 4 / $3.15 billion 0 / $0 0 / $0 - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Global Real Estate Fund Theodore R. Bigman 17 / $12.61 billion 7 / $4.11 940 / $6.55 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Michiel te Paske 8 / $4.04 billion 6 / $1.81 24 / $2.96 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 4 / $3.71 billion 3 / $679 million 14 / $2.12 billion Sven van Kemenade - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 5 / $4.2 billion 3 / $2.62 16 / $2.64 billion billion Angeline Ho - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Growth & Income Fund and James Gilligan 19 / $38.13 billion 0 / $0 3 / $677 million VK Equity & Income Fund - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- James Roeder 19 / $38.13 billion 0 / $0 3 / $677 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 19 / $38.13 billion 0 / $0 3 / $677 million Mark Laskin - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 73 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Thomas Bastian 19 / $38.13 billion 0 / $0 3 / $677 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- Sergio Marcheli 19 / $38.13 billion 0 / $0 3 / $677 million - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Equity and Income Fund Steven Kreider 42 / $36.84 billion 0 / $0 63 / $12.95 billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- VK Mid-Cap Growth Fund Dennis P. Lynch 37 / $32.18 billion 5 / $1.52 7,247 / $1.98 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- David Cohen 37 / $32.18 billion 5 / $1.52 7,247 / $1.98 billion billion - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 37 / $32.18 billion 5 / $1.52 7,247 / $1.98 billion billion Sam Chainani - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 37 / $32.18 billion 5 / $1.52 7,247 / $1.98 billion billion Jason Yeung - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- - -------------------------------------- ---------------------- -------------------- ----------------- --------------------- 37 / $32.18 billion 5 / $1.52 7,247 / $1.98 billion billion Alexander Norton - -------------------------------------- ---------------------- -------------------- ----------------- ---------------------
* Other Accounts excludes the assets and number of accounts in wrap fee programs that are managed using model portfolios. POTENTIAL MATERIAL CONFLICTS OF INTEREST Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and/or other accounts may be presented with one or more of the following potential conflicts: o Time and attention. The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. The Subadvisers seek to manage such competing interests for the time and attention of portfolio managers by having most portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds. 74 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Limited investment opportunities. If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, the Subadvisers have adopted procedures for allocating portfolio transactions across multiple accounts. o Brokerage allocation. With respect to securities transactions for the Funds, the Subadvisers determine which broker to use to execute each order, consistent with their duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which a Subadviser or an affiliate of a Subadviser acts as Subadviser, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), the Subadvisers may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a Fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of the Fund or other account(s) involved. o Pursuit of differing strategies. At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing, including potentially opposite, positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds and/or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts. o Variation in compensation. Finally, the appearance of a conflict of interest may arise where a Subadviser has an incentive, such as a performance-based management fee, which relates to the management of one Fund or account but not all Funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities. The Subadvisers have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. See the prospectus section "Fund Management -- Duties of the Manager and Subadvisers" for discussion of potential or apparent conflict of interest regarding the Manager's discretion to allocate assets for the TargetPLUS Balanced Fund, TargetPLUS Growth Fund, and TargetPLUS Moderate Fund. PORTFOLIO MANAGER COMPENSATION The following section includes portfolio manager compensation information as of December 31, 2007, for each of the Subadvisers and for the Manager in its capacity to determine the allocation of assets of the Fixed Income Portfolio between the Diversified Income Strategy and the Total Return Strategy for the TargetPLUS Balanced Fund, TargetPLUS Growth Fund, and TargetPLUS Moderate Fund. The portfolio managers are employed by the respective Subadvisers, not by the Funds. The Manager Allianz Investment Management LLC ("AZIM") The portfolio manager's cash compensation consists of a market-based salary plus incentive compensation in the form of a bonus and a phantom equity plan. The amount of the bonus is determined by the overall financial performance of AZIM relative to its business goals for the fiscal year. The phantom equity plan provides awards based on the target earnings of AZIM over a three-year period. Awards vest three years after they are made, at which time the exact amount of the award is determined based on AZIM's actual earnings for the prior three-year period. In addition, the portfolio manager is eligible to participate in a non-qualified deferred compensation plan, which offers participants the tax benefits of deferring the receipt of a portion of their cash compensation until such time as designated under the plan. 75 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The Subadvisers Columbia Management Advisors, LLC The portfolio managers received their compensation from Columbia Advisors and its parent company, Columbia Management Group, in the form of salary, bonus, stock options, restricted stock and notional investments through an incentive plan, the value of which is measured by reference to the performance of the Columbia Funds in which the account is invested. The portfolio managers' bonus is variable and is generally based, on (1) an evaluation of the manager's investment performance and (2) the results of a peer and/or management review of such individual, which takes into account skills and attributes such as team participation, investment process, communication, and professionalism. In evaluating investment performance, Columbia Advisors generally considers the one-, three-, and five-year performance of mutual funds and other accounts the portfolio manager's relative to certain market benchmarks (the Merrill Lynch 100 Technology Index is the benchmark index for portfolio manager compensation for the AZL Columbia Technology Fund)and peer groups (Morningstar Specialty-Technology Category for the AZL Columbia Technology Fund) emphasizing each manager's three-, and five-year performance. Columbia Advisors may also consider a portfolio manager's performance in managing client assets in sectors and industries assigned to the manager as part of his or her investment team responsibilities, where applicable. For portfolio managers who also have group management responsibilities, another factor in their evaluation is an assessment of the group's overall investment performance. The size of the overall bonus pool each year is determined by Columbia Management Group and depends in part on levels of compensation generally in the investment management industry (based on market compensation data) and Columbia Advisors' profitability for the year which is largely determined by assets under management. ClearBridge Advisors, LLC ClearBridge Advisors, LLC ("ClearBridge") investment professionals receive base salary and other employee benefits and are eligible to receive incentive compensation. Base salary is fixed and typically determined based on market factors and the skill and experience of individual investment personnel. ClearBridge has an incentive and deferred compensation plan (the "Plan") for its investment professionals, including the fund's portfolio manager(s). Each investment professional works as a part of an investment team. The Plan is designed to align the objectives of ClearBridge investment professionals with those of fund shareholders and other ClearBridge clients. Under the Plan a "base incentive pool" is established for each team each year as a percentage of ClearBridge's revenue attributable to the team (largely management and related fees generated by funds and other accounts). A team's revenues are typically expected to increase or decrease depending on the effect that the team's investment performance as well as inflows and outflows have on the level of assets in the investment products managed by the team. The "base incentive pool" of a team is reduced by base salaries paid to members of the team and other employee expenses attributable to the team. The investment team's incentive pool is then adjusted to reflect its ranking among a "peer group" of non-ClearBridge investment managers and the team's pre-tax investment performance against the Russell 1000 Growth Index for the LMP Large Cap Growth Fund. The peer group of non-ClearBridge investment managers is defined by product style/type, vehicle type and geography and selected by independent vendors that track and provide (for a fee paid by ClearBridge) relevant peer group performance and ranking data. Longer-term (5- year) performance is more heavily weighted than shorter-term (1- year) performance in the calculation of the performance adjustment factor. The incentive pool for a team may also be adjusted based on other qualitative factors by the applicable ClearBridge Chief Investment Officer.). The incentive pool will be allocated by the applicable ClearBridge chief investment officer to the team leader and, based on the recommendations of the team leader, to the other members of the team. Up to 20% of an investment professional's annual incentive compensation is subject to deferral. For portfolio managers, 25% of this deferral tracks performance of their primary managed product, while another 25% tracks performance of an elected fund. Therefore, portfolio managers may potentially have 50% of their deferred award amount tracking the performance of their primary managed product. The remaining 50% of the deferral is received in the form of Legg Mason restricted stock shares. 76 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Davis Selected Advisers, L.P. Kenneth Feinberg's compensation as a Davis Advisors employee consists of (i) a base salary, (ii) an annual bonus equal to a percentage of growth in Davis Advisors' profits, (iii) awards of equity ("Units") in Davis Advisors including Units, options on Units, and/or phantom Units, and (iv) an incentive plan whereby Davis Advisors purchases shares in selected funds managed by Davis Advisors. At the end of specified periods, generally five-years following the date of purchase, some, all, or none of the fund shares will be registered in the employee's name based on fund performance, after expenses on a pre-tax basis, versus the S&P 500 Index, and versus peer groups as defined by Morningstar or Lipper. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. Christopher Davis' annual compensation as an employee of Davis Advisors consists of a base salary. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. The Dreyfus Corporation Mellon Capital Management Corporation's ("Mellon Capital's") portfolio managers responsible for managing mutual funds are generally eligible for compensation consisting of base salary, bonus, and payments under Mellon Capital's long-term incentive compensation program. All compensation is paid by Mellon Capital and not by the mutual funds. The same methodology described below is used to determine portfolio manager compensation with respect to the management of mutual funds and other accounts. Mutual fund portfolio managers are also eligible for the standard retirement benefits and health and welfare benefits available to all Mellon Capital employees. Certain portfolio managers may be eligible for additional retirement benefits under several supplemental retirement plans that Mellon Capital provides to restore dollar-for-dollar the benefits of management employees that had been cut back solely as a result of certain limits due to the tax laws. These plans are structured to provide the same retirement benefits as the standard retirement benefits. In addition, mutual fund portfolio managers whose compensation exceeds certain limits may elect to defer a portion of their salary and/or bonus under the Mellon Financial Corporation deferred compensation plan. A portfolio manager's base salary is determined by the manager's experience and performance in the role, taking into account the ongoing compensation benchmark analyses. A portfolio manager's base salary is generally a fixed amount that may change as a result of an annual review, upon assumption of new duties, or when a market adjustment of the position occurs. A portfolio manager's bonus is determined by a number of factors. One factor is performance of the mutual fund relative to expectations for how the mutual fund should have performed, given its objectives, policies, strategies and limitations, and the market environment during the measurement period. Additional factors include the overall financial performance of Mellon Capital, the performance of all accounts (relative to expectations) for which the portfolio manager has responsibility, the portfolio manager's contributions to the investment management functions within the sub-asset class, contributions to the development of other investment professionals and supporting staff, and overall contributions to strategic planning and decisions for the investment management group. The target bonus is expressed as a percentage of base salary. The actual bonus paid may be more or less than the target bonus, based on how well the manager satisfies the objectives stated above. The bonus is paid on an annual basis. Under the long-term incentive compensation program, certain portfolio managers are eligible to receive a payment from Mellon Capital's long-term incentive compensation plan based on their years of service, job level and, if applicable, management responsibilities. Each year, a portion of the firm's profits is allocated to the long-term incentive compensation award. The annual awards are paid after three years. First Trust Advisors, L.P. The compensation structure for each member of the First Trust Investment Committee is based on a fixed salary as well as a discretionary bonus determined by the management of the Subadviser. Salaries are determined by management and are based on an individual's position and overall value to the firm. Bonuses are also determined 77 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- by management and are based on an individual's overall contribution to the success of the firm and the profitability of the firm. Salaries and bonuses for members of the First Trust Investment Committee are not based on criteria such as a Fund's performance or the value of assets included in a Fund's portfolio. In addition, Mr. Carey, Mr. Erickson, Mr. McGarel, and Mr. Lindquist have an indirect ownership stake in the firm and will therefore receive their allocable share of ownership-related distributions. Founders Asset Management LLC The portfolio manager is a dual employee of Founders and The Boston Company Asset Management, LLC ("The Boston Company"), an affiliate of Founders. The portfolio manager's cash compensation is comprised primarily of a market-based salary and incentive compensation (annual and long term retention incentive awards). Funding for The Boston Company Annual Incentive Plan and Long Term Retention Incentive Plan is through a pre-determined fixed percentage of overall profitability of The Boston Company. In general, bonus awards are based initially on The Boston Company's financial performance. However, awards for select senior portfolio managers are based initially on their individual investment performance (one, three, and five-year weighted). In addition, awards for portfolio managers that manage alternative strategies are partially based on a portion of the fund's realized performance fee. The portfolio manager is eligible to receive annual cash bonus awards from the Annual Incentive Plan. Annual incentive opportunities are pre-established for the portfolio manager based upon competitive industry compensation benchmarks. A significant portion of the opportunity awarded is based upon the one, three, and five-year (three and five-year weighted more heavily) pre-tax performance of the portfolio manager's accounts relative to the performance of the appropriate Lipper and Callan peer groups. Other factors considered in determining the award are individual qualitative performance and the asset size and revenue growth or retention of the products managed. Awards are generally subject to management discretion and pool funding availability. Awards are paid in cash on an annual basis. However, some portfolio managers may receive a portion of their annual incentive award in deferred vehicles. The portfolio manager also is eligible to participate in The Boston Company's Long Term Retention Incentive Plan. This plan provides for an annual award, payable in cash and/or restricted stock of Founders' ultimate parent company, The Bank of New York Mellon Corporation ("BNY Mellon") (three-year cliff vesting period for both). The value of the cash portion of the award earns interest during the vesting period based upon the growth in The Boston Company's net income (capped at 20% and with a minimum payout of the BNY Mellon 3 year CD rate). The portfolio manager may elect to defer portions of his base salary and/or incentive compensation under the BNY Mellon deferred compensation plan. Franklin Advisory Services, LLC Compensation. Franklin Advisory Services seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually and the level of compensation is based on individual performance, the salary range for a portfolio manager's level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager's compensation consists of the following three elements: Base salary - Each portfolio manager is paid a base salary. Annual bonus - Annual bonuses are structured to align the interests of the portfolio manager with those of the Fund's shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Franklin Resources and mutual funds advised by the manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and Fund shareholders. The Chief Investment Officer of the manager and/or other officers of the manager, with responsibility for the Fund, have discretion in the granting of annual bonuses 78 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan: o Investment performance. Primary consideration is given to the historic investment performance over the 1, 3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate (the Russell 2000 Value Index is the benchmark index for the AZL Franklin Small Cap Value Fund). o Non-investment performance. The more qualitative contributions of a portfolio manager to the manager's business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of any bonus award. o Responsibilities. The characteristics and complexity of funds managed by the portfolio manager are factored in the manager's appraisal. Additional long-term equity-based compensation - Portfolio managers may also be awarded restricted shares or units of Franklin Resources stock or restricted shares or units of one or more mutual funds, and options to purchase common shares of Franklin Resources stock. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent. Portfolio managers also participate in benefit plans and programs available generally to all employees of the manager. Invesco Aim Capital Management, Inc. Invesco Aim seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, a benefits package, and a relocation package if such benefit is available. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. Invesco Aim evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements: o Base salary. Each portfolio manager is paid a base salary. In setting the base salary, Invesco Aim's intention is to be competitive in light of the particular portfolio manager's experience and responsibilities. o Annual bonus. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and non-quantitative components. Generally, 70% of the bonus is quantitatively determined, based typically on a four-year rolling average of pre-tax performance of all registered investment company accounts for which a portfolio manager has day-to-day management responsibilities versus the performance of a pre-determined peer group. In instances where a portfolio manager has responsibility for management of more than one fund, an asset weighted four-year rolling average is used. High fund performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided compensation survey information) and poor fund performance (versus applicable peer group) could result in no bonus. The amount of fund assets under management typically has an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance. The remaining 30% portion of the bonus is discretionary as determined by Aim and takes into account other subjective factors. o Equity-based compensation. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares of Invesco Ltd. (Invesco) stock from pools determined from time to time by the Remuneration Committee of the Invesco Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent. o Participation in group insurance programs. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes. 79 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Participation in deferred compensation plan. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also participate in benefit plans and programs available generally to all employees. Jennison Associates LLC Jennison seeks to maintain a highly competitive compensation program designed to attract and retain outstanding investment professionals, which includes portfolio managers and research analysts, and to align the interests of its investment professionals with those of its clients and overall firm results. Overall firm profitability determines the total amount of incentive compensation pool that is available for investment professionals. Investment professionals are compensated with a combination of base salary and discretionary cash bonus. In general, the cash bonus comprises the majority of the compensation for investment professionals. Additionally, senior investment professionals, including portfolio managers and senior research analysts, are eligible to participate in a voluntary deferred compensation program where all or a portion of the discretionary cash bonus can be deferred. Participants in the deferred compensation plan are permitted to allocate the deferred amounts among various options that track the gross of fee pre-tax performance of various mutual funds, of which nearly all of the equity options are managed by Jennison, and composites of accounts managed by Jennison, which may include accounts managed for unregistered products. Investment professionals' total compensation is determined through a subjective process that evaluates numerous qualitative and quantitative factors. There is no particular weighting or formula for considering the factors. Some portfolio managers or analysts may manage or contribute ideas to more than one product strategy and are evaluated accordingly. The following factors, listed in order of importance, will be reviewed for each portfolio manager: o One and three year pre-tax investment performance of groupings of accounts (a "Composite") relative to market conditions, pre-determined passive indices and industry peer group data for the product strategy (e.g., large cap growth, large cap value) for which the portfolio manager is responsible; o Historical and long-term business potential of the product strategies; o Qualitative factors such as teamwork and responsiveness, and o Other factors such as experience and other responsibilities such as being a team leader or supervisor may also affect an investment professional's total compensation. The passive indices reviewed for each portfolio manager are as follows: (i) AZL Jennison 20/20 Focus Fund: Spiros Segalas (Russell 1000(R) Growth Index) and David A. Kiefer (Russell 1000(R) Value Index); (ii) AZL Jennison Growth Fund: Michael A. Del Balso (Russell 1000(R) Growth Index), Kathleen A. McCarragher (Russell 1000(R) Growth Index) and Spiros Segalas (Russell 1000(R) Growth Index). Potential Conflicts of Interest: In managing other portfolios (including affiliated accounts), certain potential conflicts of interest may arise. Potential conflicts include, for example, conflicts among investment strategies, conflicts in the allocation of investment opportunities, or conflicts due to different fees. As part of its compliance program, Jennison has adopted policies and procedures that seek to address and minimize the effects of these conflicts. Jennison's portfolio managers typically manage multiple accounts. These accounts may include, among others, mutual funds, separately managed advisory accounts (assets managed on behalf of institutions such as pension funds, colleges and universities, foundations), commingled trust accounts, other types of unregistered commingled accounts, affiliated single client and commingled insurance separate accounts, model nondiscretionary portfolios, and model portfolios used for wrap fee programs. Portfolio managers make investment decisions for each portfolio based on the investment objectives, policies, practices and other relevant investment considerations that the managers believe are applicable to that portfolio. Consequently, portfolio managers may recommend the purchase (or sale) of certain securities for one portfolio and not another portfolio. Securities purchased in one portfolio may perform better than the securities purchased for another portfolio. Similarly, securities sold from one portfolio may 80 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- result in better performance if the value of that security declines. Generally, however, portfolios in a particular product strategy (e.g., large cap growth equity) with similar objectives are managed similarly. Accordingly, portfolio holdings and industry and sector exposure tend to be similar across a group of accounts in a strategy that have similar objectives, which tends to minimize the potential for conflicts of interest. While these accounts have many similarities, the investment performance of each account will be different primarily due to differences in guidelines, timing of investments, fees, expenses and cash flows. Furthermore, certain accounts (including affiliated accounts) in certain investment strategies may buy or sell securities while accounts in other strategies may take the same or differing, including potentially opposite, position. For example, certain strategies may short securities that may be held long in other strategies. The strategies that sell a security short held long by another strategy could lower the price for the security held long. Similarly, if a strategy is purchasing a security that is held short in other strategies, the strategies purchasing the security could increase the price of the security held short. Jennison has policies and procedures that seek to mitigate, monitor and manage this conflict. In addition, Jennison has adopted trade aggregation and allocation procedures that seek to treat all clients (including affiliated accounts) fairly and equitably. These policies and procedures address the allocation of limited investment opportunities, such as IPOs and the allocation of transactions across multiple accounts. Some accounts have higher fees, including performance fees, than others. These differences may give rise to a potential conflict that a portfolio manager may favor the higher fee-paying account over the other or allocate more time to the management of one account over another. While Jennison does not monitor the specific amount of time that a portfolio manager spends on a single portfolio, senior Jennison personnel periodically review the performance of Jennison's portfolio managers as well as periodically assess whether the portfolio manager has adequate resources to effectively manage the accounts assigned to that portfolio manager. Jennison also believes that its compensation structure tends to mitigate this conflict. Legg Mason Capital Management, Inc. Each Portfolio Manager is paid a fixed base salary and a bonus. Bonus compensation is reviewed annually and is determined by a number of factors. The bonus compensation for Robert Hagstrom (Portfolio Manager for the LM Growth Fund) is reviewed annually and is determined by a number of factors, including the annual performance of his accounts relative to the S&P 500 Composite Stock Index (with dividends reinvested), his performance over various other time periods, the total value of his assets under management, his contribution to the Subadviser's research process, the profitability of the Subadviser and Mr. Hagstrom's contribution to profitability, and trends in industry compensation levels and practices. The bonus compensation for Mary Chris Gay (Portfolio Manager for the LM Value Fund) is reviewed annually and is determined by a number of factors, including the total value of the assets, and the growth in assets, under her management (these are a function of performance, retention of assets, and flows of new assets), Ms. Gay's contribution to the Subadviser's research process, and trends in industry compensation levels and practices. Each Portfolio Manager is also eligible to receive stock options from Legg Mason Inc. based upon an assessment of the Portfolio Manager's contribution to the success of the company, as well employee benefits, including, but not limited to, health care and other insurance benefits, participation in the Legg Mason 401(k) program, and participation in other Legg Mason deferred compensation plans. One account managed by Robert Hagstrom (Portfolio Manager for the LM Growth Fund) pays a performance fee, and thus may pay higher fees if certain performance objectives and other requirements are met. Since Mr. Hagstrom's compensation structure does consider contribution to firm profitability as one of its criteria, it is possible under certain circumstances that his bonus compensation could be more positively impacted by the account that pays a performance fee than it would by achieving the same performance in the Fund or another account. However, investment ideas are generally implemented in all similarly managed accounts at the same time, subject to considerations of each account's investment guidelines, restrictions, tax considerations, cash balances, liquidity needs, trading costs, and other factors. In addition, the Subadviser maintains written policies and procedures to address this potential conflict of interests and ensure that accounts are treated fairly. One account managed by Mary Chris Gay pays a performance fee, however, since the calculation of her bonus compensation does not use 81 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- contribution to the Subadviser's profitability as a specific factor, the Subadviser does not believe that this creates a material conflict of interests. Neuberger Berman Management Inc. A portion of the compensation paid to each Portfolio Manager is determined by comparisons to pre-determined peer groups and benchmarks (the Russell MidCap Value Index as the primary index and the Russell MidCap Index as the secondary index for the AZL Neuberger Berman Regency Fund), as opposed to a system dependent on a percent of management fees. The Portfolio Managers are paid a base salary that is not dependent on performance. Each Portfolio Manager also has a "target bonus," which is set each year and can be increased or decreased prior to payment based in part on performance measured against the relevant peer group and benchmark. Performance is measured on a three-year rolling average in order to emphasize longer-term performance. There is also a subjective component to determining the bonus, which consists of the following factors: (i) the individual's willingness to work with the marketing and sales groups; (ii) his or her effectiveness in building a franchise; and (iii) client servicing. Senior management determines this component in appropriate cases. There are additional components that comprise the Portfolio Managers' compensation packages, including: (i) whether the manager was a partner/principal of Neuberger Berman prior to Neuberger Berman's Inc.'s initial public offering; (ii) for more recent hires, incentives that may have been negotiated at the time the Portfolio Manager joined the Neuberger Berman complex; and (iii) the total amount of assets for which the Portfolio Manager is responsible. Neuberger Berman Management's Portfolio Managers have always had a degree of independence that they would not get at other firms that have, for example, investment committees. Neuberger Berman Management believes that its Portfolio Managers are retained not only through compensation and opportunities for advancement, but also by a collegial and stable money management environment. In addition, there are additional stock and option award programs available. Neuberger Berman Management believes the measurement versus the peer groups on a three-year rolling average basis creates a meaningful disincentive to try and beat the peer group and benchmark in any given year by taking undue risks in portfolio management. The incentive is to be a solid performer over the longer-term, not necessarily to be a short-term winner in any given year. Nicholas-Applegate Capital Management LLC ("NACM") The following explains the compensation structure of each individual (as listed in the Prospectus) that shares primary responsibility for day-to-day portfolio management of the Fund (for the purposes of this section, "Portfolio Managers"): Base Salary. Each Portfolio Manager is paid a fixed base salary set at a competitive level, taking into consideration the Portfolio Manager's experience and responsibilities, as determined by NACM. Annual Bonus and Profit Sharing Opportunity. Each Portfolio Manager's compensation is directly affected by the performance, on a pre-tax basis, of the individual portfolios he or she manages, including each Fund; as well as the performance of the individual's portfolio management team and the overall success of the firm. Approximately 75% of each Portfolio Manager's bonus is based on one- and three-year annualized performance of client accounts under his or her management, with greater weight placed on three-year performance. This takes into account relative performance of the accounts to each account's individual benchmark (the MSCI EAFE Index for the AZL NACM International Fund) (representing approximately one half of the calculation) and the accounts' peer rankings in institutional consultant universes (representing the other half). In the case of the Fund, the benchmark against which the performance of the Fund's portfolio will be compared for these purposes is indicated in the prospectus. The remaining 25% of the bonus is based on a qualitative review and overall firm profitability. The qualitative review evaluates each NACM Portfolio Manager based on the individual's contribution to the implementation of the investment process of his or her accounts, including the Fund. The lead portfolio manager evaluates the other members of the portfolio management team. The Chief Investment Officer (Mr. Valeiras) evaluates the lead portfolio manager. 82 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Each NACM investment team has a profit-sharing plan. Each team receives a pool which is based on "EBITDA" (i.e., earnings before interest, taxes, depreciation and amortization) of the accounts managed by the team and is distributed subjectively. All team members are eligible. The Chief Investment Officer and lead portfolio manager determine allocations among the team. The profits to be allocated increase with the profitability of the applicable accounts. The Portfolio Managers are also eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation until such time as designated under the plan. Oppenheimer Capital LLC Oppenheimer Capital believes that its compensation program is competitively positioned to attract and retain high-caliber investment professionals. As more fully described below, portfolio managers receive a base salary, a variable bonus opportunity, and participation in a Long Term Incentive Plan and group retirement plans. Total cash compensation, as described below, is set for each portfolio manager relative to his or her performance and the market. Portfolio manager compensation is reviewed and modified each year as appropriate to reflect changes in the market, as well as to adjust drivers of compensation to promote good sustained fund performance. Oppenheimer Capital attempts to keep its compensation levels at or above the median for similar positions in the local area. Compensation. The portfolio manager's compensation consists of the following elements: Base salary. The portfolio manager is paid a fixed base salary that is set at a level determined by Oppenheimer Capital. In setting the base salary, the firm's intentions are to be competitive in light of the portfolio manager's experience and responsibilities. Firm management evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Annual bonus and Long Term Incentive Plan. The portfolio manager is eligible for an annual bonus in addition to a base salary. The bonus typically forms the majority of the individual's annual cash compensation and is based in part on pre-tax performance against the Fund's relevant benchmark (the Russell 2000 Growth Index for the AZL OCC Opportunity Fund, and the Russell 1000 Value Index for the AZL OCC Value Fund) over one and three year periods, with some consideration for longer periods. Allianz Global Investors of America L.P. ("AGI") has established a Long Term Incentive Plan for certain employees. The plan provides awards that are based on operating earnings growth of Oppenheimer Capital and the collective earnings growth of all the asset management companies of AGI. Participation in group retirement plans. The portfolio manager is eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation until such time as designated under the plan. Conflicts of Interest. When a portfolio manager has responsibility for managing more than one account, potential conflicts of interest may arise. Those conflicts could include preferential treatment of one account over others in terms of allocation of resources or of investment opportunities. While the portfolio managers of Oppenheimer Capital are subject to a written Code of Ethics that is designed to ensure that the personal securities transactions of covered persons will not interfere with making decisions in the best interest of advisory clients, the portfolio managers may, from time to time, acquire, possess, manage, and dispose of securities or other investment assets for their own accounts, for the accounts of their families, for the account of any entity in which they have a beneficial interest or for the accounts of others for whom they may provide investment advisory services (collectively, "Managed Accounts"), in transactions which may or may not correspond with transactions effected or positions held in the Funds. When Oppenheimer Capital determines that it would be appropriate for a particular Fund and one or more Managed Account to participate in an investment opportunity, Oppenheimer Capital will seek to execute orders for a Fund and for such Managed Accounts on a basis which it considers equitable, but that equality of treatment of a Fund and one or more other Managed Accounts is not assured. In such situations, Oppenheimer Capital may (but is not be required to) place orders for a Fund and each other Managed Account simultaneously and if all such orders are not filled at the same price, Oppenheimer Capital may cause a Fund and each Managed Account to pay or receive the average of the prices at which the orders were filled. If all such orders cannot be fully 83 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- executed under prevailing market conditions, Oppenheimer Capital may allocate the securities traded among a Fund and other Managed Accounts, pursuant to policies and procedures adopted to address these potential conflicts of interest, in a manner which it considers equitable, taking into account the size of the order placed for a Fund and each other Managed Account as well as any other factors which it deems relevant. Oppenheimer Capital advises one or more accounts that are charged an advisory fee that is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to a Fund or an account without a performance-based fee. Oppenheimer Capital has adopted policies and procedures that are reasonably designed to allocate investment opportunities between such other accounts and Funds and accounts without a performance-based fee on a fair and equitable basis over time. OppenheimerFunds, Inc. ("OFI") Under the Subadviser's compensation program for its portfolio managers and portfolio analysts, their compensation is based primarily on the investment performance results of the funds and accounts they manage, rather than on the financial success of the Subadviser. This is intended to align the portfolio managers' and analysts' interests with the success of the funds and accounts and their investors. The Subadviser's compensation structure is designed to attract and retain highly qualified investment management professionals and to reward individual and team contributions toward creating shareholder value. As of December 31, 2007, the portfolio managers' compensation consisted of three elements: a base salary, an annual discretionary bonus and eligibility to participate in long-term awards of options and appreciation rights in regard to the common stock of the Subadviser's holding company parent. Senior portfolio managers may also be eligible to participate in the Subadviser's deferred compensation plan. The base pay component of each portfolio manager is reviewed regularly to ensure that it reflects the performance of the individual, is commensurate with the requirements of the particular portfolio, reflects any specific competence or specialty of the individual manager, and is competitive with other comparable positions, to help the Subadviser attract and retain talent. The annual discretionary bonus is determined by senior management of the Subadviser and is based on a number of factors, including a fund's pre-tax performance for periods of up to five years, measured against an appropriate benchmark selected by management. The benchmarks with respect to the Funds are as follows: AZL Oppenheimer Global Fund is measured against the Lipper Global Multi-Cap Growth Funds Index; AZL Oppenheimer International Growth Fund is measured against the Lipper International Funds Index; and the AZL Oppenheimer Main Street Fund is measured against the Lipper Large Cap Core Funds Index. Other factors include management quality (such as style consistency, risk management, sector coverage, team leadership and coaching) and organizational development. The compensation structure is also intended to be internally equitable and serve to reduce potential conflicts of interest between the Funds and other funds and accounts managed by the portfolio managers. The compensation structure of other accounts managed by the portfolio manager is the same as the compensation structure of the Funds, described above. Pacific Investment Management Company LLC ("PIMCO") PIMCO has adopted a "Total Compensation Plan" for its professional level employees, including its portfolio managers, PIMCO has adopted a "Total Compensation Plan" for its professional level employees, including its portfolio managers, that is designed to pay competitive compensation and reward performance, integrity and teamwork consistent with the firm's mission statement. The Total Compensation Plan includes a significant incentive component that rewards high performance standards, work ethic and consistent individual and team contributions to the firm. The compensation of portfolio managers consists of a base salary, a bonus, and may include a retention bonus. Portfolio managers who are Managing Directors of PIMCO also receive compensation from PIMCO's profits. Certain employees of PIMCO, including portfolio managers, may elect to defer compensation through PIMCO's deferred compensation plan. PIMCO also offers its employees a non-contributory defined contribution plan through which PIMCO makes a contribution based on the employee's compensation. PIMCO's contribution rate increases at a specified compensation level, which is a level that would include portfolio managers. 84 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Salary and Bonus. Base salaries are determined by considering an individual portfolio manager's experience and expertise and may be reviewed for adjustment annually. Portfolio managers are entitled to receive bonuses, which may be significantly more than their base salary, upon attaining certain performance objectives based on predetermined measures of group or department success. These goals are specific to individual portfolio managers and are mutually agreed upon annually by each portfolio manager and his or her manager. Achievement of these goals is an important, but not exclusive, element of the bonus decision process. In addition, the following non-exclusive list of qualitative criteria (collectively, the "Bonus Factors") may be considered when determining the bonus for portfolio managers: o 3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax investment performance as judged against the applicable benchmarks* for each account managed by a portfolio manager and relative to applicable industry peer groups; * The S&P 500 Index for the AZL PIMCO Fundamental IndexPLUS Total Return Fund; the Lehman Aggregate Bond Index for allocations to the Total Return Strategy for the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund; the Lehman Brothers Global Credit Hedged USD Index for allocations to the Diversified Income Strategy for the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund. o Appropriate risk positioning that is consistent with PIMCO's investment philosophy and the Investment Committee/CIO approach to the generation of alpha; o Amount and nature of assets managed by the portfolio manager; o Consistency of investment performance across portfolios of similar mandate and guidelines (reward low dispersion); o Generation and contribution of investment ideas in the context of PIMCO's secular and cyclical forums, portfolio strategy meetings, Investment Committee meetings, and on a day-to-day basis; o Absence of defaults and price defaults for issues in the portfolios managed by the portfolio manager; o Contributions to asset retention, gathering and client satisfaction; o Contributions to mentoring, coaching and/or supervising; and o Personal growth and skills added. A portfolio manager's compensation is not based directly on the performance of any portfolio or any other account managed by that portfolio manager. Final bonus award amounts are determined by the PIMCO Compensation Committee. Retention Bonuses. Certain portfolio managers may receive a discretionary, fixed amount retention bonus, based upon the Bonus Factors and continued employment with PIMCO. Each portfolio manager who is a Senior Vice President or Executive Vice President of PIMCO receives a variable amount retention bonus, based upon the Bonus Factors and continued employment with PIMCO. Investment professionals, including portfolio managers, are eligible to participate in a Long Term Cash Bonus Plan ("Cash Bonus Plan"), which provides cash awards that appreciate or depreciate based upon the performance of PIMCO's parent company, Allianz Global Investors, and PIMCO over a three-year period. The aggregate amount available for distribution to participants is based upon Allianz Global Investors' profit growth and PIMCO's profit growth. Participation in the Cash Bonus Plan is based upon the Bonus Factors, and the payment of benefits from the Cash Bonus Plan, is contingent upon continued employment at PIMCO. Profit Sharing Plan. Instead of a bonus, portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO's net profits. Portfolio managers who are Managing Directors receive an amount determined by the Managing Director Compensation Committee, based upon an individual's overall contribution to the firm and the Bonus Factors. Under his employment agreement, William Gross receives a fixed percentage of the profit sharing plan. 85 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Allianz Transaction Related Compensation. In May 2000, a majority interest in the predecessor holding company of PIMCO was acquired by a subsidiary of Allianz AG ("Allianz"). In connection with the transaction, Mr. Gross received a grant of restricted stock of Allianz, the last of which vested on May 5, 2005. From time to time, under the PIMCO Class B Unit Purchase Plan, Managing Directors and certain executive management (including Executive Vice Presidents) of PIMCO may become eligible to purchase Class B Units of PIMCO. Upon their purchase, the Class B Units are immediately exchanged for Class A Units of PIMCO Partners, LLC, a California limited liability company that holds a minority interest in PIMCO and is owned by the Managing Directors and certain executive management of PIMCO. The Class A Units of PIMCO Partners, LLC entitle their holders to distributions of a portion of the profits of PIMCO. The PIMCO Compensation Committee determines which Managing Directors and executive management may purchase Class B Units and the number of Class B Units that each may purchase. The Class B Units are purchased pursuant to full recourse notes issued to the holder. The base compensation of each Class B Unit holder is increased in an amount equal to the principal amortization applicable to the notes given by the Managing Director or member of executive management. Portfolio managers who are Managing Directors also have long-term employment contracts, which guarantee severance payments in the event of involuntary termination of a Managing Director's employment with PIMCO. Conflicts of Interest From time to time, potential conflicts of interest may arise between a portfolio manager's management of the investments of a Fund, on the one hand, and the management of other accounts, on the other. The other accounts might have similar investment objectives or strategies as the Funds, track the same index a Fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Funds. The other accounts might also have different investment objectives or strategies than the Funds. Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the portfolio manager's day-to- day management of a Fund. Because of their positions with the Funds, the portfolio managers know the size, timing and possible market impact of a Fund's trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of a Fund. Investment Opportunities. A potential conflict of interest may arise as result of the portfolio manager's management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both a Fund and other accounts managed by the portfolio manager, but may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a Fund and another account. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Under PIMCO's allocation procedures, investment opportunities are allocated among various investment strategies based on individual account investment guidelines and PIMCO's investment outlook. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by- side management of the Funds and certain pooled investment vehicles, including investment opportunity allocation issues. Performance Fees. A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to a Fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between the Funds and such other accounts on a fair and equitable basis over time. Schroder Investment Management North America Inc. ("Schroders") Schroders fund managers are paid in a combination of base salary and annual discretionary bonus, as well as the standard retirement, health, and welfare benefits available to all of its employees. Certain of the most senior managers also participate in a long-term incentive program. 86 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Generally, portfolio managers employed by Schroders, including Mr. Dobbs, receive compensation based on the factors discussed below. Base salary is determined by reference to the level of responsibility inherent in the role and the experience of the incumbent, and is benchmarked annually against market data to ensure competitive salaries. The base salary is subject to an annual review, and will increase if market movements make this necessary and/or if there has been an increase in the employee's responsibilities. Discretionary bonuses for fund managers are determined by a number of factors. At a macro level the total amount available to spend is a function of the compensation to revenue ratio achieved by Schroders globally. Schroders then assesses the performance of the division and of the team to determine the share of the aggregate bonus pool that is spent in each area. This focus on "team" maintains consistency and minimizes internal competition that may be detrimental to the interests of our clients. For individual fund managers, Schroders assesses the performance of their funds relative to competitors and to the relevant benchmarks over one- and three-year periods, the level of funds under management, and the level of performance fees generated. Schroders also reviews "softer" factors such as leadership, contribution to other parts of the business, and adherence to our corporate values of excellence, integrity, teamwork, passion, and innovation. A manager's bonus is paid in combination of cash and Schroders plc stock, as determined by Schroders. This stock vests over a period of three years and ensures that the interests of the employee are aligned with those of the shareholder, and that key employees have an increasing incentive to remain with Schroders as their store of unvested awards grows over time. The relevant Benchmarks for the Funds that are subadvised by Schroders are as follows: Schroder International Small Cap Fund - S&P/Citigroup Extended Markets EuroPacific Index; Schroders Emerging Markets Equity Fund -- MSCI Emerging Markets Index. Turner Investment Partners, Inc. Investment professionals receive a base salary commensurate with their level of experience. Turner's goal is to maintain competitive base salaries through review of industry standards, market conditions, and salary surveys. Compensation for investment professionals is tied to the performance of all accounts within the relevant composite. Turner evaluates investment professionals' performance over multiple time frames, including 1, 3, 5 year and since inception, relative to appropriate market benchmarks. In addition, each employee is eligible for equity awards. Turner believes this compensation provides incentive to attract and retain highly qualified people. The objective performance criteria noted above accounts for 90% of the bonus calculation. The remaining 10% is based upon subjective, "good will" factors including teamwork, interpersonal relations, the individual's contribution to overall success of the firm, media and client relations, presentation skills, and professional development. Portfolio managers/analysts are reviewed on an annual basis. Robert E. Turner, CFA, chairman and chief investment officer, and David Kovacs, CFA, chief investment officer, quantitative strategies, are responsible for setting base salaries, bonus targets, and making all subjective judgments related to the compensation for Turner's Quantitative Equity Team members.. Van Kampen Asset Management Compensation Structure of Portfolio Managers Portfolio managers receive a combination of base compensation and discretionary compensation, comprising a cash bonus and several deferred compensation programs described below. The methodology used to determine portfolio manager compensation is applied across all funds/accounts managed by the portfolio managers. BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary compensation based on the level of their position with the Investment Adviser. 87 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers may receive discretionary compensation. Discretionary compensation can include: o Cash Bonus. o Morgan Stanley's Long Term Incentive Compensation awards - a mandatory program that defers a portion of discretionary year-end compensation into restricted stock units or other awards based on Morgan Stanley common stock or other investments that are subject to vesting and other conditions. o Investment Management Alignment Plan (IMAP) awards - a mandatory program that defers a portion of discretionary year-end compensation and notionally invests it in designated funds advised by the Investment Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio managers must notionally invest a minimum of 25% to a maximum of 100% of the IMAP deferral into a combination of the designated funds they manage that are included in the IMAP fund menu, which may or may not include the Fund. o Voluntary Deferred Compensation Plans - voluntary programs that permit certain employees to elect to defer a portion of their discretionary year-end compensation and directly or notionally invest the deferred amount: (1) across a range of designated investment funds, including funds advised by the Investment Adviser or its affiliates; and/or (2) in Morgan Stanley stock units. Several factors determine discretionary compensation, which can vary by portfolio management team and circumstances. In order of relative importance, these factors include: o Investment performance. A portfolio manager's compensation is linked to the pre-tax investment performance of the funds/accounts managed by the portfolio manager. Investment performance is calculated for one-, three- and five-year periods measured against a fund's/account's primary benchmark (as set forth in the fund's prospectus), indices and/or peer groups where applicable. Generally, the greatest weight is placed on the three- and five-year periods. o Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager. o Contribution to the business objectives of the Investment Adviser. o The dollar amount of assets managed by the portfolio manager. o Market compensation survey research by independent third parties. o Other qualitative factors, such as contributions to client objectives. Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the investment team(s) of which the portfolio manager is a member. 88 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- PORTFOLIO MANAGER OWNERSHIP OF SECURITIES IN THE FUNDS At December 31, 2007, none of the Portfolio Managers for any of the Funds beneficially owned shares of any Fund. AFFILIATED PERSONS The following table lists persons who are affiliated with the Trust and who are also affiliated persons of the Manager.
- -------------------- ------------------------------------------------------------- ------------------------------- Name Position with Trust Position with Adviser - -------------------- ------------------------------------------------------------- ------------------------------- - -------------------- ------------------------------------------------------------- ------------------------------- Jeffrey Kletti Trustee; President Director; President - -------------------- ------------------------------------------------------------- ------------------------------- - -------------------- ------------------------------------------------------------- ------------------------------- Brian Muench Vice President Vice President - -------------------- ------------------------------------------------------------- ------------------------------- - -------------------- ------------------------------------------------------------- ------------------------------- Stephen G. Simon Chief Compliance Officer and Anti-Money Laundering Chief Compliance Officer Compliance Officer - -------------------- ------------------------------------------------------------- -------------------------------
PORTFOLIO TRANSACTIONS Purchases and sales of portfolio securities which are debt securities usually are principal transactions in which portfolio securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters of portfolio securities generally include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers may include the spread between the bid and asked prices. Transactions on stock exchanges involve the payment of negotiated brokerage commissions. Transactions in the over-the-counter market are generally principal transactions with dealers. With respect to the over-the-counter market, the Trust, where possible will deal directly with the dealers who make a market in the securities involved except under those circumstances where better price and execution are available elsewhere. In distributing brokerage business arising out of the placement of orders for the purchase and sale of securities for any Fund, the objective of the Fund's Manager or Subadviser is to obtain the best overall terms. Allocation of transactions, including their frequency, to various brokers and dealers is determined by the Manager or Subadviser, in its best judgment and in the manner deemed fair and reasonable to shareholders. The primary consideration is prompt execution of orders in an effective manner at the most favorable price. Subject to this consideration, brokers and dealers who provide supplemental investment research to the Manager or Subadviser may receive orders for transactions on behalf of the Trust. The types of research services the Manager or Subadviser receives include economic analysis and forecasts, financial market analysis and forecasts, industry and company specific analysis, performance monitoring, interest rate forecasts, arbitrage relative valuation analysis of various debt securities, analyses of U.S. Treasury securities, research-dedicated computer hardware and software and related consulting services and other services that assist in the investment decision-making process. Research services are received primarily in the form of written reports, computer-generated services, telephone contacts and personal meetings with security analysts. Research services may also be provided in the form of meetings arranged with corporate and industry spokespersons or may be generated by third parties but are provided to the Manager or Subadvisers by, or through, broker-dealers. Research so received is in addition to and not in lieu of services required to be performed by the Manager or Subadviser and does not reduce the fees payable to such adviser by the Trust. Such information may be useful to the Manager or Subadviser in serving both the Trust and other clients and, conversely supplemental information obtained by the placement of business of other clients may be useful to the Manager or Subadviser in carrying out its obligations to the Trust. The Manager and Subadvisers also may consider sales of shares of the Trust as a factor in the selection of broker-dealers to execute portfolio transactions for the Trust. The selection of a particular broker or dealer based on such considerations will not affect the price per share that would be paid by a shareholder for shares of a Fund, nor will it affect the amount a Fund would receive for any sale of Fund shares. Consistent with achieving best execution, a Fund may participate in so-called "commission recapture" programs, under which brokers or dealers used by the Fund remit a portion of brokerage commissions to the particular Fund from which they were generated. Subject to oversight by the Fund's Board of Directors, either the Fund's Manager or Subadviser, is responsible for the selection of brokers or dealers and for ensuring that a Fund receives best execution in connection with its portfolio brokerage transactions. Participation in such programs may have the effect of reducing overall expenses and increasing overall returns for certain Funds 89 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- While the Manager or Subadviser generally seeks competitive commissions, the Trust may not necessarily pay the lowest commission available on each brokerage transaction for the reasons discussed above. Thus, a Fund may pay a higher brokerage commission in connection with a given portfolio transaction than it would have paid another broker for the same transaction in recognition of the value of brokerage or research services provided by the executing broker. The total brokerage commissions paid by each Fund for the last 3 fiscal years are listed in the following table.
Total Brokerage Commission Paid for Total Brokerage Total Brokerage the Fiscal Year Commission Paid for Commission Paid for Ended December 31, the Fiscal Year Ended the Fiscal Year Ended Fund 2007 December 31, 2006 December 31, 2005 AIM International Equity Fund $508,628.13 $495,471.34 $229,446.50 Columbia Technology Fund 403,660.97 280,673.71 212,759.44 Davis NY Venture Fund 137,601.71 137,533.30 110,862.07 Dreyfus Founders Equity Growth Fund 281,348.94 254,096.85 267,576.76 Dreyfus Premier Small Cap Value Fund 127,828.25 193,412.98 186,666.33 Franklin Small Cap Value Fund 147,407.52 105,043.06 252,225.29 Jennison 20/20 Focus Fund 849,767.60 603,739.34 139,917.00 Jennison Growth Fund 68,752.04 74,686.46 26,642.30 LM Growth Fund 131,895.27 81,315.36 86,276.55 LM Value Fund 185,939.20 181,380.96 217,102.53 LMP Large Cap Growth Fund 88,988.49 144,180.16 178,911.52 Money Market Fund 0 0 0 NACM International Fund 324,766.35 NA NA Neuberger Berman Regency Fund 170,292.60 93,323.50 NA OCC Opportunity Fund 840,295.01 936,952.45 911,459.34 OCC Value Fund 544,805.25 323,454.66 576,825.55 Oppenheimer Global Fund 95,974.86 118,532.83 115,923.69 Oppenheimer International Growth Fund 158,999.06 100,769.29 64,584.87 Oppenheimer Main Street Fund 156,930.47 156,720.58 168,886.05 PIMCO Total Return Fund 13,261.46 9,108.27 NA Schroder Emerging Markets Equity 841,087.96 143,505.47 NA Fund Schroder International Small Cap 187,828.08 NA NA Fund S&P 500 Index Fund 6,963.38 NA NA Small Cap Stock Index Fund 10,200.38 NA NA TargetPLUS Balanced Fund 12,818.69 NA NA Target Double Play Fund 181,668.12 71.25 NA TargetPLUS Equity Fund 210,668.12 170.70 NA TargetPLUS Growth Fund 68,602.88 NA NA TargetPLUS Moderate Fund 40,129.91 NA NA Turner Quantitative Small Cap Growth Fund 272,941.10 333,271.25 117,959.88 VK Comstock Fund 287,771.11 316,895.60 354,614.59 VK Equity and Income Fund 84,695.01 67,460.37 84,280.99 VK Global Franchise Fund 178,572.99 129,038.66 95,589.82 VK Global Real Estate Fund 259,690.12 99,777.06 NA VK Growth and Income Fund 169,981.28 155,706.94 229,854.67 VK Mid Cap Growth Fund 507,459.99 364,526.39 282,484.50
Brokerage commissions paid by a Fund may vary significantly from year to year as a result of a variety of factors, including changing asset levels through the year, changes in portfolio turnover rates, varying market conditions, and changes in investment strategies and processes. 90 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- AFFILIATED BROKERS The following table lists the amount of brokerage commissions paid during the last three years to any broker that is affiliated with the Trust, the Manager, or any Subadviser. All of the brokers listed are affiliates of the Manager or a Subadvisor.
--------------------------------- -------------------------- -------------------------- -------------------------- Aggregate Dollar Amount Aggregate Dollar Amount Aggregate Dollar Amount of Brokerage Commissions of Brokerage Commissions of Brokerage Commissions Paid for the Fiscal Year Paid for the Fiscal Year Paid for the Fiscal Year Name of Affiliated Broker Ended December 31, 2007 Ended December 31, 2006 Ended December 31, 2005 --------------------------------- -------------------------- -------------------------- -------------------------- --------------------------------- -------------------------- -------------------------- -------------------------- Dresdner Kleinwort Wasserstein $15,714 $2,807 $8,867 LLC (part of Dresdner Bank AG) --------------------------------- -------------------------- -------------------------- -------------------------- --------------------------------- -------------------------- -------------------------- -------------------------- Dresdner Kleinwort Benson 244 0 0 (part of Dresdner Bank AG) --------------------------------- -------------------------- -------------------------- -------------------------- --------------------------------- -------------------------- -------------------------- -------------------------- Lehman Brothers 14,350 12,118 0 --------------------------------- -------------------------- -------------------------- -------------------------- --------------------------------- -------------------------- -------------------------- -------------------------- Morgan Stanley 21,631 25,289 0 --------------------------------- -------------------------- -------------------------- -------------------------- --------------------------------- -------------------------- -------------------------- -------------------------- Wachovia 9,716 160 0 --------------------------------- -------------------------- -------------------------- -------------------------- The following table shows the percentage of aggregate brokerage commissions paid to the affiliated broker and the percentage of the aggregate dollar amount of transactions involving the payment of commissions effected through the affiliated broker during the fiscal year ended December 31, 2007. - ------------------------------------------- --------------------------------- --------------------------------------- Name of Affiliated Broker Percentage of Aggregate Percentage of Aggregate Dollar Amount Brokerage Commissions Paid for of Transactions Involving the Payout Fiscal Year Ended December 31, of Commissions for the Fiscal Year 2007 Ended December 31, 2007 - ------------------------------------------- --------------------------------- --------------------------------------- - ------------------------------------------- --------------------------------- --------------------------------------- Dresdner Kleinwort Wasserstein LLC 0.18% 0.10% (part of Dresdner Bank AG) - ------------------------------------------- --------------------------------- --------------------------------------- - ------------------------------------------- --------------------------------- --------------------------------------- Lehman Brothers 0.17% 0.13% - ------------------------------------------- --------------------------------- --------------------------------------- - ------------------------------------------- --------------------------------- --------------------------------------- Morgan Stanley 0.25% 0.21% - ------------------------------------------- --------------------------------- --------------------------------------- - ------------------------------------------- --------------------------------- --------------------------------------- Wachovia 0.11% 0.13% - ------------------------------------------- --------------------------------- ---------------------------------------
Except as permitted by applicable rules under the 1940 Act, the Trust will not acquire portfolio securities issued by, make savings deposits in, or enter into repurchase or reverse repurchase agreements with the Manager or Subadviser or the Distributor, or their affiliates. Subject to the requirements of the 1940 Act and the oversight of the Board of Trustees, the Funds may borrow from the Manager or Subadviser for temporary or emergency purposes in order to meet unanticipated redemptions or to meet payment obligations when a portfolio transaction "fails" due to circumstances beyond a Fund's control. At December 31, 2007, the Funds listed below held the following securities of issuers, each of which derived more than 15% of its gross revenues from the business of a broker, dealer, underwriter, or an investment: Fund Name of Broker or Dealer Approximate Aggregate Value of
Issuer's Securities Owned by the Fund at 12/31/2007 - ----------------------------------------------------- -------------------------- ----------------------------------- - ----------------------------------------------------- -------------------------- ----------------------------------- AZL Davis NY Venture Fund State Street $2,054,360 AZL Davis NY Venture Fund JP Morgan Chase $17,588,156 AZL Davis NY Venture Fund Merrill Lynch $7,537,380 AZL Dreyfus Founders Equity Growth Fund Goldman Sachs $2,951,131 AZL Dreyfus Founders Equity Growth Fund State Street $972,695 AZL Dreyfus Founders Equity Growth Fund Bank of America $1,077,711 AZL Dreyfus Founders Equity Growth Fund JP Morgan Chase $1,271,743 AZL Jennison Growth Fund Goldman Sachs $903,210 AZL Jennison Growth Fund Merrill Lynch $381,128 91 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- AZL First Trust Target Double Play Fund JP Morgan Chase $2,151,901 AZL LMP Large Cap Growth Fund Lehman Brothers $5,164,328 AZL LMP Large Cap Growth Fund Merrill Lynch $6,470,641 AZL Legg Mason Value Fund Goldman Sachs $2,430,065 AZL Legg Mason Value Fund Merrill Lynch $5,260,640 AZL Legg Mason Value Fund JP Morgan Chase $17,975,070 AZL Money Market Fund Barclays Bank $5,000,000 AZL Money Market Fund State Street $10,000,000 AZL Money Market Fund Bank of America $4,968,844 AZL Money Market Fund Lehman Brothers $25,562,982 AZL Money Market Fund Goldman Sachs $9,995,846 AZL Money Market Fund JP Morgan Chase $24,998,475 AZL Money Market Fund Merrill Lynch $20,389,832 AZL NACM International Fund Barclays Bank $285,038 AZL OCC Value Fund Lehman Brothers $23,061,056 AZL OCC Value Fund Bank of America $8,643,970 AZL OCC Value Fund JP Morgan Chase $11,689,470 AZL Oppenheimer Global Fund Northern Trust $2,579,214 AZL Oppenheimer Main Street Fund Bank of America $3,503,304 AZL Oppenheimer Main Street Fund Goldman Sachs $2,924,680 AZL Oppenheimer Main Street Fund JP Morgan Chase $3,792,487 AZL Oppenheimer Main Street Fund Merrill Lynch $1,653,344 AZL Oppenheimer Main Street Fund Lehman Brothers $444,992 AZL PIMCO Fundamental IndexPLUS Total Return Fund JP Morgan Chase $1,273,215 AZL PIMCO Fundamental IndexPLUS Total Return Fund Lehman Brothers $1,249,577 AZL PIMCO Fundamental IndexPLUS Total Return Fund Merrill Lynch $870,433 AZL PIMCO Fundamental IndexPLUS Total Return Fund Barclays Bank $100,762 AZL PIMCO Fundamental IndexPLUS Total Return Fund Bank of America $1,255,578 AZL PIMCO Fundamental IndexPLUS Total Return Fund Goldman Sachs $958,858 AZL S&P 500 Index Fund Goldman Sachs $182,792 AZL S&P 500 Index Fund Lehman Brothers $75,256 AZL S&P 500 Index Fund Merrill Lynch $99,308 AZL S&P 500 Index Fund Northern Trust $30,632 AZL S&P 500 Index Fund Bank of America $394,033 AZL S&P 500 Index Fund JP Morgan Chase $314,280 AZL S&P 500 Index Fund State Street $69,020 AZL TargetPLUS Balanced Fund JP Morgan Chase $54,693 AZL TargetPLUS Balanced Fund Barclays Bank $140,365 AZL TargetPLUS Balanced Fund Goldman Sachs $24,494 AZL TargetPLUS Equity Fund JP Morgan Chase $849,865 AZL TargetPLUS Equity Fund Barclays Bank $615,602 AZL TargetPLUS Growth Fund JP Morgan Chase $303,367 AZL TargetPLUS Growth Fund Barclays Bank $219,774 AZL TargetPLUS Growth Fund Goldman Sachs $24,494 AZL TargetPLUS Moderate Fund JP Morgan Chase $144,350 AZL TargetPLUS Moderate Fund Barclays Bank $455,700 92 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- AZL TargetPLUS Moderate Fund Bank of America $25,057 AZL TargetPLUS Moderate Fund Goldman Sachs $24,494 AZL Van Kampen Comstock Fund Bank of America $24,066,958 AZL Van Kampen Comstock Fund JP Morgan Chase $13,099,278 AZL Van Kampen Comstock Fund Merrill Lynch $8,204,881 AZL Van Kampen Comstock Fund Barclays Bank $1,118,249 AZL Van Kampen Equity and Income Fund Bank of America $5,108,321 AZL Van Kampen Equity and Income Fund JP Morgan Chase $19,412,164 AZL Van Kampen Equity and Income Fund Merrill Lynch $3,144,789 AZL Van Kampen Equity and Income Fund Goldman Sachs $2,150,159 AZL Van Kampen Equity and Income Fund Lehman Brothers $1,945,226
Investment decisions for each Fund of the Trust are made independently from those made for the other Funds or any other portfolio investment company or account managed by the Manager or Subadviser. Any such other portfolio, investment company or account may also invest in the same securities as the Trust. When a purchase or sale of the same security is made at substantially the same time on behalf of a Fund and another Fund, portfolio, investment company or account, the transaction will be averaged as to price, and available investments will be allocated as to amount, in a manner which the Manager or Subadviser believes to be equitable to the Fund(s) and such other portfolio, investment company, or account. In some instances, this investment procedure may adversely affect the price paid or received by a Fund or the size of the position obtained by the Fund. To the extent permitted by law, the Manager or Subadviser may aggregate the securities to be sold or purchased for a Fund with those to be sold or purchased for other Funds or for other portfolios, investment companies, or accounts in order to obtain best execution. In making investment recommendations for the Trust, the Manager or Subadviser will not inquire or take into consideration whether an issuer of securities proposed for purchase or sale by the Trust is a customer of the Manager, its parent, affiliates, or a Subadviser and, in dealing with its customers, the Manager, its parent and affiliates or a Subadviser will not inquire or take into consideration whether securities of such customers are held by the Trust. ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTANT Citi Fund Services Ohio, Inc. ("CFSO"), whose principal location of business is 3435 Stelzer Road, Columbus, Ohio 43219, serves as the administrator (the "Administrator"), transfer agent (the "Transfer Agent") and fund accountant (the "Fund Accountant") to the Trust pursuant to an Amended and Restated Services Agreement dated November 1, 2006 (the "Services Agreement"). As Administrator, CFSO has agreed to maintain office facilities for the Trust; furnish statistical and research data, clerical and certain bookkeeping services and stationery and office supplies; prepare the periodic reports to the SEC on Form N-SAR and N-CSR or any comparable or replacement forms thereof; compile data for, prepare for execution by the Funds and file certain federal and state tax returns and required tax filings; prepare compliance filings pursuant to state securities laws with the advice of the Trust's counsel; keep and maintain the financial accounts and records of the Funds, including calculation of daily expense accruals; and generally assist in all aspects of the Trust's operations other than those performed by the Manager under the Investment Management Agreement, the Subadvisers under the Subadvisory Agreements, or by the Custodian under the Custody Agreement. Under the Services Agreement, the Administrator may delegate all or any part of its responsibilities thereunder. As Transfer Agent, CFSO performs the following services in connection with each Fund's shareholders of record: maintains shareholder records; processes shareholder purchase and redemption orders; processes transfers and exchanges of shares of the Funds on the shareholder files and records; processes dividend payments and reinvestments; and assists in the mailing of shareholder reports and proxy solicitations. As Fund Accountant, CFSO maintains the accounting books and records for the Funds, including journals containing an itemized daily record of all purchases and sales of portfolio securities, all receipts and disbursements of cash and all other debits and credits, general and auxiliary ledgers reflecting all asset, liability, reserve, capital, 93 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- income and expense accounts, including interest accrued and interest received and other required separate ledger accounts; maintains a monthly trial balance of all ledger accounts; performs certain accounting services for the Funds, including calculation of the net asset value per share, calculation of the dividend and capital gain distributions, if any, and of yield, reconciliation of cash movements with Trust's custodian, affirmation to the Trust's custodian of all portfolio trades and cash settlements, verification and reconciliation with the Trust's custodian of all daily trade activities; provides certain reports; obtains dealer quotations, prices from a pricing service matrix prices, or where necessary, fair value pricing information or adjustment factors from independent fair value pricing sources on all portfolio securities in order to mark the portfolio to the market; and prepares an interim balance sheet, statement of income and expense, and statement of changes in net assets for the Funds. Under the terms of the Services Agreement CFSO also provides a variety of compliance services utilized by the Chief Compliance Officer of the Trust. CFSO receives a fee from each Fund for its services as Administrator, Transfer Agent and Fund Accountant and is reimbursed for certain expenses assumed pursuant to the Services Agreement, aggregated and paid monthly, including (a) a minimum annual base fee of $1,250,000, (b) an asset-based fee, calculated daily and paid monthly, at the annual rate of 0.06% of the combined average daily net assets of the Funds from $550 million to $2 billion; 0.045% of the combined average daily net assets of the Funds from $2 billion to $3 billion; 0.03% of the combined average daily net assets of the Funds from $3 billion to $5 billion; and 0.01% of the combined average daily net assets of the Funds over $5 billion; and (c) a fee of either $5,000 or $7,500 per Fund (depending on the number of securities held by the Fund) for fair value support services. The fees under (b) above are subject to a minimum fee of $50,000 per year for each Fund. From time to time, CFSO may waive all or a portion of the administration fee payable to it by the Funds, either voluntarily or pursuant to applicable statutory expense limitations. In addition, CFSO receives an annual fee of $85,000 from the Trust for compliance services provided under the terms of the Services Agreement. 94 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - --------------------------------------------------------------------------------
For the fiscal year ended December 31, 2007, CFSO was entitled to receive and waived administration fees from the Funds as follows: Fund Service Fees Earned Service Fees Waived AIM International Equity Fund $153,627 $ -- Columbia Technology Fund 30,318 -- Davis NY Venture Fund 254,911 -- Dreyfus Founders Equity Growth Fund 83,260 -- Dreyfus Premier Small Cap Value Fund 32,291 -- Franklin Small Cap Value Fund 182,495 -- Jennison 20/20 Focus Fund 157,113 -- Jennison Growth Fund 23,553 -- LM Growth Fund 58,215 -- LM Value Fund 180,886 -- LMP Large Cap Growth Fund 123,675 -- Money Market Fund 237,794 -- NACM International Fund 22,317 -- Neuberger Berman Regency Fund 39,096 -- OCC Opportunity Fund 79,994 -- OCC Value Fund 141,412 -- Oppenheimer Global Fund 100,728 -- Oppenheimer International Growth Fund 109,084 -- Oppenheimer Main Street Fund 60,766 -- PIMCO Total Return Fund 39,588 -- Schroder Emerging Markets Equity Fund 69,082 -- Schroder International Small Cap Fund 23,871 -- S&P 500 Index Fund 11,216 -- Small Cap Stock Index Fund 11,426 -- Target Double Play Fund 18,579 -- TargetPLUS Balanced Fund 4,508 -- TargetPLUS Equity Fund 19,195 -- TargetPLUS Growth Fund 6,171 -- TargetPLUS Moderate Fund 5,312 -- Turner Quantitative Small Cap Growth Fund 35,147 -- VK Comstock Fund 321,447 -- VK Equity and Income Fund 109,025 -- VK Global Franchise Fund 190,572 -- VK Global Real Estate Fund 73,887 -- VK Growth and Income Fund 163,312 -- VK Mid Cap Growth Fund 179,329 --
The Services Agreement renews for successive one-year terms unless terminated by either party not less than 60 days prior to the expiration of such term, provided that any such renewal is approved at least annually (i) by the Trust's Board of Trustees or by vote of a majority of the outstanding voting securities of the affected Fund and (ii) by vote of a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of any party to the Services Agreement cast in person at a meeting called for such purpose. The Services Agreement is terminable for cause with respect to a particular Fund at any time on 60 days' written notice without penalty by vote of the Trustees, by vote of a majority of the outstanding shares of that Fund or by CFSO. The Services Agreement provides that CFSO shall not be liable for any error of judgment or mistake of law or any loss suffered by the Trust in connection with the matters to which the Services Agreement relates, except a loss from willful misfeasance, bad 95 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- faith or negligence in the performance of its duties, or from the reckless disregard by CFSO of its obligations and duties thereunder. DISTRIBUTOR Allianz Life Financial Services, LLC ("ALFS"), an affiliate of the Manager, whose principal location of business is 5701 Golden Hills Drive, Minneapolis, Minnesota 55416, serves as distributor to the Trust pursuant to a Distribution Agreement dated as of August 28, 2007 (the "Distribution Agreement"). The Distribution Agreement provides that the Distributor will use appropriate efforts to solicit orders for the sale of the Funds' shares from bona fide investors and may enter into selling group agreements with responsible dealers and dealer managers as well as sell the Funds' shares to individual investors. The Distributor is not obligated to sell any specific amount of shares. The Distribution Agreement was last approved by the Trust's Board of Trustee's (including a majority of such Trustee's who are not interested persons of the Trust or any party to such agreement within the meaning of the 1940 Act) on October 23, 2007. Unless otherwise terminated, the Distribution Agreement will continue in effect for successive one-year periods from the date of such Agreement if approved at least annually (i) by the Trust's Board of Trustees or by the vote of a majority of the outstanding shares of the Trust, and (ii) by the vote of a majority of the Trustees who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any party to the Distribution Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement is terminable at any time on 60 days' written notice without penalty by the Trustees, by a vote of a majority of the shareholders of the Trust, or by ALFS on 90 days' written notice. The Distribution Agreement will automatically terminate in the event of any assignment as defined in the 1940 Act. Distribution Plan. A Distribution Plan (the "Plan") has been adopted by each of the Funds pursuant to Rule 12b-1 of the Act. Pursuant to the Plan, the Funds may pay directly or reimburse the Distributor monthly in amounts described in the Prospectus for costs and expenses of marketing the shares of the Funds. The Plan provides for payments by each Fund to the Distributor at an annual rate not to exceed 0.25% of the Fund's average net assets. For the Davis NY Venture Fund, Dreyfus Premier Small Cap Fund, Schroder Emerging Markets Equity Fund, Oppenheimer Global Fund, Oppenheimer Main Street Fund, and S&P 500 Index Fund (the "Multi-Class Funds") payments to the Distributor may be made only on assets attributable to Class 2 Shares.
For the fiscal year or period ended December 31, 2007, the following 12b-1 fees shown as earned and waived for the Funds were: Fund 12b-1 Fees Earned 12b-1 Fees Waived AIM International Equity Fund $869,272 $-- Columbia Technology Fund 171,095 -- Davis NY Venture Fund (Class 2) 1,443,195 -- Dreyfus Founders Equity Growth Fund 443,546 -- Dreyfus Premier Small Cap Value Fund (Class 2) 182,190 -- Franklin Small Cap Value Fund 1,033,540 -- Jennison 20/20 Focus Fund 888,777 -- Jennison Growth Fund 133,127 -- LM Growth Fund 329,588 -- LM Value Fund 1,027,318 -- LMP Large Cap Growth Fund 698,920 -- Money Market Fund 1,347,690 -- NACM International Fund 129,523 Neuberger Berman Regency Fund 221,669 -- OCC Opportunity Fund 454,038 -- OCC Value Fund 755,479 -- Oppenheimer Global Fund (Class 2) 569,128 -- Oppenheimer International Growth Fund 616,791 -- 96 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Oppenheimer Main Street Fund (Class 2) $343,431 $-- PIMCO Total Return Fund 176,849 -- Schroder Emerging Markets Fund (Class 2) 393,382 -- Schroder International Small Cap Fund 138,538 -- S&P 500 Index Fund 41,171 -- Small Cap Stock Index Fund 37,005 -- Target Double Play Fund 106,966 -- TargetPLUS Balanced Fund 11,849 -- TargetPLUS Equity Fund 110,408 -- TargetPLUS Growth Fund 35,794 -- TargetPLUS Moderate Fund 20,604 -- Turner Quantitative Small Cap Growth Fund 197,101 -- VK Comstock Fund 1,821,371 -- VK Equity and Income Fund 616,414 -- VK Global Franchise Fund 1,079,431 -- VK Global Real Estate Fund 417,835 -- VK Growth and Income Fund 922,095 -- VK Mid Cap Growth Fund 1,001,846 --
Under the Plan, each Fund pays the Distributor and other securities dealers and other financial institutions and organizations for certain distribution activities. The above amounts represent payments to securities dealers and other financial institutions and organizations for certain distribution services. Amounts received by the Distributor may, additionally, subject to the Plan's maximums, be used to cover certain other costs and expenses related to the distribution of Fund shares and provision of service to Fund shareholders, including: (a) advertising by radio, television, newspapers, magazines, brochures, sales literature, direct mail or any other form of advertising; (b) expenses of sales employees or agents of the Distributor, including salary, commissions, travel and related expenses; (c) costs of printing prospectuses and other materials to be given or sent to prospective investors; and (d) such other similar services as the Trustees determine to be reasonably calculated to result in the sale of shares of the Funds. Each Fund will pay all costs and expenses in connection with the preparation, printing and distribution of the Prospectus to current shareholders and the operation of its Plan(s), including related legal and accounting fees. A Fund will not be liable for distribution expenditures made by the Distributor in any given year in excess of the maximum amount payable under a Plan for that Fund in that year. The Plan provides that it may not be amended to increase materially the costs which the Funds may bear pursuant to the Plan without shareholder approval and that other material amendments to the Plan must be approved by the Board of Trustees, and by the Trustees who are neither "interested persons" (as defined in the 1940 Act) of the Trust nor have any direct or indirect financial interest in the operation of the particular Plan or any related agreement, by vote cast in person at a meeting called for the purpose of considering such amendments. The selection and nomination of the Trustees have been committed to the discretion of the Trustees who are not "interested persons" of the Trust. The continuance of the Plan is subject to similar annual approval by the Trustees and the Plan Trustees. The Plan's continuance was most recently approved by the Board of Trustees on October 23, 2007. The Plan is terminable at any time by a vote of a majority of the Plan Trustees or by vote of the holders of a majority of the shares of the Fund. The Board of Trustees has concluded that there is a reasonable likelihood that the Plan will benefit the Funds and their shareholders. 97 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The Plan was initially approved by the Board of Trustees, as described above, for each Fund on the dates shown in the table below: Fund Date AIM International Equity Fund February 27, 2002 Columbia Technology Fund September 6, 2001 Davis NY Venture Fund September 6, 2001 Dreyfus Founders Equity Growth Fund September 6, 2001 Dreyfus Premier Small Cap Value Fund February 27, 2004 Franklin Small Cap Value Fund March 1, 2003 Jennison 20/20 Focus Fund February 25, 2005 Jennison Growth Fund February 25, 2005 LM Growth Fund February 27, 2002 LM Value Fund April 11, 2001 LMP Large Cap Growth Fund February 27, 2002 Money Market Fund October 6, 1999* NACM International Fund February 23, 2007 Neuberger Berman Regency Fund February 25, 2006 OCC Opportunity Fund February 27, 2002 OCC Value Fund September 6, 2001 Oppenheimer Global Fund February 27, 2004 Oppenheimer International Growth Fund September 6, 2001 Oppenheimer Main Street Fund February 27, 2004 PIMCO Total Return Fund February 25, 2006 Schroder Emerging Markets Equity Fund February 25, 2006 Schroder International Small Cap Fund February 23, 2007 S&P 500 Index Fund February 23, 2007 Small Cap Index Fund February 23, 2007 Target Double Play Fund November 29, 2006 TargetPLUS Balanced Fund February 23, 2007 TargetPLUS Equity Fund November 29, 2006 TargetPLUS Growth Fund February 23, 2007 TargetPLUS Moderate Fund February 23, 2007 Turner Quantitative Small Cap Growth Fund February 25, 2005 VK Comstock Fund April 11, 2001 VK Equity and Income Fund February 27, 2004 VK Global Franchise Fund March 1, 2003 VK Global Real Estate Fund February 25, 2006 VK Growth and Income Fund April 11, 2001 VK Mid Cap Growth Fund April 11, 2001 * Approved by the sole shareholder of each class of shares of each of the Fund on October 26, 1999. - -------------------------------------------------------------------------------- CUSTODIAN The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675, serves as Custodian to the Trust pursuant to the Custody Agreement dated May 31, 2001 (the "Custody Agreement"). The Custodian's responsibilities include safeguarding and controlling the Funds' cash and securities, handling the receipt and delivery of securities, and collecting interest and dividends on the Funds' investments. The Northern Trust Company also serves as agent for the lending of portfolio securities of certain of the Funds. The securities lending agent for certain other Funds is the New York Branch of Dresdner Bank AG, an affiliate of the Manager. For their services as securities lending agents, the Northern Trust Company and Dresdner Bank each receive a percentage of the income earned from securities lending. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP ("KPMG"), 191 West Nationwide Boulevard, Suite 500, Columbus, OH 43215, is the independent registered public accounting firm for the Trust. KPMG provides financial auditing services as well as certain tax return preparation services for the Trust. 98 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- LEGAL COUNSEL Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis MN 55402, is the legal counsel to the Trust. Wilmer Cutler Pickering Hale & Dorr LLP, 2445 M Street, N.W., Washington DC 20037, is legal counsel to the Independent Trustees. CODES OF ETHICS Federal law requires the Trust, its investment advisers and its principal underwriter to adopt codes of ethics which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their respective personnel may invest in securities for their personal accounts (including securities that may be purchased or held by the Trust). Each code of ethics is included as an exhibit to the Trust's registration statement which is on file with, and available from, the Securities and Exchange Commission. Each Code has been adopted pursuant to Rule 17j-1 under the 1940 Act. LICENSING ARRANGEMENTS AZL First Trust Target Double Play Fund and AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") In order to use the names of certain companies and their products or services in the strategies used to manage them, the AZL First Trust Target Double Play Fund and AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") rely on licenses granted to First Trust. "The Dow(R)," "Dow Jones Industrial Average(SM)," "DJIA(SM)," and "Dow Jones Select Dividend Index(SM)" are service marks of Dow Jones & Company, Inc. (Dow Jones) and have been licensed for use for certain purposes by First Trust Advisors L.P. and are used by the First Trust Portfolios under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), Dow Jones & Company, Inc., and First Trust Advisors L.P. Dow Jones does not sponsor, endorse, sell, or promote the First Trust Portfolios, or The Dow(R) Target Dividend Strategy. Dow Jones makes no representation regarding the advisability of investing in such products. The First Trust Portfolios are not sponsored, endorsed, sold, or promoted by Dow Jones. Dow Jones makes no representation or warranty, express or implied, to the owners of the First Trust Portfolios or any member of the public regarding the advisability of purchasing the First Trust Portfolios. Dow Jones' only relationship to First Trust and Allianz is the licensing of certain copyrights, trademarks, servicemarks, and service names of Dow Jones. Dow Jones has no obligation to take the needs of First Trust, Allianz, or the owners of the First Trust Portfolios into consideration in determining, composing or calculating the Dow Jones Industrial Average(SM). Dow Jones is not responsible for and has not participated in the determination of the terms and conditions of the First Trust Portfolios to be issued, including the pricing or the amount payable under the policy. Dow Jones has no obligation or liability in connection with the administration or marketing of the First Trust Portfolios. DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, ALLIANZ, OWNERS OF THE FIRST TRUST PORTFOLIOS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS, OR INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH 99 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND FIRST TRUST OR ALLIANZ. "Value Line," "The Value Line Investment Survey(R)," and "Value Line Timeliness Ranking System" are registered trademarks of Value Line, Inc. or Value Line Publishing, Inc. that have been licensed to First Trust Advisors L.P. and are used by the AZL First Trust Target Double Play Fund and AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "First Trust Portfolios") under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), and First Trust Advisors L.P. which is a Licensee of Value Line Publishing, Inc. The First Trust Portfolios and the Value Line(R) Target 25 Strategy are not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the First Trust Portfolios. First Trust Advisors L.P., Allianz, and Allianz Life Insurance Company of North America are not affiliated with any Value Line Company. Value Line Publishing, Inc.'s ("VLPI") only relationship to First Trust is VLPI's licensing to First Trust of certain VLPI trademarks and trade names and the Value Line Timeliness Ranking System (the "System") which is composed by VLPI without regard to First Trust, the First Trust Portfolios, the Value Line(R) Target 25 Strategy or any investor. VLPI has no obligation to take the needs of First Trust or any investor in the First Trust Portfolios or the Value Line(R) Target 25 Strategy into consideration in composing the System. The results of the First Trust Portfolios or the Value Line(R) Target 25 Strategy may differ from the hypothetical or published results of the Value Line Timeliness Ranking System. VLPI is not responsible for and has not participated in the determination of the prices and composition of the First Trust Portfolios, the Value Line(R) Target 25 Strategy or the timing of the issuance for sale of the First Trust Portfolios or in the calculation of the equations by which the First Trust Portfolios are to be converted into cash. VLPI MAKES NO WARRANTY CONCERNING THE SYSTEM, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM USAGE OF TRADE, COURSE OF DEALING, OR COURSE OF PERFORMANCE, AND VLPI MAKES NO WARRANTY AS TO THE POTENTIAL PROFITS OR ANY OTHER BENEFITS THAT MAY BE ACHIEVED BY USING THE SYSTEM OR ANY INFORMATION OR MATERIALS GENERATED THEREFROM. VLPI DOES NOT WARRANT THAT THE SYSTEM WILL MEET ANY REQUIREMENTS OR THAT IT WILL BE ACCURATE OR ERROR-FREE. VLPI ALSO DOES NOT GUARANTEE ANY USES, INFORMATION, DATA, OR OTHER RESULTS GENERATED FROM THE SYSTEM. VLPI HAS NO OBLIGATION OR LIABILITY (I) IN CONNECTION WITH THE ADMINISTRATION, MARKETING, OR TRADING OF THE FIRST TRUST PORTFOLIOS; OR (II) FOR ANY LOSS, DAMAGE, COST, OR EXPENSE SUFFERED OR INCURRED BY ANY INVESTOR OR OTHER PERSON OR ENTITY IN CONNECTION WITH THE FIRST TRUST PORTFOLIOS, AND IN NO EVENT SHALL VLPI BE LIABLE FOR ANY LOST PROFITS OR OTHER CONSEQUENTIAL, SPECIAL, PUNITIVE, INCIDENTAL, INDIRECT, OR EXEMPLARY DAMAGES IN CONNECTION WITH THE FIRST TRUST PORTFOLIOS OR THE VALUE LINE(R) TARGET 25 STRATEGY. "NYSE(R)" is a registered trademark of, and "NYSE International 100 Index(R)" is a registered service mark of, NYSE Group, Inc. and have been licensed for use for certain purposes by First Trust and are used by the AZL TargetPLUS Equity Fund, and the Equity Portfolios of the AZL TargetPLUS Balanced Fund, AZL TargetPLUS Growth Fund, and AZL TargetPLUS Moderate Fund (the "TargetPLUS Portfolios") under a sublicense agreement among Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust (together with Allianz Life Advisers, LLC, "Allianz"), NYSE Group, Inc., and First Trust Advisors L.P. The TargetPLUS Portfolios' strategies, based in part on the NYSE International 100 Index(R), are not sponsored, endorsed, sold or promoted by NYSE Group, Inc. and NYSE Group, Inc. makes no representation regarding the advisability of investing in the TargetPLUS Portfolios. NYSE Group, Inc. has no relationship to First Trust or Allianz, other than the licensing of the NYSE International 100 Index(R) (the "Index") and its service marks for use in connection the TargetPLUS Portfolios and the NYSE(R) International Target 25 Strategy. 100 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NYSE Group, Inc. does not: o Sponsor, endorse, sell, or promote the TargetPLUS Portfolios. o Recommend that any person invest in the TargetPLUS Portfolios or any other securities. o Have any responsibility or liability for, or make any decisions about, the timing, amount, or pricing of the TargetPLUS Portfolios. o Have any responsibility or liability for the administration, management, or marketing of the TargetPLUS Portfolios. o Consider the needs of the TargetPLUS Portfolios or the owners of the TargetPLUS Portfolios in determining, composing, or calculating the Index or have any obligation to do so. NYSE Group, Inc. will not have any liability in connection with the TargetPLUS Portfolios or the NYSE(R) International Target 25 Strategy. Specifically, o NYSE Group, Inc. does not make any warranty, express or implied, and NYSE Group, Inc. disclaims any warranty about: o The results to be obtained by the TargetPLUS Portfolios or the NYSE(R) International Target 25 Strategy, the owners of the TargetPLUS Portfolios, or any other person in connection with the use of the Index and the data included in the Index; o The accuracy or completeness of the Index and its data; o The merchantability and the fitness for a particular purpose or use of the Index and its data; o NYSE Group, Inc. will have no liability for any errors, omissions, or interruptions in the Index or its data; o Under no circumstances will NYSE Group, Inc. or any of its affiliates be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if NYSE Group, Inc. knows that they might occur. The licensing agreement that permits Allianz to use the foregoing trademarks and servicemarks in connection with the TargetPLUS Portfolios is between First Trust and NYSE Group, Inc., and is solely for their benefit and not for the benefit of the owners of the TargetPLUS Portfolios or any other third parties. The publishers of the DJIA, the Dow Jones Select Dividend Index(SM), the FT30 Index, the Hang Seng Index, the NYSE International 100 Index(R), and the Value Line Timeliness Ranking System are not affiliated with First Trust Advisors L.P., Allianz Life Advisers, LLC, Allianz Variable Insurance Products Trust or Allianz Life Insurance Company of North America and have not participated in creating the AZL First Trust Target Double Play Fund, AZL TargetPLUS Balanced Fund, AZL TargetPLUS Equity Fund, AZL TargetPLUS Growth Fund, or AZL TargetPLUS Moderate Fund, the strategies used to manage any of these Funds, or the selection of securities for these Funds. Except as otherwise noted, none of the index publishers have approved any of the information in the prospectus. AZL S&P 500 Index Fund and AZL Small Cap Stock Index Fund (the "AZL Index Funds") The AZL S&P 500 Index Fund and AZL Small Cap Stock Index Fund (the "AZL Index Funds") are not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the owners of the AZL Index Funds or any member of the public regarding the advisability of investing in securities generally or in the AZL Index Funds particularly or the ability of the S&P 500 Index and the S&P SmallCap 600 Index to track general stock market performance. S&P's only relationship to the Manager (the "Licensee") is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index and the S&P SmallCap 600 Index which is determined, composed and calculated by S&P without regard to the Licensee or the AZL Index Funds. S&P has no obligation to take the needs of the Licensee or the owners of the AZL Index Funds into consideration in determining, composing or calculating the S&P 500 Index and the S&P SmallCap 600 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the AZL Index Funds or the timing of the issuance or sale of the AZL Index Funds or in the determination or calculation of the equation by which 101 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- the AZL Index Funds is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the AZL Index Funds. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE AZL INDEX FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION DESCRIPTION OF SHARES The Trust is a Delaware business trust organized on July 13, 1999. The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest of series and classes of shares. The shares are offered on a continuous basis. Pursuant to such authority, the Board of Trustees has established 36 series, each previously named and defined collectively as the "Funds." Each share of each Fund represents an equal proportionate interest with each other share of that series. Upon liquidation, shares are entitled to a pro rata share of the Trust based on the relative net assets of each series. Shareholders have no preemptive or conversion rights. Shares are redeemable and transferable. No commissions are paid for distributing the Funds' shares. Under the terms of the Declaration of Trust, the Trust is not required to hold annual shareholder meetings. Shareholder meetings for the purpose of electing Trustees will be held when required by law, when or at such time as less than a majority of Trustees holding office have been elected by shareholders, or at such other time as the Trustees then in office deem it appropriate to call a shareholders' meeting for the election of Trustees. At meetings of shareholders, each share is entitled to one vote for each dollar of net asset value applicable to such share. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes applicable to shares voting for the election of Trustees can elect all of the Trustees to be elected at a meeting. The rights of shareholders cannot be modified other than by a vote of the majority of the outstanding shares. The Declaration of Trust provides that a Trustee will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Declaration of Trust protects a Trustee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his duties involved in the conduct of his office. In addition to the 36 separate investment portfolios, the Trust previously offered five additional funds which ceased as an investment option effective May 1, 2002. These funds, the USAZ Strategic Growth Fund, the AZOA Global Opportunities Fund, the AZOA Growth Fund, the AZOA Diversified Assets Fund and the AZOA Fixed Income Fund were merged into four existing USAZ and PIMCO funds on November 15, 2002. The merger was approved by shareholders under a business combination filing with the SEC. 102 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Certain VIP Funds have been renamed since their inception. The following table includes each VIP Fund's date of inception and any previous names:
- ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- Fund Investment Options Inception Previous Name Dates Previous Name Dates - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL AIM International Equity Fund 5/1/02 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Columbia Technology Fund 11/5/01 AZL Oppenheimer 12/8/03 USAZ AllianceBernstein 11/5/01 Emerging Technologies to Technology Fund to Fund 7/6/06 12/7/03 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Davis NY Venture Fund 11/5/01 USAZ AllianceBernstein 11/5/01 Growth and Income Fund to 3/7/04 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Dreyfus Founders Equity Growth 11/5/01 USAZ AllianceBernstein 11/5/01 Fund Large Cap Growth Fund to 3/7/04 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Dreyfus Premier Small Cap Value 5/3/04 Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL First Trust Target Double Play 12/27/06 Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Franklin Small Cap Value Fund 5/1/03 USAZ PIMCO NFJ Small 5/1/03 Cap Value Fund to 4/3/05 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Jennison 20/20 Focus Fund 4/29/05 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Jennison Growth Fund 4/29/05 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Legg Mason Growth Fund 5/1/02 USAZ AIM Dent 5/1/02 Demographic Trends Fund to 4/3/05 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Legg Mason Value Fund 5/5/01 USAZ PIMCO PEA Growth 5/1/03 USAZ PIMCO Growth and 5/5/01 and Income Fund to Income Fund to 7/26/04 4/30/03 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL LMP Large Cap Growth Fund 5/1/02 AZL Salomon Brothers 4/4/05 USAZ AIM Blue Chip Fund 5/1/02 Large Cap Growth Fund to to 11/6/06 4/3/05 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Money Market Fund 2/1/00 AZOA Money Market Fund 11/5/01 USAllianz VIP Money 2/1/00 to Market Fund to 4/30/02 11/4/01 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL NACM International Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Neuberger Berman Regency Fund 5/1/06 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL OCC Opportunity Fund 5/1/02 AZL Oppenheimer 5/1/02 Emerging Growth Fund to 8/27/06 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL OCC Value Fund 11/5/01 USAZ PEA Value Fund 5/1/03 USAZ PIMCO Value Fund 11/5/01 to to 9/15/05 4/30/03 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Oppenheimer Global Fund 5/3/04 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Oppenheimer International 11/5/01 USAZ Templeton 5/1/02 AZOA Global Opportunities 11/5/01 Growth Fund Developed Markets Fund to Fund (merger) to 3/7/04 4/30/02 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Oppenheimer Main Street Fund 5/3/04 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL PIMCO Fundamental IndexPLUS 5/1/06 Total Return Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Schroder Emerging Markets 5/1/06 AZL Oppenheimer 5/1/06 Equity Fund Developing Markets Fund to 12/7/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Schroder International Small 5/1/07 Cap Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL S&P 500 Index Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Small Cap Index Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL TargetPLUS Balanced Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL TargetPLUS Equity Fund 12/27/06 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL TargetPLUS Growth Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL TargetPLUS Moderate Fund 5/1/07 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- 103 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Turner Quantitative Small Cap 4/29/05 AZL LMP Small Cap 11/7/06 AZL Salomon Brothers 4/29/05 Growth Fund Growth Fund to Small Cap Growth Fund to 6/25/07 11/6/06 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Comstock Fund 5/1/01 USAllianz Comstock Fund 5/1/01 to 11/4/01 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Equity and Income 5/3/04 Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Global Franchise Fund 5/1/03 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Global Real Estate 5/1/06 Fund - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Growth and Income 5/1/01 USAllianz Growth and 5/1/01 Fund Income Fund to 11/4/01 - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- - ------------------------------------- ---------- ------------------------- --------- --------------------------- --------- AZL Van Kampen Mid Cap Growth Fund 5/1/01 USAZ VanKampen Growth 11/5/01 USAllianz Capital Growth 5/1/01 Fund to Fund to 4/28/05 11/4/01 - ------------------------------------- ---------- ------------------------- --------- --------------------------- ---------
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES As used in the Funds' Prospectus and in this Statement of Additional Information, "vote of a majority of the outstanding shares" of the Trust or any Fund means the affirmative vote, at an annual or special meeting of shareholders duly called, of the lesser of: (a) 67% or more of the votes of shareholders of the Trust or the Fund, present at such meeting at which the holders of more than 50% of the votes attributable to the shareholders of record of the Trust or the Fund are represented in person or by proxy, or (b) the holders of more than fifty percent (50%) of the outstanding votes of shareholders of the Trust or the Fund. ADDITIONAL TAX INFORMATION Each Fund intends to qualify as a "regulated investment company" (a "RIC" under the Code). Such qualification generally will relieve the Funds of liability for federal income taxes to the extent their earnings are distributed in accordance with the Code. However, taxes may be imposed on the Funds by foreign countries with respect to income received on foreign securities. Depending on the extent of each Fund's activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located, or in which it is otherwise deemed to be conducting business, each Fund may be subject to the tax laws of such states or localities. In addition, if for any taxable year the Fund does not qualify for the special tax treatment afforded regulated investment companies, all of its taxable income will be subject to a federal tax at regular corporate rates (without any deduction for distributions to its shareholders). In such event, dividend distributions would be taxable to shareholders to the extent of earnings and profits, and would be eligible for the dividends-received deduction for corporations. A non-deductible excise tax is also imposed on regulated investment companies that do not make distributions to shareholders on a timely basis in accordance with calendar-year distribution requirements (regardless of whether they otherwise have a non-calendar taxable year). These rules require annual distributions equal to 98% of ordinary income for the calendar year plus 98% of their capital gain net income for the one-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a Fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. If distributions during a calendar year were less than the required amount, a particular Fund would be subject to a non-deductible excise tax equal to 4% of the deficiency. 104 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- For federal income tax purposes, the following Funds had capital loss carry forwards as of December 31, 2007, which are available to offset future capital gains, if any: Amount Expires AZL Jennison Growth Fund $890,444 12/31/2014 AZL Money Market Fund 2,395 12/31/2013 AZL Money Market Fund 3,920 12/31/2014 AZL NACM International Fund 2,031,226 12/31/2015 AZL Neuberger Berman Regency Fund 523,057 12/31/2014 AZL Neuberger Berman Regency Fund 4,112,229 12/31/2015 AZL Schroder International Small Cap FundFund 569,210 12/31/2015 AZL TargetPLUS Balanced Fund 26,139 12/31/2015 AZL TargetPLUS Moderate Fund 37,801 12/31/2015 To the extent these carryforwards are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. Each of the Funds will be required in certain cases to withhold and remit to the United States Treasury 31% of taxable distributions paid to a shareholder who has provided either an incorrect tax identification number or no number at all, or who is subject to withholding by the Internal Revenue Service for failure to report properly payments of interest or dividends. Dividends of investment company taxable income (including net short-term capital gains) are taxable to shareholders as ordinary income. Distributions of investment company taxable income may be eligible for the corporate dividends-received deduction to the extent attributable to a Fund's dividend income from U.S. corporations, and if other applicable requirements are met. Distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses) designated by a Fund as capital gain dividends are not eligible for the dividends-received deduction and will generally be taxable to shareholders as long-term capital gains, regardless of the length of time the Fund's shares have been held by a shareholder. Capital gains from assets held for one year or less will be taxed as ordinary income. Generally, dividends are taxable to shareholders, whether received in cash or reinvested in shares of a Fund. Any distributions that are not from a Fund's investment company taxable income or net capital gain may be characterized as a return of capital to shareholders or, in some cases, as capital gain. Shareholders will be notified annually as to the federal tax status of dividends and distributions they receive and any tax withheld thereon. Dividends, including capital gain dividends, declared in October, November, or December with a record date of such month and paid during the following January will be treated as having been paid by a Fund and received by shareholders on December 31 of the calendar year in which declared, rather than the calendar year in which the dividends are actually received. Upon the taxable disposition (including a sale or redemption) of shares of a Fund, a shareholder may realize a gain or loss depending upon his basis in his shares. Such gain or loss generally will be treated as capital gain or loss if the shares are capital assets in the shareholder's hands. Such gain or loss will be long-term or short-term, generally depending upon the shareholder's holding period for the shares. However, a loss realized by a shareholder on the disposition of Fund shares with respect to which capital gain dividends have been paid will, to the extent of such capital gain dividends, be treated as long-term capital loss if such shares have been held by the shareholder for six months or less. Further, a loss realized on a disposition will be disallowed to the extent the shares disposed of are replaced (whether by reinvestment of distributions or otherwise) within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Shareholders receiving distributions in the form of additional shares will have a cost basis for Federal income tax purposes in each share received equal to the net asset value of a share of the Funds on the reinvestment date. A portion of the difference between the issue price and the face amount of zero coupon securities ("Original Issue Discount") will be treated as income to any Fund holding securities with Original Issue Discount each year although no current payments will be received by such Fund with respect to such income. This original issue discount will 105 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- comprise a part of the investment company taxable income of such Fund which must be distributed to shareholders in order to maintain its qualification as a RIC and to avoid federal income tax at the level of the relevant Fund. Taxable shareholders of such a Fund will be subject to income tax on such original issue discount, whether or not they elect to receive their distributions in cash. In the event that a Fund acquires a debt instrument at a market discount, it is possible that a portion of any gain recognized on the disposition of such instrument may be treated as ordinary income. A Fund's investment in options, futures contracts and forward contracts, options on futures contracts and stock indices and certain other securities, including transactions involving actual or deemed short sales or foreign exchange gains or losses are subject to many complex and special tax rules. For example, over-the-counter options on debt securities and certain equity options, including options on stock and on narrow-based stock indexes, will be subject to tax under Section 1234 of the Code, generally producing, a long-term or short-term capital gain or loss upon lapse of the option or sale of the underlying stock or security. By contrast, a Fund's treatment of certain other options, futures and forward contracts entered into by the Fund is generally governed by Section 1256 of the Code. These "Section 1256" positions generally include regulated futures contracts, foreign currency contracts, non-equity options and dealer equity options. Each such Section 1256 position held by a Fund will be marked-to-market (i.e., treated as if it were sold for fair market value) on the last business day of that Fund's fiscal year, and all gain or loss associated with fiscal year transactions and marked-to-market positions at fiscal year end (except certain currency gain or loss covered by Section 988 of the Code) will generally be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. The effect of Section 1256 mark-to-market may be to accelerate income or to convert what otherwise would have been long-term capital gains into short-term capital gains or short-term capital losses into long-term capital losses within such Fund. The acceleration of income on Section 1256 positions may require the Fund to accrue taxable income without the corresponding receipt of cash. In order to generate cash to satisfy the distribution requirements of the Code, a Fund may be required to dispose of portfolio securities that it otherwise would have continued to hold or to use cash flows from other sources, such as the sale of the Fund's shares. In these ways, any or all of these rules may affect the amount, character and timing of income earned and in turn distributed to shareholders by the Funds. When a Fund holds options or contracts which substantially diminish its risk of loss with respect to other positions (as might occur in some hedging transactions), this combination of positions could be treated as a straddle for tax purposes, resulting in possible deferral of losses, adjustments in the holding periods of securities owned by a Fund and conversion of short-term capital losses into long-term capital losses. Certain tax elections exist for mixed straddles, i.e., straddles comprised of at least one Section 1256 position and at least one non-Section 1256 position, which may reduce or eliminate the operation of these straddle rules. Each Fund will monitor its transactions in such options and contracts and may make certain other tax elections in order to mitigate the effect of the above rules and to prevent disqualification of a Fund as a RIC under Subchapter M of the Code. In order for a Fund to qualify as a RIC for any taxable year, at least 90% of the Fund's annual gross income must be derived from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock or securities, including gains from foreign currencies, and other income derived with respect to the business of investing in stock, securities or currencies. Future Treasury regulations may provide that foreign exchange gains may not qualify for purposes of the 90% limitation if such gains are not directly related to a Fund's principal business of investing in stock or securities, or options or futures with respect to such stock or securities. Currency speculation or the use of currency forward contracts or other currency instruments for non-hedging purposes may generate gains deemed to be not directly related to the Fund's principal business of investing in stock or securities and related options or futures. Each Fund will limit its activities involving foreign exchange gains to the extent necessary to comply with the above requirements. The federal income tax treatment of interest rate and currency swaps is unclear in certain respects and may in some circumstances result in the realization of income not qualifying under the 90% limitation described above. Each Fund will limit its interest rate and currency swaps to the extent necessary to comply with this requirement. 106 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Under Code Section 817(h), a segregated asset account upon which a variable annuity contract or variable life insurance policy is based must be "adequately diversified." A segregated asset account will be adequately diversified if it complies with certain diversification tests set forth in Treasury regulations. If a RIC satisfies certain conditions relating to the ownership of its shares, a segregated asset account investing in such investment company will be entitled to treat its pro rata portion of each asset of the investment company as an asset for purposes of these diversification tests. The Funds intend to meet these ownership conditions and to comply with the diversification tests noted above. Accordingly, a segregated asset account investing solely in shares of a Fund will be adequately diversified if the Funds meet the foregoing requirements. However, the failure of a Fund to meet such conditions and to comply with such tests could cause the owners of variable annuity contracts and variable life insurance policies based on such account to recognize ordinary income each year in the amount of any net appreciation of such contract or policy during the year. Provided that a Fund and a segregated asset account investing in the Fund satisfy the above requirements, any distributions from the Fund to such account will be exempt from current federal income taxation to the extent that such distributions accumulate in a variable annuity contract or variable life insurance policy. Persons investing in a variable annuity contract or variable life insurance policy offered by a segregated asset account investing in a Fund should refer to the Prospectus with respect to such contract or policy for further tax information. Information set forth in the prospectus and this Statement of Additional Information which relates to federal taxation is only a summary of some of the important federal tax considerations generally affecting purchasers of shares of the Funds. No attempt has been made to present a detailed explanation of the federal income tax treatment of a Fund or its shareholders and this description is not intended as a substitute for federal tax planning. Accordingly, potential purchasers of shares of a Fund are urged to consult their tax advisers with specific reference to their own tax situation, including any application of foreign, state or local tax laws. In addition, the tax discussion in the Prospectus and this Statement of Additional Information is based on tax laws and regulations which are in effect on the date of the Prospectus and this Statement of Additional Information. Such laws and regulations may be changed by legislative or administrative action. The Funds may invest in non-U.S. corporations, which may be treated as "passive foreign investment companies" ("PFICs") under the Code. This could result in adverse tax consequences upon the disposition of, or the receipt of "excess distributions" with respect to, such equity investments. To the extent that each Fund invests in PFICs, it may adopt certain tax strategies to reduce or eliminate the adverse effects of certain federal tax provisions governing PFIC investments. Many non-U.S. banks and insurance companies may be excluded from PFIC treatment if they satisfy certain technical requirements under the Code. To the extent that each Fund invests in foreign securities which are determined to be PFIC securities and is required to pay a tax on such investments, a credit for this tax would not be allowed to be passed through to such Fund's shareholders. Therefore, the payment of this tax would reduce such Fund's economic return from its PFIC investments. Gains from dispositions of PFIC shares and excess distributions received with respect to such shares are treated as ordinary income rather than capital gains. PERFORMANCE INFORMATION From time to time performance information for the Funds showing their standardized average annual total return, non-standardized return and/or yield may be presented in advertisements, sales literature and shareholder reports. Such performance figures are based on historical earnings and are not intended to indicate future performance. Standardized average annual total return of a Fund will be calculated for the period since the establishment of the Fund and will reflect the imposition of the maximum sales charge, if any. Standardized average annual total return is measured by comparing the value of an investment in a Fund at the beginning of the relevant period to the redemption value of the investment at the end of the period (assuming immediate reinvestment of any dividends or capital gains distributions) and annualizing the result. Yield of a Fund will be computed by dividing a Fund's net investment income per share earned during a recent one-month period by that Fund's per share maximum offering price (reduced by any undeclared earned income expected to be paid shortly as a dividend) on the last day of the period and annualizing the result. 107 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- In addition, from time to time the Funds may present their respective distribution rates in shareholder reports and in supplemental sales literature which is accompanied or preceded by a Prospectus and in shareholder reports. Distribution rates will be computed by dividing the distribution per share over a twelve-month period by the maximum offering price per share. The calculation of income in the distribution rate includes both income and capital gains dividends and does not reflect unrealized gains or losses, although a Fund may also present a distribution rate excluding the effect of capital gains. The distribution rate differs from the yield, because it includes capital gains which are often non-recurring in nature, whereas yield does not include such items. Distribution rates may also be presented excluding the effect of a sales charge, if any. Total return, whether standardized or non-standardized, and yield are functions of the type and quality of instruments held in the portfolio, levels of operation expenses and changes in market conditions. Consequently, total return and yield will fluctuate and are not necessarily representative of future results. Any fees charged by Allianz Life Insurance Co. of North America or any of its affiliates with respect to customer accounts for investing in shares of the Funds will not be included in performance calculations. Such fees, if charged, will reduce the actual performance from that quoted. In addition, if the Manager or the Distributor voluntarily reduce all or a part of their respective fees, as further discussed in the Prospectus, the total return of such Fund will be higher than it would otherwise be in the absence of such voluntary fee reductions. Yields and total returns quoted for the Funds include the effect of deducting the Funds' expenses, but may not include charges and expenses attributable to a particular variable annuity contract or variable life insurance policy. Since shares of the Funds may be purchased only through a variable annuity contract or variable life insurance policy, you should carefully review the prospectus of the variable annuity contract or variable life insurance policy you have chosen for information on relevant charges and expenses. Including these charges in the quotations of the Funds' yield and total return would have the effect of decreasing performance. Performance information for the Funds must always be accompanied by, and reviewed with, performance information for the insurance product which invests in the Funds. YIELDS OF THE MONEY MARKET FUND The standardized seven-day yield for the Money Market Fund is computed: (1) by determining the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical pre-existing account in that Fund having a balance of one share at the beginning of the seven-day base period, subtracting a hypothetical charge reflecting deductions from shareholder accounts; (2) dividing the difference by the value of the account at the beginning of the base period to obtain the base period return; and (3) annualizing the results (i.e., multiplying the base period return by (365/7)). The net change in the account value of the Money Market Fund includes the value of additional shares purchased with dividends from the original share, dividends declared on both the original share and any additional shares, and all fees, other than non-recurring account charges charged to all shareholder accounts in proportion to the length of the base period and assuming that Fund's average account size. The capital changes to be excluded from the calculation of the net change in account value are net realized gains and losses from the sale of securities and unrealized appreciation and depreciation. At any time in the future, yields may be higher or lower than past yields and there can be no assurance that any historical results will continue. YIELDS OF THE NON-MONEY MARKET FUNDS Yields of each of the Non-Money Market Funds will be computed by analyzing net investment income per share for a recent thirty-day period and dividing that amount by a Fund share's maximum offering price (reduced by any undeclared earned income expected to be paid shortly as a dividend) on the last trading day of that period. Net investment income will reflect amortization of any market value premium or discount of fixed income securities (except for obligations backed by mortgages or other assets) and may include recognition of a pro rata portion of the stated dividend rate of dividend paying portfolio securities. The yield of each of the Non-Money Market Funds will vary from time to time depending upon market conditions, the composition of a Fund's portfolio and operating expenses of the Trust allocated to each Fund. These factors and possible differences in the methods used in calculating yield should be considered when comparing a Fund's yield to yields published for other investment 108 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- companies and other investment vehicles. Yield should also be considered relative to changes in the value of the Fund's shares and to the relative risks associated with the investment objectives and policies of each of the Funds. CALCULATION OF TOTAL RETURN Standardized average annual total return is a measure of the change in value of the investment in a Fund over the period covered, which assumes any dividends or capital gains distributions are reinvested in the Fund immediately rather than paid to the investor in cash. Standardized average annual total return will be calculated by: (1) adding to the total number of shares purchased by a hypothetical $1,000 investment in the Fund and all additional shares which would have been purchased if all dividends and distributions paid or distributed during the period had immediately been reinvested, (2) calculating the value of the hypothetical initial investment of $1,000 as of the end of the period by multiplying the total number of shares owned at the end of the period by the net asset value per share on the last trading day of the period, (3) assuming redemption at the end of the period, and (4) dividing this account value for the hypothetical investor by the initial $1,000 investment and annualizing the result for periods of less than one year. MISCELLANEOUS Individual Trustees are elected by the shareholders and, subject to removal by a vote of two-thirds of the Board of Trustees, serve until their successors are elected and qualified. Meetings of shareholders are not required to be held at any specific intervals. Individual Trustees may be removed by vote of the shareholders voting not less than two-thirds of the shares then outstanding. The Trust is registered with the SEC as a management investment company. Such registration does not involve supervision of the management policies of the Trust. The Prospectus and this Statement of Additional Information omit certain of the information contained in the Registration Statement filed with the SEC. Copies of such information may be obtained from the SEC by payment of the prescribed duplicating fee. Holders of variable annuity contracts or variable life insurance policies issued by Participating Insurance Companies for which shares of the Funds are the investment vehicle will receive from the Participating Insurance Companies the Trust's unaudited semi-annual financial statements and year-end financial statements audited by the Trust's independent registered public accounting firm. Each report will show the investments owned by the Funds and the market values of the investments and will provide other information about the Funds and their operations. The Trust currently does not foresee any disadvantages to the holders of variable annuity contracts and variable life insurance policies of affiliated and unaffiliated Participating Insurance Companies arising from the fact that the interests of the holders of variable annuity contracts and variable life insurance policies may differ due to differences of tax treatment or other considerations or due to conflict between the affiliated or unaffiliated Participating Insurance Companies. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise and to determine what action, if any, should be taken in response to such conflicts. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by the Participating Insurance Companies. The Trust assumes no responsibility for such prospectuses. The portfolio managers of the Funds and other investment professionals may from time to time discuss in advertising, sales literature or other material, including periodic publications, various topics of interest to shareholders and prospective investors. The topics may include, but are not limited to, the advantages and disadvantages of investing in tax-deferred and taxable investments; Fund performance and how such performance may compare to various market indices; shareholder profiles and hypothetical investor scenarios; the economy; the financial and capital markets; investment strategies and techniques; investment products and tax, retirement and investment planning. The Prospectus and this Statement of Additional Information are not an offering of the securities herein described in any state in which such offering may not lawfully be made. No salesman, dealer or other person is authorized to give 109 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- any information or make any representation other than those contained in the Prospectus and this Statement of Additional Information. FINANCIAL STATEMENTS Audited financial statements as of December 31, 2007, are incorporated by reference to the Annual Report to shareholders, which has been previously sent to shareholders of each Fund pursuant to the 1940 Act and previously filed with the Securities and Exchange Commission. A copy of the Annual Report and the Funds' latest Semi-Annual Report may be obtained without charge on the internet by accessing the Allianz Life website at https://www.allianzlife.com or upon written request from Allianz VIP Funds at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free 1-877-833-7113. PROXY VOTING POLICIES AND PROCEDURES The proxy voting policies and procedures of the Trust, Allianz Investment Management LLC, and all of the Subadvisers are located in Appendix B to this Statement of Additional Information. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is available without charge, upon request, by accessing the Fund's website at https://www.allianzlife.com or by accessing the SEC's EDGAR database via the Internet at www.sec.gov. 110 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX A COMMERCIAL PAPER RATINGS A Standard & Poor's ("S&P") commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard and Poor's for commercial paper: "A-1" -- Obligations are rated in the highest category indicating that the obligor's capacity to meet its financial commitment is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. "A-2" -- Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations rated "A-1". However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. "A-3" -- Obligations exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. "B" -- Obligations are regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. "C" -- Obligations are currently vulnerable to nonpayment and are dependent on favorable business, financial, and economic conditions for the obligor to meet its financial obligation. "D" -- Obligations are in payment default. The "D" rating category is used when payments on an obligation are not made on the date due, even if the applicable grace period has not expired, unless S&P believes such payments will be made during such grace period. The "D" rating will also be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually debt obligations not having an original maturity in excess of one year, unless explicitly noted. The following summarizes the rating categories used by Moody's for commercial paper: "Prime-1" -- Issuers (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity. "Prime-2" -- Issuers (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. "Prime-3" -- Issuers (or supporting institutions) have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. "Not Prime" -- Issuers do not fall within any of the rating categories. 111 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The three rating categories of Duff & Phelps for investment grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating category. The following summarizes the rating categories used by Duff & Phelps for commercial paper: "D-1+" -- Debt possesses the highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. "D-1" -- Debt possesses very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. "D-1" -- Debt possesses high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. "D-2" -- Debt possesses good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. "D-3" -- Debt possesses satisfactory liquidity and other protection factors qualify issues as investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. "D-4" -- Debt possesses speculative investment characteristics. Liquidity is not sufficient to ensure against disruption in debt service. Operating factors and market access may be subject to a high degree of variation. "D-5" -- Issuer has failed to meet scheduled principal and/or interest payments. Fitch IBCA short-term ratings apply to debt obligations that have time horizons of less than 12 months for most obligations, or up to three years for U.S. public finance securities. The following summarizes the rating categories used by Fitch IBCA for short-term obligations: "F1" -- Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments and may have an added "+" to denote any exceptionally strong credit feature. "F2" -- Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of securities rated "F1." "F3" -- Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade. "B" -- Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. "C" -- Securities possess high default risk. This designation indicates that the capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. "D" -- Securities are in actual or imminent payment default. Thomson BankWatch short-term ratings assess the likelihood of an untimely payment of principal and interest of debt instruments with original maturities of one year or less. The following summarizes the ratings used by Thomson BankWatch: "TBW-1" -- This designation represents Thomson BankWatch's highest category and indicates a very high likelihood that principal and interest will be paid on a timely basis. "TBW-2" -- This designation represents Thomson BankWatch's second-highest category and indicates that while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated "TBW-1." 112 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- "TBW-3" -- This designation represents Thomson BankWatch's lowest investment-grade category and indicates that while the obligation is more susceptible to adverse developments (both internal and external) than those with higher ratings, the capacity to service principal and interest in a timely fashion is considered adequate. "TBW-4" -- This designation represents Thomson BankWatch's lowest rating category and indicates that the obligation is regarded as non-investment grade and therefore speculative. CORPORATE AND LONG-TERM DEBT RATINGS The following summarizes the ratings used by Standard & Poor's for corporate and municipal debt: "AAA" -- An obligation rated "AAA" has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. "AA" -- An obligation rated "AA" differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. "A" -- An obligation rated "A" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. "BBB" -- An obligation rated "BBB" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. "BB," "B," "CCC," "CC" and "C" -- Debt is regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. "BB" -- Debt is less vulnerable to non-payment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. "B" -- Debt is more vulnerable to non-payment than obligations rated "BB," but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. "CCC" -- Debt is currently vulnerable to non-payment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. "CC" -- An obligation rated "CC" is currently highly vulnerable to non-payment. "C" -- The "C" rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. "D" -- An obligation rated "D" is in payment default. This rating is used when payments on an obligation are not made on the date due, even if the applicable grace period has not expired, unless S & P believes that such payments will be made during such grace period. "D" rating is also used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. PLUS (+) OR MINUS (-) -- The ratings from "AA" through "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. "r" -- This rating is attached to highlight derivative, hybrid, and certain other obligations that S & P believes may experience high volatility or high variability in expected returns due to non-credit risks. Examples of such obligations are: securities whose principal or interest return is indexed to equities, commodities, or currencies; 113 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- certain swaps and options; and interest-only and principal-only mortgage securities. The absence of an "r" symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return. The following summarizes the ratings used by Moody's for corporate and municipal long-term debt: "Aaa" -- Bonds are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. "Aa" -- Bonds are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. "A" -- Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. "Baa" -- Bonds are considered as medium-grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. "Ba," "B," "Caa," "Ca" and "C" -- Bonds that possess one of these ratings provide questionable protection of interest and principal ("Ba" indicates speculative elements; "B" indicates a general lack of characteristics of desirable investment; "Caa" are of poor standing; "Ca" represents obligations which are speculative in a high degree; and "C" represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default. Con. (--) -- Bonds for which the security depends upon the completion of some act or the fulfillment of some condition are rated conditionally. These are bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operation experience, (c) rentals which begin when facilities are completed, or (d) payments to which some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon completion of construction or elimination of basis of condition. Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols, Aa1, A1, Baa1, Ba1 and B1. The following summarizes the long-term debt ratings used by Duff & Phelps for corporate and municipal long-term debt: "AAA" -- Debt is considered to be of the highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt. "AA" -- Debt is considered of high credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. "A" -- Debt possesses protection factors which are average but adequate. However, risk factors are more variable and greater in periods of economic stress. "BBB" -- Debt possesses below-average protection factors but such protection factors are still considered sufficient for prudent investment. Considerable variability in risk is present during economic cycles. "BB," "B," "CCC," "DD" and "DP" -- Debt that possesses one of these ratings is considered to be below investment grade. Although below investment grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B" possesses the risk that obligations will not be met when due. Debt rated "CCC" is well below investment grade and has considerable uncertainty as to timely payment of principal, interest or preferred dividends. Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents preferred stock with dividend arrearages. 114 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- To provide more detailed indications of credit quality, the "AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within these major categories. The following summarizes the ratings used by Fitch IBCA for corporate and municipal bonds: "AAA" -- Bonds considered to be investment grade and of the highest credit quality. These ratings denote the lowest expectation of investment risk and are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is very unlikely to be adversely affected by foreseeable events. "AA" -- Bonds considered to be investment grade and of very high credit quality. These ratings denote a very low expectation of investment risk and indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. "A" -- Bonds considered to be investment grade and of high credit quality. These ratings denote a low expectation of investment risk and indicate strong capacity for timely payment of financial commitments. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than bonds with higher ratings. "BBB" -- Bonds considered to be investment grade and of good credit quality. These ratings denote that there is currently a low expectation of investment risk. The capacity for timely payment of financial commitments is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this category. "BB" -- Bonds considered to be speculative. These ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic changes over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. "B" -- Bonds are considered highly speculative. These ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. "CCC," "CC" and "C" -- Bonds have high default risk. Capacity for meeting financial commitments is reliant upon sustained, favorable business or economic developments. "CC" ratings indicate that default of some kind appears probable, and "C" ratings signal imminent default. "DDD," "DD" and "D" -- Bonds are in default. Securities are not meeting obligations and are extremely speculative. "DDD" designates the highest potential for recovery on these securities, and "D" represents the lowest potential for recovery. To provide more detailed indications of credit quality, the Fitch IBCA ratings from and including "AA" to "B" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within these major rating categories. Thomson BankWatch assesses the likelihood of an untimely repayment of principal or interest over the term to maturity of long term debt and preferred stock which are issued by United States commercial banks, thrifts and non-bank banks; non-United States banks; and broker-dealers. The following summarizes the rating categories used by Thomson BankWatch for long-term debt ratings: "AAA" -- This designation represents the highest category assigned by Thomson BankWatch to long-term debt and indicates that the ability to repay principal and interest on a timely basis is extremely high. "AA" -- This designation indicates a very strong ability to repay principal and interest on a timely basis with limited incremental risk compared to issues rated in the highest category. "A" -- This designation indicates that the ability to repay principal and interest is strong. Issues rated "A" could be more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. 115 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- "BBB" -- This designation represents Thomson BankWatch's lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are, however, more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. "BB," "B," "CCC" and "CC" -- These designations are assigned by Thomson BankWatch to non-investment grade long-term debt. Such issues are regarded as having speculative characteristics regarding the likelihood of timely payment of principal and interest. "BB" indicates the lowest degree of speculation and "CC" the highest degree of speculation. "D" -- This designation indicates that the long-term debt is in default. PLUS (+) OR MINUS (-) -- The ratings from "AAA" through "CC" may include a plus or minus sign designation which indicates where within the respective category the issue is placed. 116 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX B -- PROXY VOTING POLICIES ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST Proxy Voting Policy and Procedures I. Policy A. Basis for Proxy Voting. Allianz Variable Insurance Products Trust (the "Trust") seeks to vote proxies received with respect to the securities held by one or more of its Funds in a manner that is most likely to maximize the monetary value of the holdings of the relevant Fund and to maximize the likelihood of there being a favorable investment return. B. Delegation of Proxy Voting. The Board of Trustees (the "Board") recognizes that the right to vote a proxy with respect to the Fund securities its holds is an asset of a Fund and that the oversight of the effective management of this asset is a part of the Board's oversight responsibility and the obligations of the Trust's officers. The Board further recognizes that the voting of proxies is an integral part of the services provided by those investment advisory organizations retained by the Trust to provide day-to-day Fund management to the Trust's several Funds (each a "Subadviser"). Accordingly, the Board hereby delegates to each Subadviser the responsibility for voting proxies held by any Fund of the Trust and for which a Subadviser provides day-to-day Fund management services, subject to the continuing oversight of the Board.(1) (1) This policy is adopted for the purpose of the disclosure requirements adopted by the Securities and Exchange Commission, Releases No. 33-8188, 34-47304, IC-25922. Monitoring Proxy Voting. The Board further delegates to Allianz Investment Management LLC. ("AZIM"), as an integral part of those services provided by AZIM to the Trust pursuant to its agreement with the Trust dated April 27, 2001, the responsibility for receiving appropriate representations that each Subadviser votes proxies received with respect to Fund securities in a manner that is consistent with such Subadviser's fiduciary obligation to the Trust and the proxy voting policies, procedures and guidelines ("Proxy Voting Policies") adopted by such Subadviser. 117 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- II. Procedures A. Subadviser Voting Procedures; Board Oversight. The officers of the Trust (or other designated agents of the Trust) shall obtain from each Subadviser (other than those Subadvisers retained to provide services to a Fund that holds only fixed income securities)(2) the Proxy Voting Policies adopted by such Subadviser as soon as reasonably practicable following the adoption of these procedures. Such Proxy Voting Policies shall be presented to the Board not later than the first Board meeting scheduled to be held following the date on which Subadvisers are required to comply with Rule 206(4)-6 (Proxy Voting) under the Investment Advisers Act of 1940.(3) The proxy voting policies and procedures of the Subadvisers will be incorporated by reference herein, substantially in the form found in Appendices 1 through 7 to these Policies and Procedures. Proxy Voting Policies or a summary thereof shall be presented to the Board thereafter at least annually and the officers of the Trust shall use reasonable efforts to ensure that the Board is notified promptly of any material changes in the Proxy Voting Policies of each Subadviser (other than those Subadvisers retained to provide services to a Fund that holds only fixed income securities). B. Specific Matters for Review. 1. Conflict of Interest. The Trust recognizes that there may be instances in which a Subadviser (or affiliated persons of the Subadviser) has a financial interest in a matter presented by a proxy. In reviewing the adequacy of Proxy Voting Procedures provided to the Trust, the Trust's officers will evaluate the extant to which conflicts of interest have been addressed; including the extent to which the existence of pre-determined voting policies have been established such that the Subadviser had limited discretion in making a proxy voting decision in the event of a conflict of interests, or existence of other specific decision-making mechanisms to ensure that any decision with respect to a proposal representing a conflict between the interests of the Subadviser and the Trust would be effectively insulated from the conflict and the basis for such decision fully documented. In limited circumstances, a Subadviser may be unable to make a decision with regard to a particular proxy vote in accordance with its proxy voting policies and procedures, due to the existence of a conflict. In these circumstances, and where the Subadviser advises the Trust of such a conflict and its inability to vote, the Trust may direct the Subadviser to vote. In directing a Subadviser to vote, the Trust may rely on one or more of the following considerations: the advice of counsel, or an independent third party; any voting decisions being made by other Subadvisers to the Trust on the same proxy voting decision, where a conflict does not exist; the policies and procedures of the Subadviser that is unable to vote due to the conflict; or, any other consideration affecting the Trust. 2. Differences Among Proxy Voting Policies. The Trust recognizes that there may be instances where the responsibility for voting proxies with respect to a single security is vested in two or more Subadvisers (e.g. when more than one Fund (or two managed portions of the same Fund) hold voting securities of a single issuer). Under these circumstances, there is the possibility that the application of relevant Proxy Voting Policies will result in proxies being voted inconsistently. It is the position of the Trust that such circumstance will not be deemed to suggest improper action on the part of any Subadviser (2) For purposes of this policy, an investment in a mutual fund that invests exclusively in fixed income securities shall be treated as though it is a direct investment in fixed income securities. 3 The effective date of this rule is August 6, 2003. 118 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- C. Voting Record Reporting. 1. Maintenance of Subadviser Voting Record. No less than annually, the Trust shall obtain from each Subadviser a record of each proxy voted with respect to Fund Securities of each Fund of the Trust served by that Subadviser during the year.(4) 2. Annual Filing on Form N-PX. The Trust shall file an annual report of each proxy voted with respect to Fund securities of the Funds during the twelve-month period ended June 30 on Form N-PX not later than August 31 of each year.(5) (4) This record may be provided directly from the Subadviser or accessed via an appropriate electronic means in the manner contemplated under relevant regulations promulgated by the Securities and Exchange Commission. (5) As it is used in this document, the term "conflict of interest" refers to a situation in which the Subadviser (or affiliated persons of the Subadviser) has a financial interest in a matter presented by a proxy that may compromise that Subadviser's independence of judgment and action with respect to the voting of the proxy in accordance with this policy. III. Revocation The delegation of the authority to vote proxies relating to Portfolio Securities of any Fund is entirely voluntary and may be revoked by the Trust, acting by resolution of the Board, in whole or in part, at any time. IV. Disclosures A. The Trust shall include in its registration statement: 1. This policy and the Proxy Voting Procedures, or summaries thereof, of each Subadviser (other than those Subadvisers retained to provide services to a Fund that holds only fixed income securities)(6); and 2. After June 30, 2004, a statement disclosing that information regarding how the Trust voted proxies relating to Fund securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling the Trust's toll-free telephone number; or through a specified Internet address; or both; and on the SEC website.(7) B. The Trust shall include in its Annual and Semi-Annual Reports to shareholders: 1. A statement disclosing that a description of the policies and procedures used by or on behalf of the Trust to determine how to vote proxies relating to Fund securities of the Funds is available without charge, upon request, by calling the Trust's toll-free telephone number; or through a specified Internet address; and on the SEC website.(8) 2. A statement disclosing that information regarding how the Trust voted proxies relating to Fund securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling the Trust's toll-free telephone number; or through a specified Internet address; or both; and on the SEC website.(9) (6) This disclosure shall be included in the registration statement next filed on behalf of the Trust after July 15, 2003. (7) This disclosure shall be included in the registration statement next filed on behalf of the Funds after August 31, 2004. (8) This disclosure shall be included in the report next filed on behalf of the Funds after July 15, 2003. (9) This disclosure shall be included in the report next filed on behalf of the Funds after August 31, 2004. 119 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ALLIANZ INVESTMENT MANAGEMENT LLC Proxy Voting Policy and Procedures I. Policy A. Basis for Proxy Voting. Allianz Investment Management LLC ("AZIM") as manager of the Allianz Variable Insurance Products Trust (the "Trust") seeks to vote proxies received with respect to the securities held by one or more of the Trust's Funds in a manner that is most likely to maximize the monetary value of the holdings of the relevant Fund and to maximize the likelihood of there being a favorable investment return. B. Delegation of Proxy Voting. The Allianz Variable Insurance Products Trust Board of Trustees (the "Board") recognizes that the right to vote a proxy with respect to the Funds' securities is an asset of a Fund and that the oversight of the effective management of this asset is a part of the Board's oversight responsibility and the obligations of the Trust's officers. The Board further recognizes that the voting of proxies is an integral part of the services provided by those investment advisory organizations retained by the Trust to provide day-to-day Fund portfolio management of the Trust's several Funds (each a "Subadviser"). Accordingly, AZIM hereby delegates to each Subadviser any responsibility it may have for voting proxies held by any Fund of the Trust and for which a Subadviser provides day-to-day Fund management services, subject to the continuing oversight of the Board.(1) C. Monitoring Proxy Voting. The Board of the Funds has delegated to AZIM, as an integral part of those services provided by AZIM to the Trust pursuant to its agreement with the Trust dated April 27, 2001, the responsibility for receiving appropriate representations that each Subadviser votes proxies received with respect to Fund securities in a manner that is consistent with such Subadviser's fiduciary obligation to the Trust and the proxy voting policies, procedures and guidelines ("Proxy Voting Policies") adopted by such Subadviser. On a quarterly basis, AZIM shall circulate a form to each Subadviser to document any material changes to the Subadvisers' Proxy Voting Policies, to obtain certification that each Subadviser has complied with its adopted policies and is maintaining all records required under both the Investment Company Act of 1940 and the Investment Advisers Act of 1940, and to note how any proxy issues that involved material conflicts of interest were resolved. II. Procedures A. Oversight of Subadviser Voting Procedures. The officers of the Trust (or other designated agents of the Trust) shall obtain from each Subadviser (other than those Subadvisers retained to provide services to a Fund that holds only fixed income securities)(2) the Proxy Voting Policies adopted by such Subadviser as soon as reasonably practicable following the adoption of these procedures. The Proxy Voting Policies of the Subadvisers incorporated by reference herein. AZIM shall use reasonable efforts to ensure that the Trust Board is notified promptly of any material changes in the Proxy Voting Policies of each Subadviser (other than those Subadvisers retained to provide services to a Fund that holds only fixed income securities). B. Specific Matters for Review. 1. Conflict of Interest(3). AZIM recognizes that there may be instances in which a Subadviser (or affiliated persons of a Subadviser) has a material conflict of interest in a matter presented by a proxy. In reviewing each Subadviser's Proxy Voting Policies, the officers of AZIM will evaluate the extent to which conflicts of interest have been addressed; including the extent to which the existence of pre-determined voting policies have been established such that the Subadviser had limited discretion in making a proxy voting decision in the event of a material conflict of interest, or the existence of other specific decision-making mechanisms to ensure that any decision with respect to a proposal representing a material conflict between the interests of the Subadviser and the security issuer would be effectively insulated from the conflict and the basis for such decision fully documented. In limited circumstances, a Subadviser may be unable to make a decision with regard to a particular proxy vote in accordance with its Proxy Voting Policies, due to the existence of a conflict of interest. In these circumstances, and where the Subadviser advises AZIM of such a conflict and its inability to vote, the AZIM Proxy Committee may direct the manner in which the Subadviser should vote. (1) This policy is adopted for the purpose of the disclosure requirements adopted by the Securities and Exchange Commission, Releases No. IA-2106. 120 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (2) For purposes of this policy, an investment in a mutual fund that invests exclusively in fixed income securities shall be treated as though it is a direct investment in fixed income securities. (3) As it is used in this document, the term "conflict of interest" refers to a situation in which the Subadviser (or affiliated persons of the Subadviser) has financial interest in a matter presented by a proxy that may compromise that Subadviser's independence of judgment and action with respect to the voting of the proxy in accordance with this policy. 2. AZIM Proxy Committee (the "Committee"). The Committee shall consist of two AZIM officers. The Committee will also have an adviser (the "Committee Adviser") appointed from the Legal Department of Allianz Life Insurance Company of North America, AZIM's parent company. The Committee may abstain or refrain from voting proxy issues if: o the Committee does not receive timely notification of shareholder meeting, o the costs involved with voting the proxy outweigh the benefits of voting the proxy issue, or o the Committee does not receive adequate information regarding the proxy issue. In the event that the Committee makes a voting decision on a proxy issue: o the Committee shall communicate it's voting decision to the Subadviser at least two days before the shareholder meeting, o all documents prepared by the Committee regarding the voting decision shall be forwarded to the Subadviser for record keeping purposes, and o the Committee Adviser shall make a report to the Trust Board regarding the Committee's voting decision at the next Board meeting. In directing a Subadviser to vote, the Committee will adhere to the following guidelines: a) If the Subadviser has retained an independent third party proxy agent, the Committee will vote pursuant to the independent proxy agent's recommendation. b) If the Subadviser has not retained an independent third party proxy agent, the Committee will review the proxy issue to determine if: o the security issuer is an affiliate of, or has a significant current or proposed business relationship with, Allianz Life Insurance Company of North America; or o where reasonably practicable, determine if the security issuer has a significant current or proposed business relationship with an affiliate of Allianz Life Insurance Company of North America. If such a relationship exists, the Committee will notify the Subadviser that it will abstain from voting the proxy issue. If such a relationship does not exist, the Committee may rely on one or more of the following considerations in making a proxy voting decision: o the Proxy Voting Policies of the Subadviser that is unable to vote due to the conflict; o the advice of an independent third party proxy agent retained by the Committee; o any voting decisions being made by other Subadvisers on the same proxy issue; o the advice of counsel; or o any other consideration affecting the Trust. 3. Differences Among Proxy Voting Policies. AZIM recognizes that there may be instances where the responsibility for voting proxies with respect to a single security is vested in two or more Subadvisers (e.g. when more than one Fund, or two managed portions of the same Fund, hold voting securities of a single issuer). Under these circumstances, there is the possibility that the application of relevant Proxy Voting Policies will result in proxies being voted inconsistently. It is the position of AZIM that such circumstance will not be deemed to suggest improper action on the part of any Subadviser C. Record Keeping Requirements. 1. Maintenance of Subadviser Voting Record. AZIM delegates to each Subadviser responsibility for collecting and maintaining a record of each proxy voted with respect to Securities of each Fund of the Trust served by that Subadviser during the year.(4) 121 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. Maintenance of Proxy Records Required by the Investment Advisers Act of 1940 (the "Advisers Act Rule"). AZIM delegates to each Specialist Manger responsibility for collecting and maintaining all records required under the Advisers Act Rule in accordance with the rule. The Subadviser may engage an independent third party proxy agent to assist in these record keeping requirements. These records include: o The Subadviser's Proxy Voting Policies; o Proxy statements regarding Fund securities; (4) This record may be provided directly from the Subadviser or accessed via an appropriate electronic means in the manner contemplated under relevant regulations promulgated by the Securities and Exchange Commission. o Records of all proxy votes cast including those cast at the instruction of AZIM; o Records of written requests for proxy voting information and all written responses to requests for information; o Any documents prepared by the Subadviser that were material to making a voting decision, or that memorialize the basis for the decision; and o Records sufficient to document proxy issues where the Subadviser experienced a material conflict of interest were resolved in the best interests of the client. III. Revocation The delegation of the authority to vote proxies relating to Fund Securities is entirely voluntary and may be revoked by AZIM, acting by resolution of the AZIM Board of Governors, in whole or in part, at any time. IV. Disclosures AZIM shall include in the Trust's registration statement: 1. This policy and a statement disclosing that this policy is available without charge, upon request, by calling a toll-free telephone number; or through a specified Internet address; or both; and on the SEC website(5); and 2. After June 30, 2004, a statement disclosing that information regarding how each Subadviser voted proxies relating to Fund securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling a toll-free telephone number; or through a specified Internet address; or both; and on the SEC website(6). (5) This disclosure shall be included in the registration statement next filed on behalf of the Trust after July 15, 2003. (6) This disclosure shall be included in the registration statement next filed on behalf of the Funds after August 31, 2004. 122 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- INVESCO AIM CAPITAL MANAGEMENT, INC. PROXY POLICIES AND PROCEDURES Invesco Aim Proxy Voting Guidelines (Effective as of March 31, 2008) The following Invesco Aim Proxy Voting Guidelines are applicable to all funds and other accounts managed by Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc and Invesco Aim Private Asset Management, Inc. (collectively, "Invesco Aim").(1) Introduction Our Belief The AIM Funds Boards of Trustees and Invesco Aim's investment professionals expect a high standard of corporate governance from the companies in our portfolios so that Invesco Aim may fulfill its fiduciary obligation to our fund shareholders and other account holders. Well governed companies are characterized by a primary focus on the interests of shareholders, accountable boards of directors, ample transparency in financial disclosure, performance-driven cultures and appropriate consideration of all stakeholders. Invesco Aim believes well governed companies create greater shareholder wealth over the long term than poorly governed companies, so we endeavor to vote in a manner that increases the value of our investments and fosters good governance within our portfolio companies. In determining how to vote proxy issues, Invesco Aim considers the probable business consequences of each issue and votes in a manner designed to protect and enhance fund shareholders' and other account holders' interests. Our voting decisions are intended to enhance each company's total shareholder value over Invesco Aim's typical investment horizon. Proxy voting is an integral part of Invesco Aim's investment process. We believe that the right to vote proxies should be managed with the same care as all other elements of the investment process. The objective of Invesco Aim's proxy-voting activity is to promote good governance and advance the economic interests of our clients. At no time will Invesco Aim exercise its voting power to advance its own commercial interests, to pursue a social or political cause that is unrelated to our clients' economic interests, or to favor a particular client or business relationship to the detriment of others. - -------------------------------------------------------------------------------- Proxy administration The Invesco Aim Proxy Committee (the "Proxy Committee") consists of members representing Invesco Aim's Investments, Legal and Compliance departments. Invesco Aim's Proxy Voting Guidelines (the "Guidelines") are revised annually by the Proxy Committee, and are approved by the AIM Funds Boards of Trustees. The Proxy Committee implements the Guidelines and oversees proxy voting. The Proxy Committee has retained outside experts to assist with the analysis and voting of proxy issues. In addition to the advice offered by these experts, Invesco Aim uses information gathered from our own research, company managements, Invesco Aim's portfolio managers and outside shareholder groups to reach our voting decisions. Generally speaking, Invesco Aim's investment-research process leads us to invest in companies led by management teams we believe have the ability to conceive and execute strategies to outperform their competitors. We select companies for investment based in large part on our assessment of their management teams' ability to create shareholder wealth. Therefore, in formulating our proxy-voting decisions, Invesco Aim gives proper consideration to the recommendations of a company's Board of Directors. 123 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Important principles underlying the Invesco Aim Proxy Voting Guidelines I. Accountability Management teams of companies are accountable to their boards of directors, and directors of publicly held companies are accountable to their shareholders. Invesco Aim endeavors to vote the proxies of its portfolio companies in a manner that will reinforce the notion of a board's accountability to its shareholders. Consequently, Invesco Aim votes against any actions that would impair the rights of shareholders or would reduce shareholders' influence over the board or over management. The following are specific voting issues that illustrate how Invesco Aim applies this principle of accountability. o Elections of directors. In uncontested director elections for companies that do not have a controlling shareholder, Invesco Aim votes in favor of slates if they are comprised of at least a majority of independent directors and if the boards' key committees are fully independent. Key committees include the Audit, Compensation and Governance or Nominating Committees. Invesco Aim's standard of independence excludes directors who, in addition to the directorship, have any material business or family relationships with the companies they serve. Contested director elections are evaluated on a case-by-case basis and are decided within the context of Invesco Aim's investment thesis on a company. o Director performance. Invesco Aim withholds votes from directors who exhibit a lack of accountability to shareholders, either through their level of attendance at meetings or by enacting egregious corporate-governance or other policies. In cases of material financial restatements, accounting fraud, habitually late filings, adopting shareholder rights plan ("poison pills") without shareholder approval, or other areas of poor performance, Invesco Aim may withhold votes from some or all of a company's directors. In situations where directors' performance is a concern, Invesco Aim may also support shareholder proposals to take corrective actions such as so-called "clawback" provisions. o Auditors and Audit Committee members. Invesco Aim believes a company's Audit Committee has a high degree of responsibility to shareholders in matters of financial disclosure, integrity of the financial statements and effectiveness of a company's internal controls. Independence, experience and financial expertise are critical elements of a well-functioning Audit Committee. When electing directors who are members of a company's Audit Committee, or when ratifying a company's auditors, Invesco Aim considers the past performance of the Committee and holds its members accountable for the quality of the company's financial statements and reports. o Majority standard in director elections. The right to elect directors is the single most important mechanism shareholders have to promote accountability. Invesco Aim supports the nascent effort to reform the U.S. convention of electing directors, and votes in favor of proposals to elect directors by a majority vote. o Classified boards. Invesco Aim supports proposals to elect directors annually instead of electing them to staggered multi-year terms because annual elections increase a board's level of accountability to its shareholders. 124 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Supermajority voting requirements. Unless proscribed by law in the state of incorporation, Invesco Aim votes against actions that would impose any supermajority voting requirement, and supports actions to dismantle existing supermajority requirements. o Responsiveness. Invesco Aim withholds votes from directors who do not adequately respond to shareholder proposals that were approved by a majority of votes cast the prior year. o Cumulative voting. The practice of cumulative voting can enable minority shareholders to have representation on a company's board. Invesco Aim supports proposals to institute the practice of cumulative voting at companies whose overall corporate-governance standards indicate a particular need to protect the interests of minority shareholders. o Shareholder access. On business matters with potential financial consequences, Invesco Aim votes in favor of proposals that would increase shareholders' opportunities to express their views to boards of directors, proposals that would lower barriers to shareholder action and proposals to promote the adoption of generally accepted best practices in corporate governance. II. Incentives Invesco Aim believes properly constructed compensation plans that include equity ownership are effective in creating incentives that induce managements and employees of our portfolio companies to create greater shareholder wealth. Invesco Aim supports equity compensation plans that promote the proper alignment of incentives, and votes against plans that are overly dilutive to existing shareholders, plans that contain objectionable structural features, and plans that appear likely to reduce the value of an account's investment. Following are specific voting issues that illustrate how Invesco Aim evaluates incentive plans. o Executive compensation. Invesco Aim evaluates compensation plans for executives within the context of the company's performance under the executives' tenure. Invesco Aim believes independent compensation committees are best positioned to craft executive-compensation plans that are suitable for their company-specific circumstances. We view the election of those independent compensation committee members as the appropriate mechanism for shareholders to express their approval or disapproval of a company's compensation practices. Therefore, Invesco Aim generally does not support shareholder proposals to limit or eliminate certain forms of executive compensation. In the interest of reinforcing the notion of a compensation committee's accountability to shareholders, Invesco Aim supports proposals requesting that companies subject each year's compensation record to an advisory shareholder vote, or so-called "say on pay" proposals. o Equity-based compensation plans. When voting to approve or reject equity-based compensation plans, Invesco Aim compares the total estimated cost of the plans, including stock options and restricted stock, against a carefully selected peer group and uses multiple performance metrics that help us determine whether the incentive structures in place are creating genuine shareholder wealth. Regardless of a plan's estimated cost relative to its peer group, Invesco Aim votes against plans that contain structural features that would impair the alignment of incentives between shareholders and management. Such features include the ability to reprice or reload options without shareholder approval, the ability to issue options below the stock's current market price, or the ability to automatically replenish shares without shareholder approval. o Employee stock-purchase plans. Invesco Aim supports employee stock-purchase plans that are reasonably designed to provide proper incentives to a broad base of employees, provided that 125 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- the price at which employees may acquire stock is at most a 15 percent discount from the market price. o Severance agreements. Invesco Aim generally votes in favor of proposals requiring advisory shareholder ratification of executives' severance agreements. However, we oppose proposals requiring such agreements to be ratified by shareholders in advance of their adoption. III. Capitalization Examples of management proposals related to a company's capital structure include authorizing or issuing additional equity capital, repurchasing outstanding stock, or enacting a stock split or reverse stock split. On requests for additional capital stock, Invesco Aim analyzes the company's stated reasons for the request. Except where the request could adversely affect the fund's ownership stake or voting rights, AIM generally supports a board's decisions on its needs for additional capital stock. Some capitalization proposals require a case-by-case analysis within the context of Invesco Aim's investment thesis on a company. Examples of such proposals include authorizing common or preferred stock with special voting rights, or issuing additional stock in connection with an acquisition. IV. Mergers, Acquisitions and Other Corporate Actions Issuers occasionally require shareholder approval to engage in certain corporate actions such as mergers, acquisitions, name changes, dissolutions, reorganizations, divestitures and reincorporations. Invesco Aim analyzes these proposals within the context of our investment thesis on the company, and determines its vote on a case-by-case basis. V. Anti-Takeover Measures Practices designed to protect a company from unsolicited bids can adversely affect shareholder value and voting rights, and they create conflicts of interests among directors, management and shareholders. Except under special issuer-specific circumstances, Invesco Aim votes to reduce or eliminate such measures. These measures include adopting or renewing "poison pills", requiring supermajority voting on certain corporate actions, classifying the election of directors instead of electing each director to an annual term, or creating separate classes of common or preferred stock with special voting rights. Invesco Aim generally votes against management proposals to impose these types of measures, and generally votes for shareholder proposals designed to reduce such measures. Invesco Aim supports shareholder proposals directing companies to subject their anti-takeover provisions to a shareholder vote. VI. Shareholder Proposals on Corporate Governance Invesco Aim generally votes for shareholder proposals that are designed to protect shareholder rights if a company's corporate-governance standards indicate that such additional protections are warranted. VII. Shareholder Proposals on Social Responsibility The potential costs and economic benefits of shareholder proposals seeking to amend a company's practices for social reasons are difficult to assess. Analyzing the costs and economic benefits of these proposals is highly subjective and does not fit readily within our framework of voting to create greater shareholder wealth over Invesco Aim's typical investment horizon. Therefore, Invesco Aim abstains from voting on shareholder proposals deemed to be of a purely social, political or moral nature. VIII. Routine Business Matters Routine business matters rarely have a potentially material effect on the economic prospects of fund holdings, so we generally support the board's discretion on these items. However, Invesco Aim votes against proposals where there is insufficient information to make a decision about the nature of the proposal. Similarly, Invesco Aim votes against proposals to conduct other unidentified business at shareholder meetings. 126 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Summary These Guidelines provide an important framework for making proxy-voting decisions, and should give fund shareholders and other account holders insight into the factors driving Invesco Aim's decisions. The Guidelines cannot address all potential proxy issues, however. Decisions on specific issues must be made within the context of these Guidelines and within the context of the investment thesis of the funds and other accounts that own the company's stock. Where a different investment thesis is held by portfolio managers who may hold stocks in common, Invesco Aim may vote the shares held on a fund-by-fund or account-by-account basis. - -------------------------------------------------------------------------------- Exceptions In certain circumstances, Invesco Aim may refrain from voting where the economic cost of voting a company's proxy exceeds any anticipated benefits of that proxy proposal. Share-lending programs One reason that some portion of Invesco Aim's position in a particular security might not be voted is the securities lending program. When securities are out on loan and earning fees for the lending fund, they are transferred into the borrower's name. Any proxies during the period of the loan are voted by the borrower. The lending fund would have to terminate the loan to vote the company's proxy, an action that is not generally in the best economic interest of fund shareholders. However, whenever Invesco Aim determines that the benefit to shareholders or other account holders of voting a particular proxy outweighs the revenue lost by terminating the loan, we recall the securities for the purpose of voting the fund's full position. "Share-blocking" Another example of a situation where Invesco Aim may be unable to vote is in countries where the exercise of voting rights requires the fund to submit to short-term trading restrictions, a practice known as "share-blocking." Invesco Aim generally refrains from voting proxies in share-blocking countries unless the portfolio manager determines that the benefit to fund shareholders and other account holders of voting a specific proxy outweighs the fund's or other account's temporary inability to sell the security. International constraints An additional concern that sometimes precludes our voting non-U.S. proxies is our inability to receive proxy materials with enough time and enough information to make a voting decision. In the great majority of instances, however, we are able to vote non-U.S. proxies successfully. It is important to note that Invesco Aim makes voting decisions for non-U.S. issuers using these Guidelines as our framework, but also takes into account the corporate-governance standards, regulatory environment and generally accepted best practices of the local market. Exceptions to these Guidelines Invesco Aim retains the flexibility to accommodate company-specific situations where strictly adhering to the Guidelines would lead to a vote that the Proxy Committee deems not to be in the best interest of the funds' shareholders and other account holders. In these situations, the Proxy Committee will vote the proxy in the manner deemed to be in the best interest of the funds' shareholders and other account holders, and will promptly inform the funds' Boards of Trustees of such vote and the circumstances surrounding it. - -------------------------------------------------------------------------------- Resolving potential conflicts of interest A potential conflict of interest arises when Invesco Aim votes a proxy for an issuer with which it also maintains a material business relationship. Examples could include issuers that are distributors of Invesco Aim's products, or issuers that employ Invesco Aim to manage portions of their retirement plans or treasury accounts. Invesco Aim reviews each proxy proposal to assess the extent, if any, to which there 127 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- may be a material conflict between the interests of the fund shareholders or other account holders and Invesco Aim. Invesco Aim takes reasonable measures to determine whether a potential conflict may exist. A potential conflict is deemed to exist only if one or more of the Proxy Committee members actually knew or should have known of the potential conflict. If a material potential conflict is deemed to exist, Invesco Aim may resolve the potential conflict in one of the following ways: (1) if the proposal that gives rise to the potential conflict is specifically addressed by the Guidelines, Invesco Aim may vote the proxy in accordance with the predetermined Guidelines; (2) Invesco Aim may engage an independent third party to determine how the proxy should be voted; or (3) Invesco Aim may establish an ethical wall or other informational barrier between the persons involved in the potential conflict and the persons making the proxy-voting decision in order to insulate the potential conflict from the decision makers. Because the Guidelines are pre-determined and crafted to be in the best economic interest of shareholders and other account holders, applying the Guidelines to vote client proxies should, in most instances, adequately resolve any potential conflict of interest. As an additional safeguard against potential conflicts, persons from Invesco Aim's marketing, distribution and other customer-facing functions are precluded from becoming members of the Proxy Committee. On a quarterly basis, the AIM Funds Boards of Trustees review a report from Invesco Aim's Internal Compliance Controls Committee. The report contains a list of all known material business relationships that Invesco Aim maintains with publicly traded issuers. That list is cross-referenced with the list of proxies voted over the period. If there are any instances where Invesco Aim's voting pattern on the proxies of its material business partners is inconsistent with its voting pattern on all other issuers, they are brought before the Trustees and explained by the Chairman of the Proxy Committee. Personal conflicts of interest. If any member of the Proxy Committee has a personal conflict of interest with respect to a company or an issue presented for voting, that Proxy Committee member will inform the Proxy Committee of such conflict and will abstain from voting on that company or issue. Funds of funds. Some AIM Funds offering diversified asset allocation within one investment vehicle own shares in other AIM Funds. A potential conflict of interest could arise if an underlying AIM Fund has a shareholder meeting with any proxy issues to be voted on, because Invesco Aim's asset-allocation funds or target-maturity funds may be large shareholders of the underlying fund. In order to avoid any potential for a conflict, the asset-allocation funds and target maturity funds vote their shares in the same proportion as the votes of the external shareholders of the underlying fund. - -------------------------------------------------------------------------------- Policies and Vote Disclosure A copy of these Guidelines and the voting record of each AIM Fund are available on our web site, www.invescoaim.com. In accordance with Securities and Exchange Commission regulations, all funds file a record of all proxy-voting activity for the prior 12 months ending June 30th. That filing is made on or before August 31st of each year. - -------------------------------------------------------------------------------- Footnotes (1)AIM Funds not managed by Invesco Aim Advisors, Inc., are governed by the proxy voting policies of their respective sub-advisors. Proxy Voting Guidelines applicable to AIM China Fund, AIM Floating Rate Fund, AIM Global Real Estate Fund, AIM International Core Equity Fund, AIM International Total Return Fund, AIM Japan Fund, AIM LIBOR Alpha Fund, AIM Real Estate Fund, AIM S&P 500 Index Fund, AIM Select Real Estate Income Fund, AIM Structured Core Fund, AIM Structured Growth Fund, AIM Structured Value Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund, AIM Trimark Small Companies Fund, Series C and Series M are available at our website, http://www.invescoaim.com. 128 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- BLACKROCK ADVISORS, LLC Proxy Voting Policies and Procedures These Proxy Voting Policies and Procedures ("Policy") for BlackRock Advisors, LLC and its affiliated U.S. registered investment advisers(1) ("BlackRock") reflect our duty as a fiduciary under the Investment Advisers Act of 1940 (the "Advisers Act") to vote proxies in the best interests of our clients. BlackRock serves as the investment manager for investment companies, other commingled investment vehicles and/or separate accounts of institutional and other clients. The right to vote proxies for securities held in such accounts belongs to BlackRock's clients. Certain clients of BlackRock have retained the right to vote such proxies in general or in specific circumstances.(2) Other clients, however, have delegated to BlackRock the right to vote proxies for securities held in their accounts as part of BlackRock's authority to manage, acquire and dispose of account assets. When BlackRock votes proxies for a client that has delegated to BlackRock proxy voting authority, BlackRock acts as the client's agent. Under the Advisers Act, an investment adviser is a fiduciary that owes each of its clients a duty of care and loyalty with respect to all services the adviser undertakes on the client's behalf, including proxy voting. BlackRock is therefore subject to a fiduciary duty to vote proxies in a manner BlackRock believes is consistent with the client's best interests,(3) whether or not the client's proxy voting is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 ("ERISA").(4) When voting proxies for client accounts (including investment companies), BlackRock's primary objective is to make voting decisions solely in the best interests of clients and ERISA clients' plan beneficiaries and participants. In fulfilling its obligations to clients, BlackRock will seek to act in a manner that it believes is most likely to enhance the economic value of the underlying securities held in client accounts.(5) It is imperative that BlackRock considers the interests of its clients, and not the interests of BlackRock, when voting proxies and that real (or perceived) material conflicts that may arise between BlackRock's interest and those of BlackRock's clients are properly addressed and resolved. (1) The Policy does not apply to BlackRock Asset Management U.K. Limited and BlackRock Investment Managers International Limited, which are U.S. registered investment advisers based in the United Kingdom. 2 In certain situations, a client may direct BlackRock to vote in accordance with the client's proxy voting policies. In these situations, BlackRock will seek to comply with such policies to the extent it would not be inconsistent with other BlackRock legal responsibilities. 3 Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President, Ram Trust Services (February 12, 2002) (Section 206 of the Investment Advisers Act imposes a fiduciary responsibility to vote proxies fairly and in the best interests of clients); SEC Release No. IA-2106 (February 3, 2003). 4 DOL Interpretative Bulletin of Sections 402, 403 and 404 of ERISA at 29 C.F.R. 2509.94-2 5 Other considerations, such as social, labor, environmental or other policies, may be of interest to particular clients. While BlackRock is cognizant of the importance of such considerations, when voting proxies it will generally take such matters into account only to the extent that they have a direct bearing on the economic value of the underlying securities. To the extent that a BlackRock client desires to pursue a particular social, labor, environmental or other agenda through the proxy votes made for its securities held through BlackRock as investment adviser, BlackRock encourages the client to consider retaining direct proxy voting authority or to appoint independently a special proxy voting fiduciary other than BlackRock. Advisers Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires, among other things, that an investment adviser that exercises voting authority over clients' proxy voting adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, discloses to its clients information about those policies and procedures and also discloses to clients how they may obtain information on how the adviser has voted their proxies. In light of such fiduciary duties, the requirements of Rule 206(4)-6, and given the complexity of the issues that may be raised in connection with proxy votes, BlackRock has adopted these policies and procedures. BlackRock's Equity Investment Policy Oversight Committee, or a sub-committee thereof (the "Committee"), addresses proxy voting issues on behalf of BlackRock and its clients.(6) The Committee is comprised of senior 129 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- members of BlackRock's Portfolio Management Group and advised by BlackRock's Legal and Compliance Department. 6 Subject to the Proxy Voting Policies of Merrill Lynch Bank & Trust Company FSB, the Committee may also function jointly as the Proxy Voting Committee for Merrill Lynch Bank & Trust Company FSB trust accounts managed by personnel dually-employed by BlackRock. 130 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- I. Scope of Committee Responsibilities The Committee shall have the responsibility for determining how to address proxy votes made on behalf of all BlackRock clients, except for clients who have retained the right to vote their own proxies, either generally or on any specific matter. In so doing, the Committee shall seek to ensure that proxy votes are made in the best interests of clients, and that proxy votes are determined in a manner free from unwarranted or inappropriate influences. The Committee shall also oversee the overall administration of proxy voting for BlackRock accounts.(7) The Committee shall establish BlackRock's proxy voting guidelines, with such advice, participation and research as the Committee deems appropriate from portfolio managers, proxy voting services or other knowledgeable interested parties. As it is anticipated that there will not necessarily be a "right" way to vote proxies on any given issue applicable to all facts and circumstances, the Committee shall also be responsible for determining how the proxy voting guidelines will be applied to specific proxy votes, in light of each issuer's unique structure, management, strategic options and, in certain circumstances, probable economic and other anticipated consequences of alternative actions. In so doing, the Committee may determine to vote a particular proxy in a manner contrary to its generally stated guidelines. The Committee may determine that the subject matter of certain proxy issues are not suitable for general voting guidelines and requires a case-by-case determination, in which case the Committee may elect not to adopt a specific voting guideline applicable to such issues. BlackRock believes that certain proxy voting issues - such as approval of mergers and other significant corporate transactions - require investment analysis akin to investment decisions, and are therefore not suitable for general guidelines. The Committee may elect to adopt a common BlackRock position on certain proxy votes that are akin to investment decisions, or determine to permit portfolio managers to make individual decisions on how best to maximize economic value for the accounts for which they are responsible (similar to normal buy/sell investment decisions made by such portfolio managers).(8) While it is expected that BlackRock, as a fiduciary, will generally seek to vote proxies over which BlackRock exercises voting authority in a uniform manner for all BlackRock clients, the Committee, in conjunction with the portfolio manager of an account, may determine that the specific circumstances of such account require that such account's proxies be voted differently due to such account's investment objective or other factors that differentiate it from other accounts. In addition, on proxy votes that are akin to investment decisions, BlackRock believes portfolio managers may from time to time legitimately reach differing but equally valid views, as fiduciaries for BlackRock's clients, on how best to maximize economic value in respect of a particular investment. (7) The Committee may delegate day-to-day administrative responsibilities to other BlackRock personnel and/or outside service providers, as appropriate. (8) The Committee will normally defer to portfolio managers on proxy votes that are akin to investment decisions except for proxy votes that involve a material conflict of interest, in which case it will determine, in its discretion, the appropriate voting process so as to address such conflict. 131 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The Committee will also be responsible for ensuring the maintenance of records of each proxy vote, as required by Advisers Act Rule 204-2.(9) All records will be maintained in accordance with applicable law. Except as may be required by applicable legal requirements, or as otherwise set forth herein, the Committee's determinations and records shall be treated as proprietary, nonpublic and confidential. The Committee shall be assisted by other BlackRock personnel, as may be appropriate. In particular, the Committee has delegated to the BlackRock Operations Department responsibility for monitoring corporate actions and ensuring that proxy votes are submitted in a timely fashion. The Operations Department shall ensure that proxy voting issues are promptly brought to the Committee's attention and that the Committee's proxy voting decisions are appropriately disseminated and implemented. To assist BlackRock in voting proxies, the Committee may retain the services of a firm providing such services. BlackRock has currently retained Institutional Shareholder Services ("ISS") in that role. ISS is an independent adviser that specializes in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to BlackRock may include, but are not limited to, in-depth research, voting recommendations (which the Committee is not obligated to follow), vote execution, and recordkeeping. 9 The Committee may delegate the actual maintenance of such records to an outside service provider. Currently, the Committee has delegated the maintenance of such records to Institutional Shareholder Services. 132 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- II. Special Circumstances Routine Consents. BlackRock may be asked from time to time to consent to an amendment to, or grant a waiver under, a loan agreement, partnership agreement, indenture or other governing document of a specific financial instrument held by BlackRock clients. BlackRock will generally treat such requests for consents not as "proxies" subject to these Proxy Voting Policies and Procedures but as investment matters to be dealt with by the responsible BlackRock investment professionals would, provided that such consents (i) do not relate to the election of a board of directors or appointment of auditors of a public company, and (ii) either (A) would not otherwise materially affect the structure, management or control of a public company, or (B) relate to a company in which BlackRock clients hold only interests in bank loans or debt securities and are consistent with customary standards and practices for such instruments. Securities on Loan. Registered investment companies that are advised by BlackRock as well as certain of our advisory clients may participate in securities lending programs. Under most securities lending arrangements, securities on loan may not be voted by the lender (unless the loan is recalled). BlackRock believes that each client has the right to determine whether participating in a securities lending program enhances returns, to contract with the securities lending agent of its choice and to structure a securities lending program, through its lending agent, that balances any tension between loaning and voting securities in a matter that satisfies such client. If client has decided to participate in a securities lending program, BlackRock will therefore defer to the client's determination and not attempt to seek recalls solely for the purpose of voting routine proxies as this could impact the returns received from securities lending and make the client a less desirable lender in a marketplace. Where a client retains a lending agent that is unaffiliated with BlackRock, BlackRock will generally not seek to vote proxies relating to securities on loan because BlackRock does not have a contractual right to recall such loaned securities for the purpose of voting proxies. Where BlackRock or an affiliate acts as the lending agent, BlackRock will also generally not seek to recall loaned securities for proxy voting purposes, unless the portfolio manager responsible for the account or the Committee determines that voting the proxy is in the client's best interest and requests that the security be recalled. Voting Proxies for Non-US Companies. While the proxy voting process is well established in the United States, voting proxies of non-US companies frequently involves logistical issues which can affect BlackRock's ability to vote such proxies, as well as the desirability of voting such proxies. These issues include (but are not limited to): (i) untimely notice of shareholder meetings, (ii) restrictions on a foreigner's ability to exercise votes, (iii) requirements to vote proxies in person, (iv) "shareblocking" (requirements that investors who exercise their voting rights surrender the right to dispose of their holdings for some specified period in proximity to the shareholder meeting), (v) potential difficulties in translating the proxy, and (vi) requirements to provide local agents with unrestricted powers of attorney to facilitate voting instructions. As a consequence, BlackRock votes proxies of non-US companies only on a "best-efforts" basis. In addition, the Committee may determine that it is generally in the best interests of BlackRock clients not to vote proxies of companies in certain countries if the Committee determines that the costs (including but not limited to opportunity costs associated with shareblocking constraints) associated with exercising a vote generally are expected to outweigh the benefit the client will derive by voting on the issuer's proposal. If the Committee so determines in the case of a particular country, the Committee (upon advice from BlackRock portfolio managers) may override such determination with respect to a particular issuer's shareholder meeting if the Committee believes the benefits of seeking to exercise a vote at such meeting outweighs the costs, in which case BlackRock will seek to vote on a best-efforts basis. Securities Sold After Record Date. With respect to votes in connection with securities held on a particular record date but sold from a client account prior to the holding of the related meeting, BlackRock may take no action on proposals to be voted on in such meeting. 133 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Conflicts of Interest. From time to time, BlackRock may be required to vote proxies in respect of an issuer that is an affiliate of BlackRock (a "BlackRock Affiliate"), or a money management or other client of BlackRock (a "BlackRock Client").(10) In such event, provided that the Committee is aware of the real or potential conflict, the following procedures apply: |X| The Committee intends to adhere to the voting guidelines set forth herein for all proxy issues including matters involving BlackRock Affiliates and BlackRock Clients. The Committee may, in its discretion for the purposes of ensuring that an independent determination is reached, retain an independent fiduciary to advise the Committee on how to vote or to cast votes on behalf of BlackRock's clients; and |X| if the Committee determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Committee shall determine how to vote the proxy after consulting with the BlackRock Legal and Compliance Department and concluding that the vote cast is in the client's best interest notwithstanding the conflict. 10 Such issuers may include investment companies for which BlackRock provides investment advisory, administrative and/or other services. 134 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- III. Voting Guidelines The Committee has determined that it is appropriate and in the best interests of BlackRock's clients to adopt the following voting guidelines, which represent the Committee's usual voting position on certain recurring proxy issues that are not expected to involve unusual circumstances. With respect to any particular proxy issue, however, the Committee may elect to vote differently than a voting guideline if the Committee determines that doing so is, in the Committee's judgment, in the best interest of its clients. The guidelines may be reviewed at any time upon the request of any Committee member and may be amended or deleted upon the vote of a majority of voting Committee members present at a Committee meeting for which there is a quorum. 135 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- A. Boards of Directors These proposals concern those issues submitted to shareholders relating to the composition of the Board of Directors of companies other than investment companies. As a general matter, the Committee believes that a company's Board of Directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a company's business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Committee therefore believes that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the corporation in a manner that will seek to maximize shareholder value over time. In individual cases, the Committee may look at a Director nominee's history of representing shareholder interests as a director of other companies, or other factors to the extent the Committee deems relevant. The Committee's general policy is to vote:
------------ -------------------------------------------------------------------------- # VOTE AND DESCRIPTION ------------ -------------------------------------------------------------------------- A.1 FOR nominees for director of United States companies in uncontested elections, except for nominees who |X| have missed at least two meetings and, as a result, attended less than 75% of meetings of the Board of Directors and its committees the previous year, unless the nominee missed the meeting(s) due to illness or company business |X| voted to implement or renew a "dead-hand" poison pill |X| ignored a shareholder proposal that was approved by either a majority of the shares outstanding in any year or by the majority of votes cast for two consecutive years |X| failed to act on takeover offers where the majority of the shareholders have tendered their shares |X| are corporate insiders who serve on the audit, compensation or nominating committees or on a full Board that does not have such committees composed exclusively of independent directors |X| on a case-by-case basis, have served as directors of other companies with allegedly poor corporate governance |X| sit on more than six boards of public companies ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.2 FOR nominees for directors of non-U.S. companies in uncontested elections, except for nominees from whom the Committee determines to withhold votes due to the nominees' poor records of representing shareholder interests, on a case-by-case basis ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.3 FOR proposals to declassify Boards of Directors, except where there exists a legitimate purpose for classifying boards ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.4 AGAINST proposals to classify Boards of Directors, except where there exists a legitimate purpose for classifying boards ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.5 AGAINST proposals supporting cumulative voting ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.6 FOR proposals eliminating cumulative voting ------------ -------------------------------------------------------------------------- 136 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.7 FOR proposals supporting confidential voting ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.8 FOR proposals seeking election of supervisory board members ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.9 AGAINST shareholder proposals seeking additional representation of women and/or minorities generally (i.e., not specific individuals) to a Board of Directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.10 AGAINST shareholder proposals for term limits for directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.11 FOR shareholder proposals to establish a mandatory retirement age for directors who attain the age of 72 or older ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.12 AGAINST shareholder proposals requiring directors to own a minimum amount of company stock ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.13 FOR proposals requiring a majority of independent directors on a Board of Directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.14 FOR proposals to allow a Board of Directors to delegate powers to a committee or committees ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.15 FOR proposals to require audit, compensation and/or nominating committees of a Board of Directors to consist exclusively of independent directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.16 AGAINST shareholder proposals seeking to prohibit a single person from occupying the roles of chairman and chief executive officer ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.17 FOR proposals to elect account inspectors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.18 FOR proposals to fix the membership of a Board of Directors at a specified size ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.19 FOR proposals permitting shareholder ability to nominate directors directly ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.20 AGAINST proposals to eliminate shareholder ability to nominate directors directly ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.21 FOR proposals permitting shareholder ability to remove directors directly ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- A.22 AGAINST proposals to eliminate shareholder ability to remove directors directly ------------ -------------------------------------------------------------------------- 137 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. Auditors These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Committee believes that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Committee will generally defer to a corporation's choice of auditor, in individual cases, the Committee may look at an auditors' history of representing shareholder interests as auditor of other companies, to the extent the Committee deems relevant. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- B.1 FOR approval of independent auditors, except for ------------------------------------------------------------------------- |X| auditors that have a financial interest in, or material association with, the company they are auditing, and are therefore believed by the Committee not to be independent |X| auditors who have rendered an opinion to any company which in the Committee's opinion is either not consistent with best accounting practices or not indicative of the company's financial situation |X| on a case-by-case basis, auditors who in the Committee's opinion provide a significant amount of non-audit services to the company ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- B.2 FOR proposals seeking authorization to fix the remuneration of auditors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- B.3 FOR approving internal statutory auditors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- B.4 FOR proposals for audit firm rotation, except for proposals that would require rotation after a period of less than 5 years ------------ -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C. Compensation and Benefits These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Committee favors disclosure of a company's compensation and benefit policies and opposes excessive compensation, but believes that compensation matters are normally best determined by a corporation's board of directors, rather than shareholders. Proposals to "micro-manage" a company's compensation practices or to set arbitrary restrictions on compensation or benefits will therefore generally not be supported. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- C.1 IN ACCORDANCE WITH THE RECOMMENDATION OF ISS on compensation plans if the ISS recommendation is based solely on whether or not the company's plan satisfies the allowable cap as calculated by ISS. If the recommendation of ISS is based on factors other than whether the plan satisfies the allowable cap the Committee will analyze the particular proposed plan. This policy applies to amendments ------------ -------------------------------------------------------------------------- 138 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- of plans as well as to initial approvals. ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.2 FOR proposals to eliminate retirement benefits for outside directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.3 AGAINST proposals to establish retirement benefits for outside directors ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.4 FOR proposals approving the remuneration of directors or of supervisory board members ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.5 AGAINST proposals to reprice stock options ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.6 FOR proposals to approve employee stock purchase plans that apply to all employees. This policy applies to proposals to amend ESPPs if the plan as amended applies to all employees. ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.7 FOR proposals to pay retirement bonuses to directors of Japanese companies unless the directors have served less than three years ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.8 AGAINST proposals seeking to pay outside directors only in stock ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.9 FOR proposals seeking further disclosure of executive pay or requiring companies to report on their supplemental executive retirement benefits ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.10 AGAINST proposals to ban all future stock or stock option grants to executives ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.11 AGAINST option plans or grants that apply to directors or employees of "related companies" without adequate disclosure of the corporate relationship and justification of the option policy ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- C.12 FOR proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation ------------ -------------------------------------------------------------------------- D. Capital Structure These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Committee will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- D.1 AGAINST proposals seeking authorization to issue shares without preemptive rights except for issuances up to 10% of a non-US company's total outstanding capital ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- D.2 FOR management proposals seeking preemptive rights or seeking authorization to issue shares with preemptive rights ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- D.3 FOR management proposals approving share repurchase programs ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- D.4 FOR management proposals to split a company's stock ------------ -------------------------------------------------------------------------- 139 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------ ------------ -------------------------------------------------------------------------- D.5 FOR management proposals to denominate or authorize denomination of securities or other obligations or assets in Euros ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- D.6 FOR proposals requiring a company to expense stock options (unless the company has already publicly committed to do so by a certain date). ------------ -------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------ E. Corporate Charter and By-Laws These proposals relate to various requests for approval of amendments to a corporation's charter or by-laws, principally for the purpose of adopting or redeeming "poison pills". As a general matter, the Committee opposes poison pill provisions. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- E.1 AGAINST proposals seeking to adopt a poison pill ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- E.2 FOR proposals seeking to redeem a poison pill ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- E.3 FOR proposals seeking to have poison pills submitted to shareholders for ratification ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- E.4 FOR management proposals to change the company's name ------------ -------------------------------------------------------------------------- F. Corporate Meetings These are routine proposals relating to various requests regarding the formalities of corporate meetings. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- F.1 AGAINST proposals that seek authority to act on "any other business that may arise" ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.2 FOR proposals designating two shareholders to keep minutes of the meeting ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.3 FOR proposals concerning accepting or approving financial statements and statutory reports ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.4 FOR proposals approving the discharge of management and the supervisory board ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.5 FOR proposals approving the allocation of income and the dividend ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.6 FOR proposals seeking authorization to file required documents/other formalities ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.7 FOR proposals to authorize the corporate board to ratify and execute approved resolutions ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.8 FOR proposals appointing inspectors of elections ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.9 FOR proposals electing a chair of the meeting ------------ -------------------------------------------------------------------------- 140 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.10 FOR proposals to permit "virtual" shareholder meetings over the Internet ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- F.11 AGAINST proposals to require rotating sites for shareholder meetings ------------ -------------------------------------------------------------------------- G. Investment Companies These proposals relate to proxy issues that are associated solely with holdings of shares of investment companies, including, but not limited to, investment companies for which BlackRock provides investment advisory, administrative and/or other services. As with other types of companies, the Committee believes that a fund's Board of Directors (rather than its shareholders) is best-positioned to set fund policy and oversee management. However, the Committee opposes granting Boards of Directors authority over certain matters, such as changes to a fund's investment objective, that the Investment Company Act of 1940 envisions will be approved directly by shareholders. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- G.1 FOR nominees for director of mutual funds in uncontested elections, except for nominees who |X| have missed at least two meetings and, as a result, attended less than 75% of meetings of the Board of Directors and its committees the previous year, unless the nominee missed the meeting due to illness or fund business |X| ignore a shareholder proposal that was approved by either a majority of the shares outstanding in any year or by the majority of votes cast for two consecutive years |X| are interested directors who serve on the audit or nominating committees or on a full Board that does not have such committees composed exclusively of independent directors |X| on a case-by-case basis, have served as directors of companies with allegedly poor corporate governance ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- G.2 FOR the establishment of new series or classes of shares ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- G.3 AGAINST proposals to change a fund's investment objective to nonfundamental ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- G.4 FOR proposals to establish a master-feeder structure or authorizing the Board to approve a master-feeder structure without a further shareholder vote ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- G.5 AGAINST a shareholder proposal for the establishment of a director ownership requirement ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- G.6 FOR classified boards of closed-end investment companies ------------ -------------------------------------------------------------------------- 141 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- H. Environmental and Social Issues These are shareholder proposals to limit corporate conduct in some manner that relates to the shareholder's environmental or social concerns. The Committee generally believes that annual shareholder meetings are inappropriate forums for the discussion of larger social issues, and opposes shareholder resolutions "micromanaging" corporate conduct or requesting release of information that would not help a shareholder evaluate an investment in the corporation as an economic matter. While the Committee is generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of shareholders, the Committee is generally not supportive of proposals to require disclosure of corporate matters for other purposes. The Committee's general policy is to vote: ------------ -------------------------------------------------------------------------- H.1 AGAINST proposals seeking to have companies adopt international codes of conduct ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- H.2 AGAINST proposals seeking to have companies provide non-required reports on: |X| environmental liabilities; |X| bank lending policies; |X| corporate political contributions or activities; |X| alcohol advertising and efforts to discourage drinking by minors; |X| costs and risk of doing business in any individual country; |X| involvement in nuclear defense systems ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- H.3 AGAINST proposals requesting reports on Maquiladora operations or on CERES principles ------------ -------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------- H.4 AGAINST proposals seeking implementation of the CERES principles ------------ --------------------------------------------------------------------------
142 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Notice to Clients BlackRock will make records of any proxy vote it has made on behalf of a client available to such client upon request.(11) BlackRock will use its best efforts to treat proxy votes of clients as confidential, except as it may decide to best serve its clients' interests or as may be necessary to effect such votes or as may be required by law. BlackRock encourage clients with an interest in particular proxy voting issues to make their views known to BlackRock, provided that, in the absence of specific written direction from a client on how to vote that client's proxies, BlackRock reserves the right to vote any proxy in a manner it deems in the best interests of its clients, as it determines in its sole discretion. These policies are as of the date indicated on the cover hereof. The Committee may subsequently amend these policies at any time, without notice. (11) Such request may be made to the client's portfolio or relationship manager or addressed in writing to Secretary, BlackRock Equity Investment Policy Oversight Committee, Legal and Compliance Department, BlackRock Inc., 40 East 52nd Street, New York, New York 10022. 143 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- CLEARBRIDGE ADVISORS LLC Proxy Voting Policies and Procedures I. TYPES OF ACCOUNTS FOR WHICH CLEARBRIDGE VOTES PROXIES ClearBridge Advisors (ClearBridge) votes proxies for each client that has specifically authorized us to vote them in the investment management contract or otherwise; votes proxies for each United States Registered Investment Company (mutual fund) for which we act as adviser or sub-adviser with the power to vote proxies; and votes proxies for each ERISA account unless the plan document or investment advisory agreement specifically reserves the responsibility to vote proxies to the plan trustees or other named fiduciary. These policies and procedures are intended to fulfill applicable requirements imposed on ClearBridge by the Investment Advisers Act of 1940, as amended, the Investment Company Act of 1940, as amended, and the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations adopted under these laws. II. GENERAL GUIDELINES In voting proxies, we are guided by general fiduciary principles. Our goal is to act prudently, solely in the best interest of the beneficial owners of the accounts we manages, and, in the case of ERISA accounts, for the exclusive purpose of providing economic benefits to such persons. We attempt to provide for the consideration of all factors that could affect the value of the investment and will vote proxies in the manner that we believe will be consistent with efforts to maximize shareholder values. III. HOW CLEARBRIDGE VOTES Section V of these policies and procedures set forth certain stated positions. In the case of a proxy issue for which there is a stated position we generally votes in accordance with such stated position. In the case of a proxy issue for which there is a list of factors set forth in Section V that we considers in voting on such issue, we vote on a case-by-case basis in accordance with the general principles set forth above and considering such enumerated factors. In the case of a proxy issue for which there is no stated position or list of factors that we considers in voting on such issue, we votes on a case-by-case basis in accordance with the general principles set forth above. We may utilize an external service provider to provide us with information and/or a recommendation with regard to proxy votes in accordance with our stated positions, but we are not required to follow any such recommendations. However, a particular business unit or investment team may utilize such an external service provider with the intention of following the recommendations of such service provider in all or substantially all cases, even where our policies do not contain a stated position. The use of an external service provider does not relieve the business unit of its responsibility for the proxy vote. (1) ClearBridge Advisors comprises ClearBridge Advisors, LLC, ClearBridge Asset Management Inc, and other affiliated investment advisory firms. IV. CONFLICTS OF INTEREST In furtherance of ClearBridge's goal to vote proxies in the best interests of clients, ClearBridge follows procedures designed to identify and address material conflicts that may arise between ClearBridge's interests and those of its clients before voting proxies on behalf of such clients. (1) Procedures for Identifying Conflicts of Interest ClearBridge relies on the following to seek to identify conflicts of interest with respect to proxy voting: A. The policy memorandum attached hereto as Appendix A will be distributed periodically to ClearBridge employees. The policy mem4orandum alerts ClearBridge employees that they are under an obligation (i) to be aware of the potential for conflicts of interest on the part of ClearBridge with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of ClearBridge's business, and (ii) to bring conflicts of interest of which they become aware to the attention of ClearBridge Compliance. 144 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. ClearBridge's finance area shall maintain and make available to ClearBridge Compliance and proxy voting personnel an up to date list of all client relationships that have historically accounted for or are projected to account for greater than 1% of ClearBridge's annual revenues. ClearBridge relies on the policy memorandum directive described in Section IV. (1) A. to identify conflicts of interest arising due to potential client relationships with proxy issuers. C. As a general matter, ClearBridge takes the position that relationships between a non-ClearBridge Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-ClearBridge Legg Mason affiliate) do not present a conflict of interest for ClearBridge in voting proxies with respect to such issuer because ClearBridge operates as an independent business unit from other Legg Mason business units and because of the existence of information barriers between ClearBridge and certain other Legg Mason business units. Special circumstances, such as contact between ClearBridge and non-ClearBridge personnel, may cause ClearBridge to consider whether non-ClearBridge relationships between Legg Mason and an issuer present a conflict of interest for ClearBridge with respect to such issuer. As noted in Section IV. (1) A., ClearBridge employees are under an obligation to be aware of the potential for conflicts of interest in voting proxies and to bring such conflicts of interest, including conflicts of interest which may arise because of such special circumstances (such as any attempt by a Legg Mason business unit or Legg Mason officer or employee to influence proxy voting by ClearBridge) to the attention of ClearBridge Compliance. Also, ClearBridge is sensitive to the fact that a significant, publicized relationship between an issuer and a non-ClearBridge Legg Mason affiliate might appear to the public to influence the manner in which ClearBridge decides to vote a proxy with respect to such issuer. For prudential reasons, ClearBridge treats such significant, publicized relationships as creating a potential conflict of interest for ClearBridge in voting proxies D. Based on information furnished by ClearBridge employees or maintained by ClearBridge Compliance pursuant to Section IV. (1) A. and C. and by ClearBridge Financial Control pursuant to Section IV. (1) B., ClearBridge Compliance shall maintain an up to date list of issuers with respect to which ClearBridge has a potential conflict of interest in voting proxies on behalf of client accounts. ClearBridge shall not vote proxies relating to issuers on such list on behalf of client accounts until it has been determined that the conflict of interest is not material or a method for resolving such conflict of interest has been agreed upon and implemented, as described in this Section IV below. Exceptions apply: (i) with respect to a proxy issue that will be voted in accordance with a stated ClearBridge position on such issue, and (ii) with respect to a proxy issue that will be voted in accordance with the recommendation of an independent third party based on application of the policies set forth herein. Such issues generally are not brought to the attention of the Proxy Voting Committee described in Section IV. (2) because ClearBridge's position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party based on application of the policies set forth herein. (2) Procedures for Assessing Materiality of Conflicts of Interest and for Addressing Material Conflicts of Interest A. ClearBridge shall maintain a Proxy Voting Committee to review and address conflicts of interest brought to its attention. The Proxy Voting Committee shall be comprised of such ClearBridge personnel as are designated from time to time. The current members of the Proxy Voting Committee are set forth on Appendix B hereto. B. All conflicts of interest identified pursuant to the procedures outlined in Section IV.(1) must be brought to the attention of the Proxy Voting Committee by ClearBridge Compliance for resolution. As noted above, a proxy issue that will be voted in accordance with a stated ClearBridge position on such issue or in accordance with the recommendation of an independent third party generally is not brought to the attention of the Proxy Voting Committee for a conflict of interest review because ClearBridge's position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party. C. The Proxy Voting Committee shall determine whether a conflict of interest is material. A conflict of interest will be considered material to the extent that it is determined that such conflict is likely to influence, or 145 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- appear to influence, ClearBridge's decision-making in voting the proxy. All materiality determinations will be based on an assessment of the particular facts and circumstances. ClearBridge Compliance shall maintain a written record of all materiality determinations made by the Proxy Voting Committee. D. If it is determined by the Proxy Voting Committee that a conflict of interest is not material, ClearBridge may vote proxies notwithstanding the existence of the conflict. E. If it is determined by the Proxy Voting Committee that a conflict of interest is material, the Proxy Voting Committee shall determine an appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination shall be based on the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc. Such methods may include: i. disclosing the conflict to clients and obtaining their consent before voting; ii. suggesting to clients that they engage another party to vote the proxy on their behalf; iii. in the case of a conflict of interest resulting from a particular employee's personal relationships, removing such employee from the decision-making process with respect to such proxy vote; or iv. such other method as is deemed appropriate given the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc.* ClearBridge Compliance shall maintain a written record of the method used to resolve a material conflict of interest. * Especially in the case of an apparent, as opposed to actual, conflict of interest, the Proxy Voting Committee may resolve such conflict of interest by satisfying itself that ClearBridge's proposed vote on a proxy issue is in the best interest of client accounts and is not being influenced by the conflict of interest. (3) Third Party Proxy Voting Firm - Conflicts of Interests With respect to a third party proxy voting firm described herein, ClearBridge will periodically review and assess such firm's policies, procedures and practices with respect to the disclosure and handling of conflicts of interest. V. VOTING POLICY These are policy guidelines that can always be superseded, subject to the duty to act solely in the best interest of the beneficial owners of accounts, by the investment management professionals responsible for the account holding the shares being voted. As a result of the independent investment advisory services provided by distinct business units, there may be occasions when different business units or different portfolio managers within the same business unit vote differently on the same issue. A ClearBridge business unit or investment team (e.g. ClearBridge's Social Awareness Investment team) may adopt proxy voting policies that supplement these policies and procedures. In addition, in the case of Taft-Hartley clients, ClearBridge will comply with a client direction to vote proxies in accordance with Institutional Shareholder Services' (ISS) PVS Proxy Voting Guidelines, which ISS represents to be fully consistent with AFL-CIO guidelines. (1) Election of Directors A. Voting on Director Nominees in Uncontested Elections. 1. We vote for director nominees. B. Chairman and CEO is the Same Person. 1. We vote on a case-by-case basis on shareholder proposals that would require the positions of the Chairman and CEO to be held by different persons. We would generally vote FOR such a proposal unless there are compelling reasons to vote against the proposal, including: o Designation of a lead director o Majority of independent directors (supermajority) o All independent key committees o Size of the company (based on market capitalization) 146 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Established governance guidelines o Company performance C. Majority of Independent Directors 1. We vote for shareholder proposals that request that the board be comprised of a majority of independent directors. Generally that would require that the director have no connection to the company other than the board seat. In determining whether an independent director is truly independent (e.g. when voting on a slate of director candidates), we consider certain factors including, but not necessarily limited to, the following: whether the director or his/her company provided professional services to the company or its affiliates either currently or in the past year; whether the director has any transactional relationship with the company; whether the director is a significant customer or supplier of the company; whether the director is employed by a foundation or university that received significant grants or endowments from the company or its affiliates; and whether there are interlocking directorships. 2. We vote for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively. D. Stock Ownership Requirements 1. We vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board. E. Term of Office 1. We vote against shareholder proposals to limit the tenure of independent directors. F. Director and Officer Indemnification and Liability Protection 1. Subject to subparagraphs 2, 3, and 4 below, we vote for proposals concerning director and officer indemnification and liability protection. 2. We vote for proposals to limit and against proposals to eliminate entirely director and officer liability for monetary damages for violating the duty of care. 3. We vote against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness. 4. We vote for only those proposals that provide such expanded coverage noted in subparagraph 3 above in cases when a director's or officer's legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) if only the director's legal expenses would be covered. G. Director Qualifications 1. We vote case-by-case on proposals that establish or amend director qualifications. Considerations include how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board. 2. We vote against shareholder proposals requiring two candidates per board seat. (2) Proxy Contests A. Voting for Director Nominees in Contested Elections 1. We vote on a case-by-case basis in contested elections of directors. Considerations include: chronology of events leading up to the proxy contest; qualifications of director nominees (incumbents and dissidents); for incumbents, whether the board is comprised of a majority of outside directors; whether key committees (ie: nominating, audit, compensation) comprise solely of independent outsiders; discussion with the respective portfolio manager(s). B. Reimburse Proxy Solicitation Expenses 147 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1. We vote on a case-by-case basis on proposals to provide full reimbursement for dissidents waging a proxy contest. Considerations include: identity of persons who will pay solicitation expenses; cost of solicitation; percentage that will be paid to proxy solicitation firms. (3) Auditors A. Ratifying Auditors 1. We vote for proposals to ratify auditors, unless an auditor has a financial interest in or association with the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company's financial position or there is reason to believe the independent auditor has not followed the highest level of ethical conduct. Specifically, we will vote to ratify auditors if the auditors only provide the company audit services and such other audit-related and non-audit services the provision of which will not cause such auditors to lose their independence under applicable laws, rules and regulations. B. Financial Statements and Director and Auditor Reports 1. We generally vote for management proposals seeking approval of financial accounts and reports and the discharge of management and supervisory board members, unless there is concern about the past actions of the company's auditors or directors. C. Remuneration of Auditors 1. We vote for proposals to authorize the board or an audit committee of the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company. D. Indemnification of Auditors 1. We vote against proposals to indemnify auditors. (4) Proxy Contest Defenses A. Board Structure: Staggered vs. Annual Elections 1. We vote against proposals to classify the board. 2. We vote for proposals to repeal classified boards and to elect all directors annually. B. Shareholder Ability to Remove Directors 1. We vote against proposals that provide that directors may be removed only for cause. 2. We vote for proposals to restore shareholder ability to remove directors with or without cause. 3. We vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. 4. We vote for proposals that permit shareholders to elect directors to fill board vacancies. C. Cumulative Voting 1. We vote against proposals to eliminate cumulative voting. 2. We vote for proposals to permit cumulative voting. D. Shareholder Ability to Call Special Meetings 1. We vote against proposals to restrict or prohibit shareholder ability to call special meetings. 2. We vote for proposals that remove restrictions on the right of shareholders to act independently of management. E. Shareholder Ability to Act by Written Consent 1. We vote against proposals to restrict or prohibit shareholder ability to take action by written consent. 2. We vote for proposals to allow or make easier shareholder action by written consent. F. Shareholder Ability to Alter the Size of the Board 148 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1. We vote for proposals that seek to fix the size of the board. 2. We vote against proposals that give management the ability to alter the size of the board without shareholder approval. G. Advance Notice Proposals 1. We vote on advance notice proposals on a case-by-case basis, giving support to those proposals which allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible. H. Amendment of By-Laws 1. We vote against proposals giving the board exclusive authority to amend the by-laws. 2. We vote for proposals giving the board the ability to amend the by-laws in addition to shareholders. I. Article Amendments (not otherwise covered by ClearBridge Proxy Voting Policies and Procedures). We review on a case-by-case basis all proposals seeking amendments to the articles of association. We vote for article amendments if: o shareholder rights are protected; o there is negligible or positive impact on shareholder value; o management provides adequate reasons for the amendments; and o the company is required to do so by law (if applicable). (5) Tender Offer Defenses A. Poison Pills 1. We vote for shareholder proposals that ask a company to submit its poison pill for shareholder ratification. 2. We vote on a case-by-case basis on shareholder proposals to redeem a company's poison pill. Considerations include: when the plan was originally adopted; financial condition of the company; terms of the poison pill. 3. We vote on a case-by-case basis on management proposals to ratify a poison pill. Considerations include: sunset provision - poison pill is submitted to shareholders for ratification or rejection every 2 to 3 years; shareholder redemption feature -10% of the shares may call a special meeting or seek a written consent to vote on rescinding the rights plan. B. Fair Price Provisions 1. We vote for fair price proposals, as long as the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares. 2. We vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions. C. Greenmail 1. We vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments. 2. We vote on a case-by-case basis on anti-greenmail proposals when they are bundled with other charter or bylaw amendments. D. Unequal Voting Rights 1. We vote against dual class exchange offers. 2. We vote against dual class re-capitalization. E. Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws 149 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1. We vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments. 2. We vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments. F. Supermajority Shareholder Vote Requirement to Approve Mergers 1. We vote against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations. 2. We vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations. G. White Squire Placements 1. We vote for shareholder proposals to require approval of blank check preferred stock issues. (6) Miscellaneous Governance Provisions A. Confidential Voting 1. We vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: in the case of a contested election, management is permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived. 2. We vote for management proposals to adopt confidential voting subject to the proviso for contested elections set forth in sub-paragraph A.1 above. B. Equal Access 1. We vote for shareholder proposals that would allow significant company shareholders equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board. C. Bundled Proposals 1. We vote on a case-by-case basis on bundled or "conditioned" proxy proposals. In the case of items that are conditioned upon each other, we examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests and therefore not in the best interests of the beneficial owners of accounts, we vote against the proposals. If the combined effect is positive, we support such proposals. D. Shareholder Advisory Committees 1. We vote on a case-by-case basis on proposals to establish a shareholder advisory committee. Considerations include: rationale and cost to the firm to form such a committee. We generally vote against such proposals if the board and key nominating committees are comprised solely of independent/outside directors. E. Other Business We vote for proposals that seek to bring forth other business matters. F. Adjourn Meeting We vote on a case-by-case basis on proposals that seek to adjourn a shareholder meeting in order to solicit additional votes. G. Lack of Information We vote against proposals if a company fails to provide shareholders with adequate information upon which to base their voting decision. (7) Capital Structure 150 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- A. Common Stock Authorization 1. We vote on a case-by-case basis on proposals to increase the number of shares of common stock authorized for issue, except as described in paragraph 2 below. 2. Subject to paragraph 3, below we vote for the approval requesting increases in authorized shares if the company meets certain criteria: a) Company has already issued a certain percentage (i.e. greater than 50%) of the company's allotment. b) The proposed increase is reasonable (i.e. less than 150% of current inventory) based on an analysis of the company's historical stock management or future growth outlook of the company. 3. We vote on a case-by-case basis, based on the input of affected portfolio managers, if holding is greater than 1% of an account. B. Stock Distributions: Splits and Dividends 1. We vote on a case-by-case basis on management proposals to increase common share authorization for a stock split, provided that the split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the split. C. Reverse Stock Splits 1. We vote for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split. D. Blank Check Preferred Stock 1. We vote against proposals to create, authorize or increase the number of shares with regard to blank check preferred stock with unspecified voting, conversion, dividend distribution and other rights. 2. We vote for proposals to create "declawed" blank check preferred stock (stock that cannot be used as a takeover defense). 3. We vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. 4. We vote for proposals requiring a shareholder vote for blank check preferred stock issues. E. Adjust Par Value of Common Stock 1. We vote for management proposals to reduce the par value of common stock. F. Preemptive Rights 1. We vote on a case-by-case basis for shareholder proposals seeking to establish them and consider the following factors: a) Size of the Company. b) Characteristics of the size of the holding (holder owning more than 1% of the outstanding shares). c) Percentage of the rights offering (rule of thumb less than 5%). 2. We vote on a case-by-case basis for shareholder proposals seeking the elimination of pre-emptive rights. G. Debt Restructuring 1. We vote on a case-by-case basis for proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. Generally, we approve proposals that facilitate debt restructuring. H. Share Repurchase Programs 151 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1. We vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. I. Dual-Class Stock 1. We vote for proposals to create a new class of nonvoting or subvoting common stock if: o It is intended for financing purposes with minimal or no dilution to current shareholders o It is not designed to preserve the voting power of an insider or significant shareholder J. Issue Stock for Use with Rights Plan 1. We vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill). K. Debt Issuance Requests When evaluating a debt issuance request, the issuing company's present financial situation is examined. The main factor for analysis is the company's current debt-to-equity ratio, or gearing level. A high gearing level may incline markets and financial analysts to downgrade the company's bond rating, increasing its investment risk factor in the process. A gearing level up to 100 percent is considered acceptable. We vote for debt issuances for companies when the gearing level is between zero and 100 percent. We view on a case-by-case basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent. Any proposed debt issuance is compared to industry and market standards. L. Financing Plans We generally vote for the adopting of financing plans if we believe they are in the best economic interests of shareholders. (8) Executive and Director Compensation In general, we vote for executive and director compensation plans, with the view that viable compensation programs reward the creation of stockholder wealth by having high payout sensitivity to increases in shareholder value. Certain factors, however, such as repricing underwater stock options without shareholder approval, would cause us to vote against a plan. Additionally, in some cases we would vote against a plan deemed unnecessary. A. OBRA-Related Compensation Proposals 1. Amendments that Place a Cap on Annual Grant or Amend Administrative Features (a) We vote for plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of the Internal Revenue Code. 2. Amendments to Added Performance-Based Goals (a) We vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of the Internal Revenue Code. 3. Amendments to Increase Shares and Retain Tax Deductions Under OBRA (a) We vote for amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) the Internal Revenue Code. 4. Approval of Cash or Cash-and-Stock Bonus Plans (a) We vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of the Internal Revenue Code. 152 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. Expensing of Options We vote for proposals to expense stock options on financial statements. C. Index Stock Options We vote on a case by case basis with respect to proposals seeking to index stock options. Considerations include whether the issuer expenses stock options on its financial statements and whether the issuer's compensation committee is comprised solely of independent directors. D. Shareholder Proposals to Limit Executive and Director Pay 1. We vote on a case-by-case basis on all shareholder proposals that seek additional disclosure of executive and director pay information. Considerations include: cost and form of disclosure. We vote for such proposals if additional disclosure is relevant to shareholder's needs and would not put the company at a competitive disadvantage relative to its industry. 2. We vote on a case-by-case basis on all other shareholder proposals that seek to limit executive and director pay. We have a policy of voting to reasonably limit the level of options and other equity-based compensation arrangements available to management to reasonably limit shareholder dilution and management compensation. For options and equity-based compensation arrangements, we vote FOR proposals or amendments that would result in the available awards being less than 10% of fully diluted outstanding shares (i.e. if the combined total of shares, common share equivalents and options available to be awarded under all current and proposed compensation plans is less than 10% of fully diluted shares). In the event the available awards exceed the 10% threshold, we would also consider the % relative to the common practice of its specific industry (e.g. technology firms). Other considerations would include, without limitation, the following: o Compensation committee comprised of independent outside directors o Maximum award limits o Repricing without shareholder approval prohibited E. Golden Parachutes 1. We vote for shareholder proposals to have golden parachutes submitted for shareholder ratification. 2. We vote on a case-by-case basis on all proposals to ratify or cancel golden parachutes. Considerations include: the amount should not exceed 3 times average base salary plus guaranteed benefits; golden parachute should be less attractive than an ongoing employment opportunity with the firm. F. Employee Stock Ownership Plans (ESOPs) 1. We vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is "excessive" (i.e., generally greater than five percent of outstanding shares). G. 401(k) Employee Benefit Plans 1. We vote for proposals to implement a 401(k) savings plan for employees. H. Stock Compensation Plans 1. We vote for stock compensation plans which provide a dollar-for-dollar cash for stock exchange. 2. We vote on a case-by-case basis for stock compensation plans which do not provide a dollar-for-dollar cash for stock exchange using a quantitative model. 153 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- I. Directors Retirement Plans 1. We vote against retirement plans for nonemployee directors. 2. We vote for shareholder proposals to eliminate retirement plans for nonemployee directors. J. Management Proposals to Reprice Options 1. We vote on a case-by-case basis on management proposals seeking approval to reprice options. Considerations include the following: o Historic trading patterns o Rationale for the repricing o Value-for-value exchange o Option vesting o Term of the option o Exercise price o Participation K. Shareholder Proposals Recording Executive and Director Pay 1. We vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation. 2. We vote against shareholder proposals requiring director fees be paid in stock only. 3. We vote for shareholder proposals to put option repricing to a shareholder vote. 4. We vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking unto account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. (9) State/Country of Incorporation A. Voting on State Takeover Statutes 1. We vote for proposals to opt out of state freezeout provisions. 2. We vote for proposals to opt out of state disgorgement provisions. B. Voting on Re-incorporation Proposals 1. We vote on a case-by-case basis on proposals to change a company's state or country of incorporation. Considerations include: reasons for re-incorporation (i.e. financial, restructuring, etc); advantages/benefits for change (i.e. lower taxes); compare the differences in state/country laws governing the corporation. C. Control Share Acquisition Provisions 1. We vote against proposals to amend the charter to include control share acquisition provisions. 2. We vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders. 3. We vote for proposals to restore voting rights to the control shares. 4. We vote for proposals to opt out of control share cashout statutes. (10) Mergers and Corporate Restructuring A. Mergers and Acquisitions 1. We vote on a case-by-case basis on mergers and acquisitions. Considerations include: benefits/advantages of the combined companies (i.e. economies of scale, operating synergies, increase in market power/share, etc...); offer price (premium or discount); change in the capital structure; impact on shareholder rights. 154 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. Corporate Restructuring 1. We vote on a case-by-case basis on corporate restructuring proposals involving minority squeeze outs and leveraged buyouts. Considerations include: offer price, other alternatives/offers considered and review of fairness opinions. C. Spin-offs 1. We vote on a case-by-case basis on spin-offs. Considerations include the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives. D. Asset Sales 1. We vote on a case-by-case basis on asset sales. Considerations include the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies. E. Liquidations 1. We vote on a case-by-case basis on liquidations after reviewing management's efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation. F. Appraisal Rights 1. We vote for proposals to restore, or provide shareholders with, rights of appraisal. G. Changing Corporate Name 1. We vote for proposals to change the "corporate name", unless the proposed name change bears a negative connotation. H. Conversion of Securities 1. We vote on a case-by-case basis on proposals regarding conversion of securities. Considerations include the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest. I. Stakeholder Provisions 1. We vote against proposals that ask the board to consider nonshareholder constituencies or other nonfinancial effects when evaluating a merger or business combination. (11) Social and Environmental Issues A. In general we vote on a case-by-case basis on shareholder social and environmental proposals, on the basis that their impact on share value can rarely be anticipated with any high degree of confidence. In most cases, however, we vote for disclosure reports that seek additional information, particularly when it appears the company has not adequately addressed shareholders' social and environmental concerns. In determining our vote on shareholder social and environmental proposals, we also analyze the following factors: 1. whether adoption of the proposal would have either a positive or negative impact on the company's short-term or long-term share value; 2. the percentage of sales, assets and earnings affected; 3. the degree to which the company's stated position on the issues could affect its reputation or sales, or leave it vulnerable to boycott or selective purchasing; 4. whether the issues presented should be dealt with through government or company-specific action; 5. whether the company has already responded in some appropriate manner to the request embodied in a proposal; 6. whether the company's analysis and voting recommendation to shareholders is persuasive; 155 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 7. what other companies have done in response to the issue; 8. whether the proposal itself is well framed and reasonable; 9. whether implementation of the proposal would achieve the objectives sought in the proposal; and 10. whether the subject of the proposal is best left to the discretion of the board. B. Among the social and environmental issues to which we apply this analysis are the following: 1. Energy and Environment 2. Equal Employment Opportunity and Discrimination 3. Product Integrity and Marketing 4. Human Resources Issues (12) Miscellaneous A. Charitable Contributions 1. We vote against proposals to eliminate, direct or otherwise restrict charitable contributions. B. Operational Items 1. We vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal. 2. We vote against proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal. 3. We vote for by-law or charter changes that are of a housekeeping nature (updates or corrections). 4. We vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable. 5. We vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable. 6. We vote against proposals to approve other business when it appears as voting item. C. Routine Agenda Items In some markets, shareholders are routinely asked to approve: o the opening of the shareholder meeting o that the meeting has been convened under local regulatory requirements o the presence of a quorum o the agenda for the shareholder meeting o the election of the chair of the meeting o regulatory filings o the allowance of questions o the publication of minutes o the closing of the shareholder meeting We generally vote for these and similar routine management proposals. D. Allocation of Income and Dividends We generally vote for management proposals concerning allocation of income and the distribution of dividends, unless the amount of the distribution is consistently and unusually small or large. E. Stock (Scrip) Dividend Alternatives 1. We vote for most stock (scrip) dividend proposals. 156 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. We vote against proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value. (13) ClearBridge has determined that registered investment companies, particularly closed end investment companies, raise special policy issues making specific voting guidelines frequently inapplicable. To the extent that ClearBridge has proxy voting authority with respect to shares of registered investment companies, ClearBridge shall vote such shares in the best interest of client accounts and subject to the general fiduciary principles set forth herein without regard to the specific voting guidelines set forth in Section V. (1) through (12). The voting policy guidelines set forth in this Section V may be changed from time to time by ClearBridge in its sole discretion. VI. OTHER CONSIDERATIONS In certain situations, ClearBridge may determine not to vote proxies on behalf of a client because ClearBridge believes that the expected benefit to the client of voting shares is outweighed by countervailing considerations. Examples of situations in which ClearBridge may determine not to vote proxies on behalf of a client include: (1) Share Blocking Proxy voting in certain countries requires "share blocking." This means that shareholders wishing to vote their proxies must deposit their shares shortly before the date of the meeting (e.g. one week) with a designated depositary. During the blocking period, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares have been returned to client accounts by the designated depositary. In deciding whether to vote shares subject to share blocking, ClearBridge will consider and weigh, based on the particular facts and circumstances, the expected benefit to clients of voting in relation to the detriment to clients of not being able to sell such shares during the applicable period. (2) Securities on Loan Certain clients of ClearBridge, such as an institutional client or a mutual fund for which ClearBridge acts as a sub-adviser, may engage in securities lending with respect to the securities in their accounts. ClearBridge typically does not direct or oversee such securities lending activities. To the extent feasible and practical under the circumstances, ClearBridge will request that the client recall shares that are on loan so that such shares can be voted if ClearBridge believes that the expected benefit to the client of voting such shares outweighs the detriment to the client of recalling such shares (e.g. foregone income). The ability to timely recall shares for proxy voting purposes typically is not entirely within the control of ClearBridge and requires the cooperation of the client and its other service providers. Under certain circumstances, the recall of shares in time for such shares to be voted may not be possible due to applicable proxy voting record dates and administrative considerations. VII. DISCLOSURE OF PROXY VOTING ClearBridge employees may not disclose to others outside of ClearBridge (including employees of other Legg Mason business units) how ClearBridge intends to vote a proxy absent prior approval from ClearBridge Legal/Compliance, except that a ClearBridge investment professional may disclose to a third party (other than an employee of another Legg Mason business unit) how it intends to vote without obtaining prior approval from ClearBridge Legal/Compliance if (1) the disclosure is intended to facilitate a discussion of publicly available information by ClearBridge personnel with a representative of a company whose securities are the subject of the proxy, (2) the company's market capitalization exceeds $1 billion and (3) ClearBridge has voting power with respect to less than 5% of the outstanding common stock of the company. If a ClearBridge employee receives a request to disclose ClearBridge's proxy voting intentions to, or is otherwise contacted by, another person outside of ClearBridge (including an employee of another Legg Mason business unit) in connection with an upcoming proxy voting matter, he/she should immediately notify ClearBridge Legal/Compliance. VIII. RECORD KEEPING AND OVERSIGHT 157 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ClearBridge shall maintain the following records relating to proxy voting: - a copy of these policies and procedures; - a copy of each proxy form (as voted); - a copy of each proxy solicitation (including proxy statements) and related materials with regard to each vote; - documentation relating to the identification and resolution of conflicts of interest; - any documents created by ClearBridge that were material to a proxy voting decision or that memorialized the basis for that decision; and - a copy of each written client request for information on how ClearBridge voted proxies on behalf of the client, and a copy of any written response by ClearBridge to any (written or oral) client request for information on how ClearBridge voted proxies on behalf of the requesting client. Such records shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the ClearBridge adviser. Each adviser to a United States Registered Investment Company shall maintain such records as are necessary to allow such fund to comply with its recordkeeping, reporting and disclosure obligations under applicable laws, rules and regulations. In lieu of keeping copies of proxy statements, ClearBridge may rely on proxy statements filed on the EDGAR system as well as on third party records of proxy statements and votes cast if the third party provides an undertaking to provide the documents promptly upon request. ClearBridge Compliance will review the proxy voting process, record retention and related matters on a periodic basis. 158 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Appendix A Memorandum To: AllClearBridge Employees From: Legal and Compliance Date: ______ ______, 2007 Re: Updated ClearBridge Proxy Voting Policies and Procedures Conflicts of Interest with respect to Proxy Voting ClearBridge Advisors (ClearBridge) currently has in place proxy voting policies and procedures designed to ensure that ClearBridge votes proxies in the best interest of client accounts. Accompanying this memorandum is a copy of ClearBridge's Proxy Voting Policies and Procedures that have been updated, effective as of _________ 2007. The proxy voting policies and procedures are designed to comply with the SEC rule under the Investment Advisers Act that addresses an investment adviser's fiduciary obligation to its clients when voting proxies. AS DISCUSSED IN MORE DETAIL BELOW, CLEARBRIDGE EMPLOYEES ARE UNDER AN OBLIGATION (i) TO BE AWARE OF THE POTENTIAL FOR CONFLICTS OF INTEREST ON THE PART OF CLEARBRIDGE IN VOTING PROXIES ON BEHALF OF CLIENT ACCOUNTS BOTH AS A RESULT OF AN EMPLOYEE'S PERSONAL RELATIONSHIPS AND DUE TO SPECIAL CIRCUMSTANCES THAT MAY ARISE DURING THE CONDUCT OF CLEARBRIDGE'S BUSINESS, AND (ii) TO BRING CONFLICTS OF INTEREST OF WHICH THEY BECOME AWARE TO THE ATTENTION OF CLEARBRIDGE COMPLIANCE. The updated proxy voting policies and procedures are substantially similar to the policies and procedures currently in effect in terms of ClearBridge's stated position on certain types of proxy issues and the factors and considerations taken into account by ClearBridge in voting on certain other types of proxy issues. While, as described in Section IV of the updated policies and procedures, ClearBridge will seek to identify significant ClearBridge client relationships and significant, publicized non-ClearBridge Legg Mason affiliate client relationships(1) which could present ClearBridge with a conflict of interest in voting proxies, all ClearBridge employees must play an important role in helping our organization identify potential conflicts of interest that could impact ClearBridge's proxy voting. ClearBridge employees need to (i) be aware of the potential for conflicts of interest on the part of ClearBridge in voting proxies on behalf of client accounts both as a result of an employee's personal relationships and due to special circumstances that may arise during the conduct of ClearBridge's business, and (ii) bring conflicts of interest of which they become aware to the attention of a ClearBridge compliance officer. A conflict of interest arises when the existence of a personal or business relationship on the part of ClearBridge or one of its employees or special circumstances that arise during the conduct of ClearBridge's business might influence, or appear to influence, the manner in which ClearBridge decides to vote a proxy. An example of a personal relationship that creates a potential conflict of interest would be a situation in which a ClearBridge employee (such as a portfolio manager or senior level executive) has a spouse or other close relative who serves as a director or senior executive of a company. An example of "special circumstances" would be explicit or implicit pressure exerted by a ClearBridge relationship to try to influence ClearBridge's vote on a proxy with respect to which the ClearBridge relationship is the issuer. Another example would be a situation in which there was contact between ClearBridge and non-ClearBridge personnel in which the non-ClearBridge Legg Mason personnel, on their own initiative or at the prompting of a client of a non-ClearBridge unit of Legg Mason, tried to exert pressure to influence ClearBridge's proxy vote(2). Of course, the foregoing examples are not exhaustive, and a variety of situations may arise that raise conflict of interest questions for ClearBridge. You are encouraged to raise and discuss 159 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- with ClearBridge Compliance particular facts and circumstances that you believe may raise conflict of interest issues for ClearBridge. As described in Section IV of the updated policies and procedures, ClearBridge has established a Proxy Voting Committee to assess the materiality of conflicts of interest brought to its attention by ClearBridge Compliance as well as to agree upon appropriate methods to resolve material conflicts of interest before proxies affected by the conflicts of interest are voted(3). As described in the updated policies and procedures, there are a variety of methods and approaches that the Proxy Voting Committee may utilize to resolve material conflicts of interest. Please note that ClearBridge employees should report all conflicts of interest of which they become aware to ClearBridge Compliance. It is up to the Proxy Voting Committee to assess the materiality of conflicts of interest brought to its attention and to agree upon an appropriate resolution with respect to conflicts of interest determined to be material. The obligation of ClearBridge employees to be sensitive to the issue of conflicts of interest and to bring conflicts of interest to the attention of ClearBridge Compliance is a serious one. Failure to do so can lead to negative legal, regulatory, and reputational consequences for the firm as well as to negative regulatory and disciplinary consequences for the ClearBridge employee. Please consult with a ClearBridge Compliance officer if you have any questions concerning your obligations with respect to conflicts of interest under the updated proxy voting policies and procedures. (1), (2) As a general matter, ClearBridge takes the position that relationships between a non-ClearBridge Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-ClearBridge Legg Mason affiliate) do not present a conflict of interest for ClearBridge in voting proxies with respect to such issuer. Such position is based on the fact that ClearBridge is operated as an independent business unit from other Legg Mason business units as well as on the existence of information barriers between ClearBridge and certain other Legg Mason business units. ClearBridge is sensitive to the fact that a significant, publicized relationship between an issuer and a non-ClearBridge Legg Mason affiliate might appear to the public to influence the manner in which ClearBridge decides to vote a proxy with respect to such issuer. As noted, ClearBridge seeks to identify such significant, publicized relationships, and for prudential reasons brings such identified situations to the attention of the Proxy Voting Committee, as described herein. Special circumstances, such as those described in the noted examples, also could cause ClearBridge to consider whether non-ClearBridge relationships between a Legg Mason affiliate and an issuer present a conflict of interest for ClearBridge with respect to such issuer. (3) Exceptions apply: (i) with respect to a proxy issue that will be voted in accordance with a stated ClearBridge position on such issue, and (ii) with respect to a proxy issue that will be voted in accordance with the recommendation of an independent third party. Such issues are not brought to the attention of the Proxy Voting Committee because ClearBridge's position is that to the extent a conflict of interest issue exists, it is resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party. 160 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Appendix B Proxy Voting Committee Members Investment Management Representatives Michael Magee Eric Thomson Peter Vanderlee Legal Representatives Leonard Larrabee Thomas Mandia Michael Scanlon Compliance Representatives Barbara Manning Brian Murphy At least one representative from each of Investment Management, Legal and Compliance must participate in any deliberations and decisions of the Proxy Voting Committee. 161 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT ADVISORS, LLC Proxy Voting Policy Applicable Regulations Rule 206(4)-6 under the Investment Advisers Act of 1940 Form N-PX ERISA Department of Labor Bulletin 94-2 Institutional Shareholder Services, Inc. (SEC No Action Letter dated September 15, 2004) Explanation/Summary of Regulatory Requirements An investment adviser that exercises voting authority over clients' proxies must adopt written policies and procedures that are reasonably designed to ensure that those proxies are voted in the best economic interests of clients. An adviser's policies and procedures must address how the adviser resolves material conflicts of interest between its interests and those of its clients. An investment adviser must comply with certain record keeping and disclosure requirements with respect to its proxy voting responsibilities. In addition, an investment adviser to Employee Retirement Income Security Act ("ERISA") accounts has an affirmative obligation to vote proxies for an ERISA account, unless the client expressly retains proxy voting authority. Policy Summary Columbia Management Advisors, LLC ("CMA") has adopted and implemented the following policy, which it believes is reasonably designed to: (1) ensure that proxies are voted in the best economic interest of clients; and (2) address material conflicts of interest that may arise. This policy applies primarily to the Global Wealth and Investment Management ("GWIM") Investment Operations Group, as well as to Compliance Risk Management ("CRM") and Legal. CRM and Business groups to whom this policy applies must adopt written procedures to implement this Policy. Policy All proxies regarding client securities for which CMA has authority to vote will, unless CMA determines in accordance with policies stated below to refrain from voting, be voted in a manner considered by CMA to be in the best interest of CMA's clients without regard to any resulting benefit or detriment to CMA or its affiliates. The best interest of clients is defined for this purpose as the interest of enhancing or protecting the economic value of client accounts, considered as a group rather than individually, as CMA determines in its sole and absolute discretion. In the event a client believes that its other interests require a different vote, CMA will vote as the client clearly instructs, provided CMA receives such instructions in time to act accordingly. Information regarding CMA's proxy voting decisions is confidential. Therefore, the information may be shared on a need to know basis only, including within CMA and with CMA affiliates. Advisory clients, including mutual funds' and other funds' boards, may obtain information on how their proxies were voted by CMA. However, CMA will not selectively disclose its investment company clients' proxy voting records to third parties. Rather, the investment company clients' proxy 162 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- records will be disclosed to shareholders by publicly-available annual filings for 12-month periods ending each year on June 30th on Form N-PX. CMA endeavors to vote, in accordance with this Policy, all proxies of which it becomes aware prior to the vote deadline date, subject to certain general exceptions described below. CMA seeks to avoid the occurrence of actual or apparent material conflicts of interest in the proxy voting process by voting in accordance with predetermined voting guidelines and observing other procedures that are intended to prevent where practicable and manage conflicts of interest (refer to Section III, Conflicts of Interest). CMA's proxy voting policy and practices are summarized in its Form ADV. Additionally, CMA will provide clients with a copy of its policies, as they may be updated from time to time, upon request. Means of Achieving Compliance I. PROXY COMMITTEE CMA has established a Proxy Committee whose standing members include senior investment management personnel, who participate as voting authorities on the Committee. Additionally, the Proxy Committee regularly involves other associates (i.e., Legal representative, CRM representatives, GWIM Investment Operations representatives, etc.) who participate as needed to enable effective execution of the Committee's responsibilities. The Proxy Committee has established a charter, which sets forth the Committee's purpose, membership and operation. The Proxy Committee's functions include, in part, (a) direction of the vote on proposals where there has been a recommendation to the Committee not to vote according to the predetermined Voting Guidelines (stated in Appendix A) or on proposals which require special, individual consideration in accordance with Section IV.C; (b) review at least annually of this Proxy Voting Policy and Voting Guidelines to ensure consistency with internal policies, client disclosures and regulatory requirements; (c) review at least annually of existing Voting Guidelines and the need for development of additional Voting Guidelines to assist in the review of proxy proposals; (d) ensure that appropriate disclosure of CMA's Proxy Voting Policy is made to its clients, is disclosed in CMA's Form ADV and is made to the Funds' shareholders; and (e) oversight of any circumstances where, as described in Section III, CMA may determine it is necessary to delegate proxy voting to an independent third party. 163 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- II. CMA'S INVESTMENT ASSOCIATES Under CMA's Voting Guidelines, certain matters must be determined on a case-by-case basis. In general, the Proxy Group within GWIM Investment Operations will refer these matters first to the relevant CMA research analyst after first confirming with CRM that the proxy matter does not present a conflict to CMA. If there is not a research analyst assigned to the particular security, the matter will be referred to the appropriate portfolio manager. In considering a particular proxy matter, the research analyst or portfolio manager must vote in the clients' best interest as defined above. Information regarding CMA's proxy voting decisions is confidential information. Therefore, research analysts and portfolio managers generally must not discuss proxy votes with any person outside of CMA and within CMA except on a need to know basis only. Research analysts and portfolio managers must discharge their responsibilities consistent with the obligations set forth below (refer to Management of Conflicts of Interest - Additional Procedures). A research analyst or portfolio manager must disclose in writing any inappropriate attempt to influence their recommendation or any other personal interest that they have with the issuer (see Appendix B - Conflicts of Interest Disclosure and Certification Form). For each Proxy Referral (defined below), the research analyst or portfolio manager is responsible for memorializing their recommendation on the Proxy Voting Recommendation Form (see Appendix C) and communicating their recommendation to the Proxy Group. Research analysts and portfolio managers should seek advice from CRM or Legal with respect to any questions that they have regarding personal conflicts of interests, communications regarding proxies, or other related matters. III. CONFLICTS OF INTEREST For purposes of this policy, a material conflict of interest is a relationship or activity engaged in by CMA, a CMA affiliate(1), or a CMA associate that creates an incentive (or appearance thereof) to favor the interests of CMA, the affiliate, or associate, rather than the clients' interests. However, a material conflict of interest is not automatically created when there is a relationship or activity engaged in by a CMA affiliate, but there is a possibility that a CMA affiliate could cause a conflict. CMA may have a conflict of interest if either CMA has a significant business relationship with a company that is soliciting a proxy, or if a CMA associate involved in the proxy voting decision-making process has a significant personal or family relationship with the particular company. A conflict of interest is considered to be "material" to the extent that a reasonable person could expect the conflict to influence CMA's decision on the particular vote at issue. In all cases where there is deemed to be a material conflict of interest, CMA will seek to resolve said conflict in the clients' best interests. 1 Bank of America Corporation ("BAC"), the ultimate corporate parent of CMA, Bank of America, N.A. and all of their numerous affiliates owns, operates and has interests in many lines of business that may create or give rise to the appearance of a conflict of interest between BAC or its affiliates and those of CMA-advised clients. For example, the commercial and investment banking business lines may have interests with respect to issuers of voting securities that could appear to or even actually conflict with CMA's duty, in the proxy voting process, to act in the best economic interest of its clients. 164 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- For those proxy proposals that: (1) are not addressed by CMA's proxy voting guidelines; (2) the guidelines specify the issue must be evaluated and determined on a case-by-case basis; or (3) a CMA investment associate believes that an exception to the guidelines may be in the best economic interest of CMA's clients (collectively, "Proxy Referrals"), CMA may vote the proxy, subject to the conflicts of interest procedures set forth below. In the case of Proxy Referrals, CRM will collect and review any information deemed reasonably appropriate to evaluate if CMA or any person participating in the proxy voting decision-making process has, or has the appearance of, a material conflict of interest. CMA investment personnel involved in the particular Proxy Referral must report any personal conflict of interest circumstances to Columbia Management's Conflicts of Interest Officer in writing (see Appendix B). CRM will consider information about CMA's significant business relationships, as well as other relevant information. The information considered by CRM may include information regarding: (1) CMA client and other business relationships; (2) any relevant personal conflicts; and (3) communications between investment professionals and parties outside the CMA investment division regarding the proxy matter. CRM will consult with relevant experts, including legal counsel, as necessary. If CRM determines that it reasonably believes (1) CMA has a material conflict of interest, or (2) certain individuals should be recused from participating in the proxy vote at issue, CRM will inform the Chair of the Proxy Committee. Where a material conflict of interest is determined to have arisen in the proxy voting process, CMA's policy is to invoke one or more of the following conflict management procedures: o Causing the proxies to be voted in accordance with the recommendations of an independent third party (which generally will be CMA's proxy voting agent); o Causing the proxies to be delegated to a qualified, independent third party, which may include CMA's proxy voting agent; or o In unusual cases, with the Client's consent and upon ample notice, forwarding the proxies to CMA's clients so that they may vote the proxies directly. Affiliate Investment Companies and Public Companies CMA considers (1) proxies solicited by open-end and closed-end investment companies for which CMA or an affiliate serves as an investment adviser or principal underwriter; and (2) proxies solicited by Bank of America Corporation ("BAC") or other public companies within the BAC organization to present a material conflict of interest for CMA. Consequently, the proxies of such affiliates will be voted following one of the conflict management practices discussed above. 165 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Management of Conflicts of Interest - Additional Procedures Additionally, by assuming his or her responsibilities pursuant to this Policy, each member of the Proxy Committee (including the chairperson) and any CMA or BAC associate advising or acting under the supervision or oversight of the Proxy Committee undertakes to disclose in writing to the Columbia Management Conflicts of Interest Officer (within CRM) any actual or apparent personal material conflicts of interest which he or she may have (e.g., relationships with nominees for directorship, members of an issuer's or dissident's management or otherwise) in determining whether or how CMA will vote proxies. In the event any member of the Proxy Committee has a conflict of interest regarding a given matter, he or she will abstain from participating in the Committee's determination of whether and/or how to vote in the matter. CMA's investment associates also follow the same disclosure requirements for any actual or apparent personal material conflicts of interest as stated in this section. In certain circumstances, CMA follows the proxy guidelines and uses other research services provided by the proxy vendor or another independent third party. CMA has undertaken a review of the proxy vendor's conflicts of interest procedures, and will continue to monitor them on an ongoing basis. CMA and other BAC affiliates have adopted various other policies and procedures that help reinforce this Policy. Please see any associated documents. Ownership Limits - Delegation of Proxy Voting to an Independent Third Party From time to time, CMA may face regulatory or compliance limits on the types or amounts of voting securities that it may purchase or hold for client accounts. Among other limits, federal, state, foreign regulatory restrictions, or company-specific ownership limits may restrict the total percentage of an issuer's voting securities that CMA can hold for clients (collectively, "Ownership Limits"). The regulations or company-specific documents governing a number of these Ownership Limits often focus upon holdings in voting securities. As a result, in limited circumstances in order to comply with such Ownership Limits and/or internal policies designed to comply with such limits, CMA may delegate proxy voting in certain issuers to a qualified, independent third party, who may be CMA's proxy voting agent. IV. PROXY VOTING GUIDELINES A. CMA's Proxy Voting Guidelines - General Practices. The Proxy Committee has adopted the guidelines for voting proxies specified in Appendix A of this policy. CMA uses an independent, third-party proxy vendor to implement its proxy voting process as CMA's proxy voting agent. In general, whenever a vote is solicited, the proxy vendor will execute the vote according to CMA's Voting Guidelines. 166 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. Ability to Vote Proxies Other than as Provided by Voting Guidelines. A Portfolio Manager or other party involved with a client's account may conclude that the best interest of the firm's client, as defined above, requires that a proxy be voted in a manner that differs from the predetermined proxy Voting Guidelines. In this situation, he or she will request that the Proxy Committee consider voting the proxy other than according to such Guidelines. If any person, group, or entity requests the Proxy Committee (or any of its members) vote a proxy other than according to the predetermined Voting Guidelines, that person will furnish to the Proxy Committee a written explanation of the reasons for the request and a description of the person's, group's, or entity's relationship, if any, with the parties proposing and/or opposing the matter's adoption using the Proxy Vote Recommendation / Proxy Committee Request Form (see Appendix C of this policy). The Proxy Committee may consider the matter, subject to the conflicts of interest procedures discussed above. C. Other Proxy Matters For the following categories, proxies will be voted as stated below: 1. New Proposals. For certain new proposals that are expected to be proposed to shareholders of multiple companies, the Proxy Committee may develop a Voting Guideline which will be incorporated into this Policy. 2. Accounts Adhering to Taft Hartley Principles. All proposals for accounts adhering to Taft Hartley principles will be voted according to the Taft Hartley Guidelines developed by the proxy vendor. 3. Accounts Adhering to Socially Responsible Principles. All proposals for accounts adhering to socially responsible principles will be voted according to the Socially Responsible Guidelines developed by the proxy vendor or as specified by the client. 4. Proxies of International Issuers. In general, CMA will refrain from voting securities in cases where international issuers impose share blocking restrictions. However, in the exceptional circumstances that CMA determines that it would be appropriate to vote such securities, all proposals for these securities will be voted only on the specific instruction of the Proxy Committee and to the extent practicable in accordance with the Voting Guidelines set forth in this Policy. Additionally, proxies will typically not be voted in markets where powers of attorney are required to be executed in order to vote shares. 5. Proxies of Investment Company Shares. Proposals on issues other than those specified in Section V.A will be voted on the specific instruction of the Proxy Committee. 6. Proxy Referrals for Passive Index Accounts. Proxy Referrals for a security that is held only within a passive index account managed by CMA's Quantitative Strategies Group and not in any other account within CMA, shall be voted according to the guidelines developed by the proxy vendor or as specified by the client. However, if a security is held within a passive index account managed by CMA's Quantitative Strategies Group and within another CMA-managed account (including without limitation an account actively managed by CMA's Quantitative Strategies Group), all proposals, including Proxy Referrals, will be voted in accordance with the Voting Guidelines, subject to the other provisions of this Policy. 167 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 7. Proxy Voting for Securities on Loan. CMA generally votes in cases where shares have been loaned from actively managed Columbia Funds as long as the shares have been recalled in a timely manner. However, CMA generally does not vote shares that have been loaned from passively managed Columbia Index Funds. Other CMA clients may have their own stock loan programs and may or may not recall their shares for proxy voting. V. VOTING PROCEDURES The Proxy Group within GWIM Investment Operations is primarily responsible for overseeing the day-to-day operations of the proxy voting process. The Proxy Group's monitoring will take into account the following elements: (1) periodic review of the proxy vendor's votes to ensure that the proxy vendor is accurately voting consistent with CMA's Voting Guidelines; and (2) review of the fund website to ensure that annual proxy voting reports are posted in a timely and accurate manner. For additional information regarding the proxy voting process, please refer to the GWIM Investment Operations Desktop Procedures. Supervision Managers and supervisory personnel are responsible for ensuring that their associates understand and follow this policy and any applicable procedures adopted by the business group to implement the policy. The Proxy Committee has ultimate responsibility for the implementation of this Policy. Escalation With the exception of conflicts of interest-related matters, issues arising under this policy should be escalated to the Proxy Committee. Issues involving potential or actual conflicts of interest should be promptly communicated to the Columbia Management Conflicts of Interest Officer. Monitoring/Oversight The Compliance Assessment Team within CRM and/or the Corporate Internal Audit Group perform periodic reviews and assessments of various lines of businesses, including a review of Columbia Management's compliance with the Proxy Voting Policy. 168 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Recordkeeping CMA will create and maintain records of each investment company's proxy record for 12-month periods ended June 30th. CMA will compile the following information for each matter relating to a portfolio security considered at any shareholder meeting during the period covered by the annual report and for which CMA was entitled to vote: o The name of the issuer of the security; o The exchange ticker symbol of the portfolio security (if symbol is available through reasonably practicable means); o The Council on Uniform Securities Identification Procedures number for the portfolio security (if number is available through reasonably practicable means); o The shareholder meeting date; o A brief identification of the matter voted on; o Whether the matter was proposed by the issuer or by a security holder; o Whether the company cast its vote on the matter; o How the company cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding the election of directors); and o Whether the company cast its vote for or against management. Business groups and support partners are responsible for maintaining all records necessary to evidence compliance with this policy. The records must be properly maintained and readily accessible in order to evidence compliance with this policy. These records include:
- ------------------------------------------------------- ---------------------------------------------------- Document Responsible Party - ------------------------------------------------------- ---------------------------------------------------- - ------------------------------------------------------- ---------------------------------------------------- Proxy Committee Meeting Minutes and Related Materials Proxy Group in GWIM Investment Operations - ------------------------------------------------------- ---------------------------------------------------- - ------------------------------------------------------- ---------------------------------------------------- Proxy Vote Recommendation Form and Supporting Proxy Group in GWIM Investment Operations Materials of Investment Management Personnel Concerning Proxy Decisions and Recommendations (or any other document created by CMA that was material to making a voting decision or that memorializes the basis for the voting decision) - ------------------------------------------------------- ---------------------------------------------------- - ------------------------------------------------------- ---------------------------------------------------- Conflicts of Interest Review Documentation, including Compliance Risk Management Conflicts of Interest Forms - ------------------------------------------------------- ---------------------------------------------------- - ------------------------------------------------------- ---------------------------------------------------- Client Communications Regarding Proxy Matters Client Service Group - ------------------------------------------------------- ---------------------------------------------------- - ------------------------------------------------------- ---------------------------------------------------- Copy of Each Applicable Proxy Statement Unless it has Investment Operations Proxy Group in GWIM been Filed with the SEC and may be Obtained from the SEC's EDGAR System - ------------------------------------------------------- ----------------------------------------------------
169 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Records should be retained for a period of not less than six years plus the current year. Records must be retained in an appropriate office of CM for the first three years. 170 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPENDIX A - CMA's Proxy Voting Policy CMA'S VOTING GUIDELINES A. The Proxy Committee has adopted the following guidelines for voting proxies: 1. Matters Relating to the Board of Directors/Corporate Governance CMA generally will vote FOR: o Proposals for the election of directors or for an increase or decrease in the number of directors, provided that no more than one-third of the Board of Directors would, presently or at any time during the previous three-year period, be from management. However, CMA generally will WITHHOLD votes from pertinent director nominees if: (i) the board as proposed to be constituted would have more than one-third of its members from management; (ii) the board does not have audit, nominating, and compensation committees composed solely of directors who qualify as being regarded as "independent," i.e. having no material relationship, directly or indirectly, with the Company, as CMA's proxy voting agent may determine (subject to the Proxy Committee's contrary determination of independence or non-independence); (iii) the nominee, as a member of the audit committee, permitted the company to incur excessive non-audit fees (as defined below regarding other business matters -- ratification of the appointment of auditors); (iv) a director serves on more than six public company boards; (v) the CEO serves on more than two public company boards other than the company's board. On a CASE-BY-CASE basis, CMA may WITHHOLD votes for a director nominee who has failed to observe good corporate governance practices or, through specific corporate action or inaction (e.g. failing to implement policies for which a majority of shareholders has previously cast votes in favor), has demonstrated a disregard for the interests of shareholders. o Proposals requesting that the board audit, compensation and/or nominating committee be composed solely of independent directors. The Audit Committee must satisfy the independence and experience requirements established by the Securities and Exchange Commission ("SEC") and the New York Stock Exchange, or appropriate local requirements for foreign securities. At least one member of the Audit Committee must qualify as a "financial expert" in accordance with SEC rules. o Proposals to declassify a board, absent special circumstances that would indicate that shareholder interests are better served by a classified board structure. CMA generally will vote FOR: o Proposals to create or eliminate positions or titles for senior management. CMA generally prefers that the role of Chairman of the Board and CEO be held by different persons unless there are compelling reasons to vote AGAINST a proposal to separate these positions, such as the existence of a counter-balancing governance structure that includes at least the following elements in addition to applicable listing standards: 171 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ( ) Established governance standards and guidelines. ( ) Full board composed of not less than two-thirds "independent" directors, as defined by applicable regulatory and listing standards. ( ) Compensation, as well as audit and nominating (or corporate governance) committees composed entirely of independent directors. ( ) A designated or rotating presiding independent director appointed by and from the independent directors with the authority and responsibility to call and preside at regularly and, as necessary, specially scheduled meetings of the independent directors to be conducted, unless the participating independent directors otherwise wish, in executive session with no members of management present. ( ) Disclosed processes for communicating with any individual director, the presiding independent director (or, alternatively, all of the independent directors, as a group) and the entire board of directors, as a group. ( ) The pertinent class of the Company's voting securities has out-performed, on a three-year basis, both an appropriate peer group and benchmark index, as indicated in the performance summary table of the Company's proxy materials. This requirement shall not apply if there has been a change in the Chairman/CEO position within the three-year period. o Proposals that grant or restore shareholder ability to remove directors with or without cause. o Proposals to permit shareholders to elect directors to fill board vacancies. o Proposals that encourage directors to own a minimum amount of company stock. o Proposals to provide or to restore shareholder appraisal rights. o Proposals to adopt cumulative voting. o Proposals for the company to adopt confidential voting. CMA will generally vote FOR shareholder proposals calling for majority voting thresholds for director elections unless the company has adopted formal corporate governance principles that present a meaningful alternative to the majority voting standard and/or provides an adequate response to both new nominees as well as incumbent nominees who fail to receive a majority of votes cast. CMA generally will vote AGAINST: o Proposals to classify boards, absent special circumstances indicating that shareholder interests would be better served by a classified board structure. o Proposals that give management the ability to alter the size of the board without shareholder approval. o Proposals that provide directors may be removed only by supermajority vote. o Proposals to eliminate cumulative voting. o Proposals which allow more than one vote per share in the election of directors. o Proposals that provide that only continuing directors may elect replacements to fill board vacancies. o Proposals that mandate a minimum amount of company stock that directors must own. o Proposals to limit the tenure of non-management directors. CMA will vote on a CASE-BY-CASE basis in contested elections of directors. CMA generally will vote on a CASE-BY-CASE basis on board approved proposals relating to corporate governance. Such proposals include, but are not limited to: o Reimbursement of proxy solicitation expenses taking into consideration whether or not CMA was in favor of the dissidents. o Proxy contest advance notice. CMA generally will vote FOR proposals that allow shareholders to submit proposals as close to the meeting date as possible while allowing for sufficient time for Company response, SEC review, and analysis by other shareholders. 172 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o CMA will vote on a CASE-BY-CASE basis to indemnify directors and officers, and AGAINST proposals to indemnify external auditors. o CMA will vote FOR the indemnification of internal auditors, unless the costs associated with the approval are not disclosed. 2. Compensation CMA generally will vote FOR management sponsored compensation plans (such as bonus plans, incentive plans, stock option plans, pension and retirement benefits, stock purchase plans or thrift plans) if they are consistent with industry and country standards. However, CMA generally is opposed to compensation plans that substantially dilute ownership interest in a company, provide participants with excessive awards, or have objectionable structural features. Specifically, for equity-based plans, if the proposed number of shares authorized for option programs (excluding authorized shares for expired options) exceeds an average of 5% of the currently outstanding shares over the previous three years or an average of 3% over the previous three years for directors only, the proposal should be referred to the Proxy Committee. The Committee will then consider the circumstances surrounding the issue and vote in the best interest of CMA's clients. CMA requires that management provide substantial justification for the repricing of options. CMA generally will vote FOR: o Proposals requiring that executive severance arrangements be submitted for shareholder ratification. o Proposals asking a company to expense stock options. o Proposals to put option repricings to a shareholder vote. o Employee stock purchase plans that have the following features: (i) the shares purchased under the plan are acquired for no less than 85% of their market value, (ii) the offering period under the plan is 27 months or less, and (iii) dilution is 10% or less. o Proposals for the remuneration of auditors if no more than 33% of the compensation costs comes from non audit activity. CMA generally will vote AGAINST: o Stock option plans that permit issuance of options with an exercise price below the stock's current market price, or that permit replacing or repricing of out-of-the money options. o Proposals to authorize the replacement or repricing of out-of-the money options. o Proposals requesting that plan administrators have advance authority to amend the terms of a plan without detailed disclosure of the specific amendments. When sufficient details are provided on the amendments permitted by the advance authority, CMA will recommend on such proposals on a CASE-BY-CASE basis CMA will vote on a CASE-BY-CASE basis proposals regarding approval of specific executive severance arrangements. 3. Capitalization CMA generally will vote FOR: o Proposals to increase the authorized shares for stock dividends, stock splits (and reverse stock splits) or general issuance, unless proposed as an anti-takeover measure or a general issuance proposal increases the authorization by more than 30% without a clear need presented by the company. Proposals for reverse stock splits should include an overall reduction in authorization. For companies recognizing preemptive rights for existing shareholders, CMA generally will vote FOR general issuance proposals that increase the authorized shares by more than 30%. CMA will vote on a CASE-BY-CASE basis all such proposals by companies that do not recognize preemptive rights for existing shareholders. 173 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Proposals for the elimination of authorized but unissued shares or retirement of those shares purchased for sinking fund or treasury stock. o Proposals to institute/renew open market share repurchase plans in which all shareholders may participate on equal terms. o Proposals to reduce or change the par value of common stock, provided the number of shares is also changed in order to keep the capital unchanged. CMA will evaluate on a CASE-BY-CASE basis proposals regarding: o Management proposals that allow listed companies to de-list and terminate the registration of their common stock. CMA will determine whether the transaction enhances shareholder value by giving consideration to: ( ) Whether the company has attained benefits from being publicly traded. ( ) Cash-out value ( ) Balanced interests of continuing vs. cashed-out shareholders ( ) Market reaction to public announcement of transaction 4. Mergers, Restructurings and Other Transactions CMA will review, on a CASE-BY-CASE basis, business transactions such as mergers, acquisitions, reorganizations, liquidations, spinoffs, buyouts and sale of all or substantially all of a company's assets. 5. Anti-Takeover Measures CMA generally will vote AGAINST proposals intended largely to avoid acquisition prior to the occurrence of an actual event or to discourage acquisition by creating a cost constraint. With respect to the following measures, CMA generally will vote as follows: Poison Pills o CMA votes FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. o CMA generally votes FOR shareholder proposals to eliminate a poison pill. o CMA generally votes AGAINST management proposals to ratify a poison pill. Greenmail o CMA will vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or to otherwise restrict a company's ability to make greenmail payments. Supermajority vote o CMA will vote AGAINST board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights and charter amendments adopting control share acquisition provisions. Control Share Acquisition Provisions o CMA will vote FOR proposals to opt out of control share acquisition statutes. 6. Other Business Matters CMA generally will vote FOR: o Bylaw amendments giving holders of at least 25% of outstanding common stock the ability to call a special meeting of stockholders. 174 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Board governance document amendments or other proposals which give the lead independent director the authority to call special meetings of the independent directors at any time. CMA generally will vote FOR: o Proposals to approve routine business matters such as changing the company's name and procedural matters relating to the shareholder meeting such as approving the minutes of a prior meeting. o Proposals to ratify the appointment of auditors, unless any of the following apply in which case CMA will generally vote AGAINST the proposal: o Credible reason exists to question: |X| The auditor's independence, as determined by applicable regulatory requirements. |X| The accuracy or reliability of the auditor's opinion as to the company's financial position. o Fees paid to the auditor or its affiliates for "non-audit" services were excessive, i.e., in excess of the total fees paid for "audit," "audit-related" and "tax compliance" and/or "tax return preparation" services, as disclosed in the company's proxy materials. o Bylaw or charter changes that are of a housekeeping nature (e.g., updates or corrections). o Proposals to approve the annual reports and accounts provided the certifications required by the Sarbanes Oxley Act of 2002 have been provided. CMA generally will vote AGAINST: o Proposals to eliminate the right of shareholders to act by written consent or call special meetings. o Proposals providing management with authority to adjourn an annual or special shareholder meeting absent compelling reasons, or to adopt, amend or repeal bylaws without shareholder approval, or to vote unmarked proxies in favor of management. o Shareholder proposals to change the date, time or location of the company's annual meeting of shareholders. CMA will vote AGAINST: o Authorization to transact other unidentified substantive (as opposed to procedural) business at a meeting. CMA will vote on a CASE-BY-CASE basis: o Proposals to change the location of the company's state of incorporation. CMA considers whether financial benefits (e.g., reduced fees or taxes) likely to accrue to the company as a result of a reincorporation or other change of domicile outweigh any accompanying material diminution of shareholder rights. o Proposals on whether and how to vote on "bundled" or otherwise conditioned proposals, depending on the overall economic effects upon shareholders. CMA generally will ABSTAIN from voting on shareholder proposals predominantly involving social, socio-economic, environmental, political or other similar matters on the basis that their impact on share value can rarely be anticipated with any high degree of confidence. CMA may, on a CASE-BY-CASE basis, vote: o FOR proposals seeking inquiry and reporting with respect to, rather than cessation or affirmative implementation of, specific policies where the pertinent issue warrants separate communication to shareholders; and o FOR or AGAINST the latter sort of proposal in light of the relative benefits and detriments (e.g. distraction, costs, other burdens) to share value which may be expected to flow from passage of the proposal. 7. Other Matters Relating to Foreign Issues CMA generally will vote FOR: 175 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Most stock (scrip) dividend proposals. CMA votes AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value. o Proposals to capitalize the company's reserves for bonus issues of shares or to increase the par value of shares. o Proposals to approve control and profit transfer agreements between a parent and its subsidiaries. o Management proposals seeking the discharge of management and supervisory board members, unless there is concern about the past actions of the company's auditors/directors and/or legal action is being taken against the board by other shareholders. o Management proposals concerning allocation of income and the distribution of dividends, unless the proxy vendor would vote against such proposal in accordance with its guidelines, in which case CMA will evaluate the proposal on a CASE-BY-CASE basis. o Proposals for the adoption of financing plans if they are in the best economic interests of shareholders. CMA will generally vote FOR proposals to approve Directors' Fees, unless the proxy vendor would vote against such proposal in accordance with its guidelines, in which case CMA will evaluate the proposal on a CASE-BY-CASE basis. CMA will evaluate management proposals to approve protective preference shares for Netherlands located company-friendly foundations proposals on a CASE-BY-CASE basis and will only support resolutions if: o The supervisory board needs to approve an issuance of shares while the supervisory board is independent within the meaning of CMA' categorization rules and the Dutch Corporate Governance Code. o No call/put option agreement exists between the company and the foundation. o There is a qualifying offer clause or there are annual management and supervisory board elections. o The issuance authority is for a maximum of 18 months. o The board of the company-friendly foundation is independent. o The company has disclosed under what circumstances it expects to make use of the possibility to issue preference shares. o There are no priority shares or other egregious protective or entrenchment tools. o The company releases its proxy circular, with details of the poison pill proposal, at least three weeks prior to the meeting. o Art 2:359c Civil Code of the legislative proposal has been implemented. 8. INVESTMENT COMPANY MATTERS Election of Directors: CMA will vote on a CASE-BY-CASE basis proposals for the election of directors, considering the following factors: o Board structure o Attendance at board and committee meetings. CMA will WITHHOLD votes from directors who: o Attend less than 75 percent of the board and committee meetings without a valid excuse for the absences. Valid reasons include illness or absence due to company business. Participation via telephone is acceptable. In addition, if the director missed only one meeting or one day's meetings, votes should not be withheld even if such absence dropped the director's attendance below 75 percent. o Ignore a shareholder proposal that is approved by a majority of shares outstanding; o Ignore a shareholder proposal this is approved by a majority of the votes cast for two consecutive years; o Are interested directors and sit on the audit or nominating committee; or 176 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Are interested directors and the full board serves as the audit or nominating committee or the company does not have one of these committees. Proxy Contests: CMA will vote on a CASE-BY-CASE basis proposals for proxy contests, considering the following factors: o Past performance relative to its peers o Market in which fund invests o Measures taken by the board to address the pertinent issues (e.g., closed-end fund share market value discount to NAV) o Past shareholder activism, board activity and votes on related proposals o Strategy of the incumbents versus the dissidents o Independence of incumbent directors; director nominees o Experience and skills of director nominees o Governance profile of the company o Evidence of management entrenchment Converting Closed-end Fund to Open-end Fund: CMA will vote conversion proposals on a CASE-BY-CASE basis, considering the following factors: o Past performance as a closed-end fund o Market in which the fund invests o Measures taken by the board to address the discount o Past shareholder activism, board activity, and votes on related proposals. Investment Advisory Agreements: CMA will vote investment advisory agreements on a CASE-BY-CASE basis, considering the following factors: o Proposed and current fee schedules o Fund category/investment objective o Performance benchmarks o Share price performance as compared with peers o Resulting fees relative to peers o Assignments (where the adviser undergoes a change of control) Approving New Classes or Series of Shares: CMA will vote FOR the establishment of new classes or series of shares. Preferred Stock Proposals: CMA will vote on a CASE-BY-CASE basis proposals for the authorization for or increase in the preferred shares, considering the following factors: 177 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Stated specific financing purpose o Possible dilution for common shares o Whether the shares can be used for antitakeover purposes Policies Addressed by the Investment Company Act of 1940 ("1940 Act"): CMA will vote proposals regarding adoption or changes of policies addressed by the 1940 Act on a CASE-BY-CASE basis, considering the following factors: o Potential competitiveness o Regulatory developments o Current and potential returns o Current and potential risk CMA generally will vote FOR these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with current SEC interpretations. Changing a Fundamental Restriction to a Non-fundamental Restriction: CMA will vote on a CASE-BY-CASE basis proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors: o Fund's target investments o Reasons given by the fund for the change o Projected impact of the change on the portfolio Change Fundamental Investment Objective to Non-fundamental: CMA will vote AGAINST proposals to change a fund's investment objective from fundamental to non-fundamental unless management acknowledges meaningful limitations upon its future requested ability to change the objective Name Change Proposals: CMA will vote on a CASE-BY-CASE basis proposals to change a fund's name, considering the following factors: o Political/economic changes in the target market o Consolidation in the target market o Current asset composition Change in Fund's Subclassification: CMA will vote on a CASE-BY-CASE basis proposals to change a fund's subclassification, considering the following factors: 178 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Potential competitiveness o Current and potential returns o Risk of concentration o Consolidation in target industry Disposition of Assets/Termination/Liquidation: CMA will vote on a CASE-BY-CASE basis these proposals, considering the following factors: o Strategies employed to salvage the company o Past performance of the fund o Terms of the liquidation Changes to the Charter Document: CMA will vote on a CASE-BY-CASE basis proposals to change the charter document, considering the following factors: o The degree of change implied by the proposal o The efficiencies that could result o The state of incorporation; net effect on shareholder rights o Regulatory standards and implications CMA will vote FOR: o Proposals allowing the Board to impose, without shareholder approval, fees payable upon redemption of fund shares, provided imposition of such fees is likely to benefit long-term fund investors (e.g., by deterring market timing activity by other fund investors) o Proposals enabling the Board to amend, without shareholder approval, the fund's management agreement(s) with its investment adviser(s) or sub-advisers, provided the amendment is not required by applicable law (including the Investment Company Act of 1940) or interpretations thereunder to require such approval CMA will vote AGAINST: o Proposals enabling the Board to: o Change, without shareholder approval the domicile of the fund o Adopt, without shareholder approval, material amendments of the fund's declaration of trust or other organizational document Changing the Domicile of a Fund: CMA will vote on a CASE-BY-CASE basis proposals to reincorporate, considering the following factors: o Regulations of both states o Required fundamental policies of both states o The increased flexibility available Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval: 179 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- CMA will vote FOR proposals to enable the Board or Investment Adviser to hire and terminate sub-advisers, without shareholder approval, in accordance with applicable rules or exemptive orders under the Investment Company Act of 1940 Distribution Agreements: CMA will vote these proposals on a CASE-BY-CASE basis, considering the following factors: o Fees charged to comparably sized funds with similar objectives o The proposed distributor's reputation and past performance o The competitiveness of the fund in the industry o Terms of the agreement Master-Feeder Structure: CMA will vote FOR the establishment of a master-feeder structure. MERGERS: CMA will vote merger proposals on a CASE-BY-CASE basis, considering the following factors: o Resulting fee structure o Performance of both funds o Continuity of management personnel o Changes in corporate governance and their impact on shareholder rights Shareholder Proposals to Establish Director Ownership Requirement: CMA will generally vote AGAINST shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While CMA favors stockownership on the part of directors, the company should determine the appropriate ownership requirement. Shareholder Proposals to Reimburse Shareholder for Expenses Incurred: CMA will vote on a CASE-BY-CASE basis proposals to reimburse proxy solicitation expenses. Shareholder Proposals to Terminate the Investment Adviser: CMA will vote on a CASE-BY-CASE basis proposals to terminate the investment adviser, considering the following factors: o Performance of the fund's NAV o The fund's history of shareholder relations o The performance of other funds under the adviser's management 180 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPENDIX B Conflicts of Interest Disclosure and Certification Form Conflict Review Questionnaire for Proxy Voting Working Group Members and Other Individuals Participating in the Proxy Voting Decision-Making Process. Instructions: Please complete each of the questions. Please provide an explanation for any affirmative responses. Return the completed questionnaire to Columbia Management Conflicts of Interest Officer. - -------------------------------------------------------------------------------- Issuer and Proxy Matter: 1. Do you or any member of your immediate family have an existing (or potential) business, financial, personal or other relationship with any management personnel of the issuer(1)? 2. Do you or any member of your immediate family have an existing (or potential) business, financial, personal or other relationship with any person participating, supporting, opposing or otherwise connected with the particular proxy proposal (e.g., principals of the issuer; director nominees of issuer company; shareholder activists)? 3. Have you discussed this particular proxy proposal with anyone outside of Columbia Management's investment group(2)? (1) Personal investing in the issuer by you or a member of your immediate family does not require an affirmative response to this item. 181 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (2) Communications with issuer or solicitors in the regular course of business would not have to be disclosed on this form. 4. Are you aware of any other potential personal conflicts of interest not described above? Please detail below. Name: Signed: Date: 182 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPENDIX C CMA Proxy Vote Recommendation/Proxy Committee Request Form Name of Investment Associate: Company Name: Overview of Proxy Vote and Meeting Date: Proxy Agenda Item(s) Description of Item: (The above information will be pre-populated by the Proxy Department.) Recommendation (FOR , AGAINST, ABSTAIN) including brief rationale: Please attach any supporting information other than analysis or reports provided by the Proxy Department. - ---------------------------------------------------------------- Signed By signing, I am certifying that I either have no conflicts of interest-related information to report or have sent a completed "Conflicts of Interest Disclosure and Certification Form" to Compliance Risk Management (Conflicts Officer). - -------------------------------------------------------------------------------- Send Completed Forms to: GWIM Investment Operations - Proxy Department or In the case of Proxy Votes to be referred to the Proxy Committee, submit this form and materials to the Chair of the Proxy Committee 183 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- DAVIS SELECTED ADVISERS, LP (Davis Advisors') Proxy Voting Policies and Procedures Amended as of June 2, 2006 I. INTRODUCTION Davis Advisors votes on behalf of its clients in matters of corporate governance through the proxy voting process. Davis Advisors takes its ownership responsibilities very seriously and believes the right to vote proxies for its clients' holdings is a significant asset of the clients. Davis Advisors exercises its voting responsibilities as a fiduciary, solely with the goal of maximizing the value of its clients' investments. Davis Advisors votes proxies with a focus on the investment implications of each issue. For each proxy vote, Davis Advisors takes into consideration its duty to clients and all other relevant facts available to Davis Advisors at the time of the vote. Therefore, while these guidelines provide a framework for voting, votes are ultimately cast on a case-by-case basis. Davis Advisors has established a Proxy Oversight Group to oversee voting policies and deal with potential conflicts of interest. In evaluating issues, the Proxy Oversight Group may consider information from many sources, including the portfolio manager for each client account, management of a company presenting a proposal, shareholder groups, and independent proxy research services. II. GUIDING PRINCIPLES Proxy voting is a valuable right of company shareholders. Through the voting mechanism, shareholders are able to protect and promote their interests by communicating views directly to the company's board, as well as exercise their right to grant or withhold approval for actions proposed by the board of directors or company management. The interests of shareholders are best served by the following principles when considering proxy proposals: Creating Value for Existing Shareholders. The most important factors that we consider in evaluating proxy issues are: (i) the Company's or management's long-term track record of creating value for shareholders. In general, we will consider the recommendations of a management with a good record of creating value for shareholders as more credible than the recommendations of managements with a poor record; (ii) whether, in our estimation, the current proposal being considered will significantly enhance or detract from long-term value for existing shareholders; and (iii) whether a poor record of long term performance resulted from poor management or from factors outside of managements control. Other factors which we consider may include: (a) Shareholder Oriented Management. One of the factors that Davis Advisors considers in selecting stocks for investment is the presence of shareholder-oriented management. In general, such managements will have a large ownership stake in the company. They will also have a record of taking actions and supporting policies designed to increase the value of the company's shares and thereby enhance shareholder wealth. Davis Advisors' research analysts are active in meeting with top management of portfolio companies and in discussing their views on policies or actions which could enhance shareholder value. Whether management shows evidence of responding to reasonable shareholder suggestions, and otherwise improving general corporate governance, is a factor which may be taken into consideration in proxy voting. (b) Allow responsible management teams to run the business. Because we try generally to invest with "owner oriented" managements (see above), we vote with the recommendation of management on most routine matters, unless 184 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- circumstances such as long standing poor performance or a change from our initial assessment indicate otherwise. Examples include the election of directors and ratification of auditors. Davis Advisors supports policies, plans and structures that give management teams appropriate latitude to run the business in the way that is most likely to maximize value for owners. Conversely, Davis Advisors opposes proposals that limit management's ability to do this. Davis Advisors will generally vote with management on shareholder social and environmental proposals on the basis that their impact on share value is difficult to judge and is therefore best done by management. (c) Preserve and expand the power of shareholders in areas of corporate governance - Equity shareholders are owners of the business, and company boards and management teams are ultimately accountable to them. Davis Advisors supports policies, plans and structures that promote accountability of the board and management to owners, and align the interests of the board and management with owners. Examples include: annual election of all board members and incentive plans that are contingent on delivering value to shareholders. Davis Advisors generally opposes proposals that reduce accountability or misalign interests, including but not limited to classified boards, poison pills, excessive option plans, and repricing of options. (d) Support compensation policies that reward management teams appropriately for performance. We believe that well thought out incentives are critical to driving long-term shareholder value creation. Management incentives ought to be aligned with the goals of long-term owners. In our view, the basic problem of skyrocketing executive compensation is not high pay for high performance, but high pay for mediocrity or worse. In situations where we feel that the compensation practices at companies we own are not acceptable, we will exercise our discretion to vote against compensation committee members and specific compensation proposals. Davis Advisors exercises its professional judgment in applying these principles to specific proxy votes. Exhibit A, "Detailed Proxy Voting Policies" provides additional explanation of the analysis which Davis Advisors may conduct when applying these guiding principles to specific proxy votes. III. FIDUCIARY DUTIES OF CARE AND LOYALTY Advisers are fiduciaries. As fiduciaries, advisers must act in the best interests of their clients. Thus, when voting portfolio securities, Davis Advisors must act in the best interest of the client and not in its own interest. When Davis Advisors has been granted the authority to vote client proxies, Davis Advisors owes the client the duties of "care" and "loyalty": (1) The duty of care requires Davis Advisors to monitor corporate actions and vote client proxies if it has undertaken to do so. (2) The duty of loyalty requires Davis Advisors to cast the proxy votes in a manner that is consistent with the best interests of the client and not subrogate the client's interest to Davis Advisors' own interests. IV. DETAILED PROXY VOTING POLICIES Section II, "Guiding Principles" describe Davis Advisors' pre-determined proxy voting policies. Exhibit A, Detailed Proxy Voting Policies provides greater insight into specific factors which Davis Advisors may sometimes consider. 185 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- V. ENSURING PROXIES ARE VOTED The Chief Compliance Officer is responsible for monitoring corporate actions and voting client proxies if Davis Advisors has been assigned the right to vote the proxies. Scope. If a client has not authorized Davis Advisors to vote its proxies, then these Policies and Procedures shall not apply to that client's account. The scope of Davis Advisors' responsibilities with respect to voting proxies are ordinarily determined by Davis Advisors' contracts with its clients, the disclosures it has made to its clients, and the investment policies and objectives of its clients. COST/BENEFIT ANALYSIS. DAVIS ADVISORS IS NOT REQUIRED TO VOTE EVERY PROXY. THERE MAY BE TIMES WHEN REFRAINING FROM VOTING A PROXY IS IN THE CLIENT'S BEST INTEREST, SUCH AS WHEN DAVIS ADVISORS DETERMINES THAT THE COST OF VOTING THE PROXY EXCEEDS THE EXPECTED BENEFIT TO THE CLIENT. DAVIS ADVISORS SHALL NOT, HOWEVER, IGNORE OR BE NEGLIGENT IN FULFILLING THE OBLIGATION IT HAS ASSUMED TO VOTE CLIENT PROXIES. Davis Advisors is not expected to expend resources if it has no reasonable expectation that doing so will provide a net benefit to its clients. For example, if clients hold only a small position in a company, or if the company's shares are no longer held by Davis Advisors clients at the time of the meeting, a decision to not vote the proxies, engage management in discussions, or to sell the securities rather than fight the corporate action, may be appropriate, particularly if the issue involved would not significantly affect the value of clients' holdings. Practical Limitations Relating To Proxy Voting While Davis Advisors uses it best efforts to vote proxies, it may not be practical or possible to vote every client proxy. For example, (i) when a client has loaned securities to a third party and Davis Advisors or the client is unable to recall the securities before record date; (ii) if Davis does not receive the proxy ballot/statement in time to vote the proxy; or (iii) if Davis is unable to meet the requirements necessary to vote foreign securities (e.g., shareblocking). Errors by Proxy Administrators. Davis Advisors may use a proxy administrator or administrators to cast its proxy votes. Errors made by these entities may be beyond Davis' Advisors' control to prevent or correct. Record of Voting The Chief Compliance Officer shall maintain records of how client proxies were voted. The Chief Compliance Officer shall also maintain a record of all votes which are inconsistent with Guiding Principles. VI. Identifying and Resolving Potential Conflicts of Interest POTENTIAL CONFLICTS OF INTEREST A potential conflict of interest arises when Davis Advisors has business interests that may not be consistent with the best interests of its client. In reviewing proxy issues to identify any potential material conflicts between Davis Advisors' interests and those of its clients, Davis Advisors will consider: 186 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (1) Whether Davis Advisors has an economic incentive to vote in a manner that is not consistent with the best interests of its clients. For example, Davis Advisors may have an economic incentive to vote in a manner that would please corporate management in the hope that doing so might lead corporate management to direct more business to Davis Advisors. Such business could include managing company retirement plans or serving as sub-adviser for funds sponsored by the company; or (2) Whether there are any business or personal relationships between a Davis Advisors employee and the officers or directors of a company whose securities are held in client accounts that may create an incentive to vote in a manner that is not consistent with the best interests of its clients. Identifying Potential Conflicts of Interest The Chief Compliance Officer is responsible for identifying potential material conflicts of interest and voting the proxies in conformance with direction received from the Proxy Oversight Group. The Chief Compliance Officer shall bring novel or ambiguous issues before the Proxy Oversight Group for guidance. Assessing Materiality. Materiality will be defined as the potential to have a significant impact on the outcome of a proxy vote. A conflict will be deemed material If (i) Davis Advisors' clients control more than 2 1/2% of the voting company's eligible vote; and (ii) more than 2 1/2% of Davis Advisors' assets under management are controlled by the voting company. If either part of this two part test is not met, then the conflict will be presumed to be immaterial. Materiality will be judged by facts reasonably available to Davis Advisors at the time the materiality determination is made and Davis Advisors is not required to investigate remote relationships or affiliations. Resolving Potential Conflicts of Interest The Proxy Oversight Group is charged with resolving material potential conflicts of interest which it becomes aware of. It is charged with resolving conflicts in a manner that is consistent with the best interests of clients. There are many acceptable methods of resolving potential conflicts, and the Proxy Oversight Group shall exercise its judgment and discretion to determine an appropriate means of resolving a potential conflict in any given situation: (1) Votes consistent with the Guiding Principles listed in Section II. are presumed to be consistent with the best interests of clients; (2) Davis Advisors may disclose the conflict to the client and obtain the client's consent prior to voting the proxy; (3) Davis Advisors may obtain guidance from an independent third party; (4) The potential conflict may be immaterial; or (5) Other reasonable means of resolving potential conflicts of interest which effectively insulate the decision on how to vote client proxies from the conflict. VII. PROXY OVERSIGHT GROUP Davis Advisors has established a Proxy Oversight Group, a committee of senior Davis Advisors officers, to oversee voting policies and decisions for clients. The Proxy Oversight Group: (1) Establishes, amends, and interprets proxy voting policies and procedures; and (2) Resolves conflicts of interest identified by the Compliance Department. Composition of the Proxy Oversight Group The following are the members of the Proxy Oversight Group. Davis Advisors': 187 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (1) A Proxy Analyst as designated by the Chief Investment Officer from time to time; (2) Davis Advisors' Chief Compliance Officer; and (3) Davis Advisors' Chief Legal Officer. Two or more members shall constitute a quorum. Meetings may be held by telephone. A vote by a majority of the Proxy Oversight Group shall be binding. Action may be taken without a meeting by memorandum signed by two or more members. VIII. SHAREHOLDER ACTIVISM Davis Advisors' fiduciary duties to its clients do not necessarily require Davis Advisors to become a "shareholder activist." As a practical matter, Davis Advisors will determine whether to engage in management discussion based upon its costs and expected benefits to clients. Prior to casting a single vote, Davis Advisors may use its influence as a large shareholder to highlight certain management practices. Consistent with its fiduciary duties, Davis Advisors may discuss with company management its views on key issues that affect shareholder value. Opening lines of communication with company management to discuss these types of issues can often prove beneficial to Davis Advisors' clients. IX. OBTAINING COPIES OF DAVIS ADVISORS' PROXY VOTING POLICIES AND PROCEDURES AND/OR HOW PROXIES WERE VOTED Davis Advisors' clients may obtain a copy of Davis Advisors' Proxy Voting Policies and Procedures and/or a record of how their own proxies were voted by writing to: Davis Selected Advisers, L.P. Attn: Chief Compliance Officer 2949 East Elvira Road, Suite 101 Tucson, Arizona, 85706 Information regarding how mutual funds managed by Davis Advisors voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available through the Funds' website (http://www.davisfunds.com, http://www.selectedfunds.com, and http://www.clipperfund.com) and also on the SEC's website at http://www.sec.gov. No party is entitled to obtain a copy of how proxies other than their own were voted without valid government authority. X. SUMMARY OF PROXY VOTING POLICIES AND PROCEDURES Davis Advisors shall maintain a summary of its Proxy Voting Policies and Procedures which also describes how a client may obtain a copy of Davis Advisors' Proxy Voting Policies and Procedures. This summary shall be included in Davis Advisors' Form ADV Part II, which is delivered to all new clients. XI. RECORDS Davis Advisors' Chief Compliance Officer shall retain for the legally required periods the following records: (a) Copies of Davis Advisors' Proxy Voting Policies and Procedures and each amendment thereof; 188 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (b) Proxy statements received regarding client securities; (c) Records of votes Davis Advisors cast on behalf of clients; (d) Records of written client requests for proxy voting information and Davis Advisors' response; and (e) Any documents prepared by Davis Advisors that were material to making a decision how to vote, or that memorialized the basis of the decision. XII. AMENDMENTS Davis Advisors' Proxy Oversight Group may amend these Proxy Voting Policies and Procedures from time to time. Clients shall be notified of material changes. Exhibit A Davis Selected Advisers, L.P. Detailed Proxy Voting Policies As Amended: June 2, 2006 The Guiding Principles control Davis Advisors' Proxy Voting. Davis Advisors attempts to votes proxies in conformance with the Guiding Principles articulated in Section II of the Proxy Voting Policies and Procedures. Following is additional explanation of the analysis which Davis Advisors may conduct when applying these Guiding Principles to specific proxy votes. We will NOT vote as indicated below if, in our judgment, the result would be contrary to our Guiding Principles. I. The Board of Directors II. Executive Compensation III. Tender Offer Defenses IV. Proxy Contests V. Proxy Contest Defenses VI. Auditors VII. Miscellaneous Governance Provisions VIII. State of Incorporation IX. Mergers and Corporate Restructuring X. Social and Environmental Issues XI. Capital Structure I. The Board of Directors A. Voting on Director Nominees in Uncontested Elections (1) We generally vote with management in the routine election of Directors. As Directors are elected to represent the economic interests of shareholders, our voting on Director Nominees may be shaped by our assessment of a director's record in representing the interests of shareholders. The most important responsibility of a director is the selection, evaluation and compensation of senior management, and we pay particular attention to directors' 189 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- performance in this area. In assessing a director's performance in selecting and evaluating management, the primary consideration is the company's long-term track record of creating value for shareholders. In terms of their record on compensation, long-term results will also be a key consideration. Philosophically, we look for directors to construct long-term compensation plans that do not allow for senior executives to be excessively compensated if long-term returns to shareholders are poor. We prefer directors to specify the benchmarks or performance hurdles by which they are evaluating management's performance. Appropriate hurdles may include the company's performance relative to its peers and the S&P 500 as well as its cost of equity capital. We expect directors to construct plans such that incentive compensation will not be paid if performance is below these hurdles. (2) In addition, we believe that stock option re-pricings and exchanges sever the alignment of employee and shareholder interests. Therefore, we will generally withhold votes for any director of any company that has allowed stock options to be re-priced or exchanged at lower prices in the previous year. (3) Directors also bear responsibility for the presentation of a company's financial statements and for the choice of broad accounting policies. We believe directors should favor conservative policies. Such policies may include reasonable pension return assumptions and appropriate accounting for stock based compensation, among others. (4) In voting on director nominees, we may also consider the following factors in order of importance: (i) long-term corporate performance:; (ii) nominee's business background and experience; (iii) nominee's investment in the company: (iv) nominee's ethical track record: (v) whether a poor record of long term performance resulted from poor management or from factors outside of managements control: (vi) corporate governance provisions and takeover activity (discussed in Sections III and IV): (vii) interlocking directorships: and (viii) other relevant information B. Majority Voting. We will generally vote for proposals that require a majority vote standard whereby directors must submit their resignation for consideration by the board of directors when they receive less than a majority of the vote cast. We will review on a case-by-case basis proposals that require directors to receive greater than a majority of the vote cast in order to remain on the board. C. Cumulative Voting. We may either support or vote against cumulative voting depending on the specific facts and circumstances. B. Classification/Declassification of the Board We generally vote against proposals to classify the board. We generally vote for proposals to repeal classified boards and to elect all directors annually. 190 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- II. Executive Compensation A. Stock Options, Bonus Plans. In general, we consider executive compensation such as stock option plans and bonus plans to be ordinary business activity. We analyze stock option plans, paying particular attention to their dilutive effects. While we generally support management proposals, we oppose compensation plans which we consider to be excessive. We believe in paying for performance. We recognize that compensation levels must be competitive and realistic and that under a fair system exceptional managers deserve to be paid exceptionally well. Our test to determine whether or not a proposal for long-term incentive compensation is appropriate is based on the following two questions. 1. Over the long-term, what is the minimum level of shareholder returns below which management's performance would be considered poor? o Performance below that of the S&P 500. o Performance below a pre-selected group of competitors. o Performance below the company's cost of equity capital. 2. Does the company's proposed incentive compensation plan (including options and restricted stock) allow for the management to receive significant incentive compensation if long-term returns to shareholders fall below the answer specified above? In most cases, the answer to the first question is unspecified. In virtually all cases, the answer to the second question is "yes," as most companies use non-qualified stock options and restricted stock for the bulk of their long-term compensation. These options and shares will become enormously valuable even if the shares compound at an unacceptably low rate - or actually do not go up at all but are simply volatile - over the long term. A fair system of long-term incentive compensation should include a threshold rate of performance below which incentive compensation is not earned. To the extent that long-term incentive compensation proposals are put to a vote, we will examine the long-term track record of the management team, past compensation history, and use of appropriate performance hurdles. We will generally vote against any proposal to allow stock options to be re-priced or exchanged at lower prices. We will generally vote against multi-year authorizations of shares to be used for compensation unless the company's past actions have been consistent with these policies. We will generally vote in favor of shareholder proposals advocating the addition of performance criteria to long-term compensation plans. B. Positive Compensation Practices. Examples of the positive compensation practices we look for in both selecting companies and deciding how to cast our proxy votes include: (1) A high proportion of compensation derived from variable, performance-based incentives; (2) Incentive formulas that cut both ways , allowing for outsized pay for outsized performance but ensuring undersized pay when performance is poor; (3) Base salaries that are not excessive; 191 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (4) Company-wide stock-based compensation grants that are capped at reasonable levels to limit dilution; (5) Stock-based compensation that appropriately aligns management incentives with shareholders, with a strong preference for equity plans that have a cost-of-capital charge or escalating strike price feature as opposed to ordinary restricted stock or plain vanilla options; (6) Appropriate performance targets and metrics, spelled out in detail in advance of the performance period; (7) Full and clear disclosure of all forms of management compensation and stock ownership (including full listing of the dollar value of perquisites, value of CEO change of control and termination provisions, pensions, and detail on management's direct ownership of stock vs. option holdings, ideally presented in a format that is easy to compare and tally rather than tucked away in footnotes); (8) Compensation committee members with the experience and wherewithal to make the tough decisions that frequently need to be made in determining CEO compensation; (9) Policies that require executives to continue holding a meaningful portion of their equity compensation after vesting/exercise; (10) Appropriate cost allocation of charges for stock-based compensation; (11) Thoughtful evaluation of the present value tradeoff between options, restricted stock and other types of compensation; and (12) Compensation targets that do not seek to provide compensation above the median of the peer group for mediocre performance. We believe this has contributed to the unacceptably high rates of CEO pay inflation. III. Tender Offer Defenses A. POISON PILLS We will generally vote against management proposals to ratify a poison pill. We will generally vote for shareholder proposals to redeem a poison pill. B. Fair Price Provisions We will generally vote for fair price proposals, as long as the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares. We will generally vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions. C. Greenmail We will generally vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments. 192 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We review on a case-by-case basis anti-greenmail proposals when they are bundled with other charter or bylaw amendments. D. Pale Greenmail We review on a case-by-case basis restructuring plans that involve the payment of pale greenmail. E. Unequal Voting Rights We will generally vote against dual class exchange offers. We will generally vote against dual class recapitalizations. F. Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws We will generally vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments. We will generally vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments. G. Supermajority Shareholder Vote Requirement to Approve Mergers We will generally vote against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations. We will generally vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations. H. White Squire Placements We will generally vote for shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes. IV. PROXY CONTESTS A. Voting for Director Nominees in Contested Elections 193 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Votes in a contested election of directors are evaluated on a case-by-case basis, considering the following factors: o long-term financial performance of the target company relative to its industry o management's track record o background to the proxy contest o qualifications of director nominees (both slates) o evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met o stock ownership positions B. Reimburse Proxy Solicitation Expenses Decisions to provide full reimbursement for dissidents waging a proxy contest are made on a case-by-case basis. V. PROXY CONTEST DEFENSES A. Board Structure: Staggered vs. Annual Elections We will generally vote against proposals to classify the board. We will generally vote for proposals to repeal classified boards and to elect all directors annually. B. Shareholder Ability to Remove Directors We will generally vote against proposals that provide that directors may be removed only for cause. We will generally vote for proposals to restore shareholder ability to remove directors with or without cause. We will generally vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. We will generally vote for proposals that permit shareholders to elect directors to fill board vacancies. C. Cumulative Voting 194 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- See discussion under "The Board of Directors". D. Shareholder Ability to Call Special Meetings We will generally vote against proposals to restrict or prohibit shareholder ability to call special meetings. We will generally vote for proposals that remove restrictions on the right of shareholders to act independently of management. E. Shareholder Ability to Act by Written Consent We will generally vote against proposals to restrict or prohibit shareholder ability to take action by written consent. We will generally vote for proposals to allow or make easier shareholder action by written consent. F. Shareholder Ability to Alter the Size of the Board We will generally vote for proposals that seek to fix the size of the board. We will generally vote against proposals that give management the ability to alter the size of the board without shareholder approval. VI. AUDITORS A. Ratifying Auditors We will generally vote for proposals to ratify auditors, unless any of the following apply: o An auditor has a financial interest in or association with the company (other than to receive reasonable compensation for services rendered), and is therefore not independent, o Fees for non-audit services are excessive, or o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position. We vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services. We will generally vote for shareholder proposals asking for audit firm rotation or partner rotation within an audit firm, unless the rotation period is so short (less than five years) that it would be unduly burdensome to the company (Sarbanes-Oxley mandates that the partners on a company's audit engagement be subject to five-year term limits). 195 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- VII. Miscellaneous Governance Provisions A. Confidential Voting We will generally vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: In the case of a contested election, management is permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived. We will generally vote for management proposals to adopt confidential voting. B. Equal Access We will generally vote for shareholder proposals that would allow significant company shareholders equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board. C. Bundled Proposals We review on a case-by-case basis bundled or "conditioned" proxy proposals. In the case of items that are conditioned upon each other, we examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, we will generally vote against the proposals. If the combined effect is positive, we will generally vote for the proposals. D. Shareholder Advisory Committees We review on a case-by-case basis proposals to establish a shareholder advisory committee. E. Stock Ownership Requirements We will generally vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board (we prefer Directors to be long-term shareholders). We oppose the awarding of stock options to directors. F. Term of Office and Independence of Committees We will generally vote against shareholder proposals to limit the tenure of outside directors. 196 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We will generally vote for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively. G. Director and Officer Indemnification and Liability Protection Proposals concerning director and officer indemnification and liability protection are evaluated on a case-by-case basis. We will generally vote against proposals to limit or eliminate entirely director and officer liability for monetary damages for violating the duty of care. We will generally vote against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness. We will generally vote for only those proposals that provide such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the director's legal expenses would be covered. H. Charitable Contributions We will generally vote against shareholder proposals to eliminate, direct or otherwise restrict charitable contributions. I. AGE LIMITS We will generally vote against shareholder proposals to impose a mandatory retirement age for outside directors. J. BOARD SIZE We will generally vote for proposals seeking to fix the board size or designate a range for the board size. We will generally vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval. K. Establish/Amend Nominee Qualifications 197 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board. We will generally vote against shareholder proposals requiring two candidates per board seat. L. FILLING VACANCIES/REMOVAL OF DIRECTORS We will generally vote against proposals that provide that directors may be removed only for cause. We will generally vote for proposals to restore shareholder ability to remove directors with or without cause. We will generally vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. We will generally vote for proposals that permit shareholders to elect directors to fill board vacancies. M. OBRA-Related Compensation Proposals o Amendments that Place a Cap on Annual Grant or Amend Administrative Features We will generally vote for plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA. o Amendments to Added Performance-Based Goals We will generally vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA. o Amendments to Increase Shares and Retain Tax Deductions Under OBRA Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) are evaluated on a case-by-case basis. o Approval of Cash or Cash-and-Stock Bonus Plans We will generally vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA where the compensation plans have been historically consistent with our principles described in Section II of this document. 9875 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- N. Shareholder Proposals to Limit Executive and Director Pay We will generally vote for shareholder proposals that seek additional disclosure of executive and director pay information. We review on a case-by-case basis all other shareholder proposals that seek to limit executive and director pay. O. Golden and Tin Parachutes We will generally vote for shareholder proposals to have golden and tin parachutes submitted for shareholder ratification. We will generally review on a case-by-case basis all proposals to ratify or cancel golden or tin parachutes. P. Employee Stock Ownership Plans (ESOPs) We will generally vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is "excessive" (i.e., generally greater than five percent of outstanding shares). Q. 401(k) Employee Benefit Plans We will generally vote for proposals to implement a 401(k) savings plan for employees. R. Stock Plans in Lieu of Cash We review plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock on a case-by-case basis. We will generally vote for plans which provide a dollar-for-dollar cash for stock exchange. We review plans which do not provide a dollar-for-dollar cash for stock exchange on a case-by-case basis. S. Director Retirement Plans We will generally vote against retirement plans for non-employee directors. 199 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We will generally vote for shareholder proposals to eliminate retirement plans for non-employee directors. VIII. STATE OF INCORPORATION A. Voting on State Takeover Statutes We review on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freeze out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions). B. Voting on Reincorporation Proposals Proposals to change a company's state of incorporation are examined on a case-by-case basis. IX. Mergers and Corporate Restructurings A. Mergers and Acquisitions Votes on mergers and acquisitions are considered on a case-by-case basis, taking into account at least the following: o anticipated financial and operating benefits o offer price (cost vs. premium) o prospects of the combined companies o how the deal was negotiated o changes in corporate governance and their impact on shareholder rights B. Corporate Restructuring Votes on corporate restructuring proposals, including minority squeeze outs, leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a case-by-case basis. C. Spin-offs Votes on spin-offs are considered on a case-by-case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives. D. Asset Sales 200 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Votes on asset sales are made on a case-by-case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies. E. Liquidations Votes on liquidations are made on a case-by-case basis after reviewing management's efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation. F. Appraisal Rights We will generally vote for proposals to restore, or provide shareholders with, rights of appraisal. G. Changing Corporate Name We will generally vote for changing the corporate name. X. Social and Environmental Issues Davis Advisors will generally vote with management on shareholder social and environmental proposals on the basis that their impact on share value is difficult to judge and is therefore best done by management. XI. Capital Structure A. Common Stock Authorization We review on a case-by-case basis proposals to increase the number of shares of common stock authorized for issue. We use quantitative criteria that measure the number of shares available for issuance after analyzing the company's industry and performance. Our first step is to determine the number of shares available for issuance (shares not outstanding and not reserved for issuance) as a percentage of the total number of authorized shares after accounting for the requested increase. Shares reserved for legitimate business purposes, such as stock splits or mergers, are subtracted from the pool of shares available. We then compare this percentage to the allowable cap developed for the company's peer group to determine if the requested increase is reasonable. Each peer group is broken down into four quartiles and within each quartile an "allowable increase" for the company is set. The top quartile performers will have the largest allowable increase. If the requested increase is greater than the "allowable increase" we will generally vote against the proposal. 201 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- B. Reverse Stock Splits We will review management proposals to implement a reverse stock split on a case-by-case basis. We will generally support a reverse stock split if management provides a reasonable justification for the split. C. Blank Check Preferred Authorization We will generally vote for proposals to create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense or carry superior voting rights. We review on a case-by-case basis proposals that would authorize the creation of new classes of preferred stock with unspecified voting, conversion, dividend and distribution, and other rights. We review on a case-by-case basis proposals to increase the number of authorized blank check preferred shares. If the company does not have any preferred shares outstanding we will generally vote against the requested increase. If the company does have preferred shares outstanding we will use the criteria set forth herein. D. Shareholder Proposals Regarding Blank Check Preferred Stock We will generally vote for shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification. E. Adjust Par Value of Common Stock We will generally vote for management proposals to reduce the par value of common stock. F. Preemptive Rights We review on a case-by-case basis proposals to create or abolish preemptive rights. In evaluating proposals on preemptive rights, we look at the size of a company and the characteristics of its shareholder base. G. Debt Restructurings We review on a case-by-case basis proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. We consider the following issues: o Dilution - How much will ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be? 202 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Change in Control - Will the transaction result in a change in control of the company? o Bankruptcy - Is the threat of bankruptcy, which would result in severe losses in shareholder value, the main factor driving the debt restructuring? Generally, we approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses. H. Share Repurchase Programs We will generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. I. DUAL-CLASS STOCK We will generally vote against proposals to create a new class of common stock with superior voting rights. We will generally vote for proposals to create a new class of nonvoting or subvoting common stock if: o It is intended for financing purposes with minimal or no dilution to current shareholders. o It is not designed to preserve the voting power of an insider or significant shareholder. J. Issue Stock for Use with Rights Plan We will generally vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill). K. Preferred Stock We will generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock). We will generally vote for proposals to create "declawed" blank check preferred stock (stock that cannot be used as a takeover defense). We will generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. 203 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We will generally vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. We vote case-by-case on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company's industry and performance in terms of shareholder returns. L. RECAPITALIZATION We vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following: more simplified capital structure, enhanced liquidity, fairness of conversion terms, impact on voting power and dividends, reasons for the reclassification, conflicts of interest, and other alternatives considered. M. Reverse Stock Splits We will generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. We will generally vote for management proposals to implement a reverse stock split to avoid delisting. Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis. N. STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS We will generally vote for management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance. O. Tracking Stock Votes on the creation of tracking stock are determined on a case-by-case basis, weighing the strategic value of the transaction against such factors as: adverse governance changes, excessive increases in authorized capital stock, unfair method of distribution, diminution of voting rights, adverse conversion features, negative impact on stock option plans, and other alternatives such as a spin-off. 204 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- DREYFUS CORPORATION -- MELLON FINANCIAL CORPORATION Summary of the Proxy Voting Policy, Procedures and Guidelines Dreyfus, through its participation on the Mellon Financial Corporation's Proxy Policy Committee (the "MPPC"), applies Mellon's Proxy Voting Policy, related procedures, and voting guidelines when voting proxies on behalf of the funds. Dreyfus recognizes that an investment adviser is a fiduciary that owes its clients, including funds it manages, a duty of utmost good faith and full and fair disclosure of all material facts. An investment adviser's duty of loyalty requires an adviser to vote proxies in a manner consistent with the best interest of its clients and precludes the adviser from subrogating the clients' interests to its own. In addition, an investment adviser voting proxies on behalf of a fund must do so in a manner consistent with the best interests of the fund and its shareholders. Dreyfus seeks to avoid material conflicts of interest by participating in the MPPC, which applies detailed, pre-determined written proxy voting guidelines (the "Voting Guidelines") in an objective and consistent manner across client accounts, based on internal and external research and recommendations provided by a third party vendor, and without consideration of any client relationship factors. Further, the MPPC engages a third party as an independent fiduciary to vote all proxies of funds managed by Mellon or its affiliates (including the Dreyfus Family of Funds), and may engage an independent fiduciary to vote proxies of other issuers at its discretion. All proxies received by the funds are reviewed, categorized, analyzed and voted in accordance with the Voting Guidelines. The guidelines are reviewed periodically and updated as necessary to reflect new issues and any changes in Mellon's or Dreyfus' policies on specific issues. Items that can be categorized under the Voting Guidelines are voted in accordance with any applicable guidelines or referred to the MPPC, if the applicable guidelines so require. Proposals that cannot be categorized under the Voting Guidelines are referred to the MPPC for discussion and vote. Additionally, the MPPC reviews proposals where it has identified a particular company, industry or issue for special scrutiny. With regard to voting proxies of foreign companies, Dreyfus weighs the cost of voting and potential inability to sell the securities (which may occur during the voting process) against the benefit of voting the proxies to determine whether or not to vote. With respect to securities lending transactions, the MPPC seeks to balance the economic benefits of continuing to participate in an open securities lending transaction against the inability to vote proxies. When evaluating proposals, the MPPC recognizes that the management of a publicly-held company may need protection from the market's frequent focus on short-term considerations, so as to be able to concentrate on such long-term goals as productivity and development of competitive products and services. In addition, the MPPC generally supports proposals designed to provide management with short-term insulation from outside influences so as to enable them to bargain effectively with potential suitors to the extent such proposals are discrete and not bundled with other proposals. The MPPC believes that a shareholder's role in the governance of a publicly-held company is generally limited to monitoring the performance of the company and its management and voting on matters which properly come to a shareholder vote. However, the MPPC generally opposes proposals designed to insulate an issuer's management unnecessarily from the wishes of a majority of shareholders. Accordingly, the MPPC generally votes in accordance with management on issues that the MPPC believes neither unduly limit the rights and privileges of shareholders nor adversely affect the value of the investment. On questions of social responsibility where economic performance does not appear to be an issue, the MPPC attempts to ensure that management reasonably responds to the social issues. Responsiveness will be measured by management's efforts to address the particular social issue including, where appropriate, assessment of the implications of the proposal to the ongoing operations of the company. The MPPC will pay particular attention to repeat issues where management has failed in its commitment in the intervening period to take actions on issues. In evaluating proposals regarding incentive plans and restricted stock plans, the MPPC typically employs a shareholder value transfer model. This model seeks to assess the amount of shareholder equity flowing out of the company to executives as options are exercised. After determining the cost of the plan, the MPPC evaluates whether the cost is reasonable based on a number of factors, including industry classification and historical performance information. The MPPC generally votes against proposals that permit or are silent on the repricing or replacement of stock options without shareholder approval or that are silent on repricing and the company has a history of repricing stock options. 205 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- THE BANK OF NEW YORK MELLON CORPORATION PROXY VOTING POLICY (Approved: October 12, 2007) 1. Scope of Policy - This Proxy Voting Policy has been adopted by certain of the investment advisory subsidiaries of The Bank of New York Mellon Corporation ("BNY Mellon"), the investment companies advised by such subsidiaries (the "Funds"), and the banking subsidiaries of BNY Mellon (BNY Mellon's investment advisory and banking subsidiaries are hereinafter referred to individually as a "Subsidiary" and collectively as the "Subsidiaries"). 2. Fiduciary Duty - We recognize that an investment adviser is a fiduciary that owes its clients a duty of utmost good faith and full and fair disclosure of all material facts. We further recognize that the right to vote proxies is an asset, just as the economic investment represented by the shares is an asset. An investment adviser's duty of loyalty precludes the adviser from subrogating its clients' interests to its own. Accordingly, in voting proxies, we will seek to act solely in the best financial and economic interests of our clients, including the Funds and their shareholders, and for the exclusive benefit of pension and other employee benefit plan participants. With regard to voting proxies of foreign companies, a Subsidiary weighs the cost of voting, and potential inability to sell, the shares against the benefit of voting the shares to determine whether or not to vote. 3. Long-Term Perspective - We recognize that management of a publicly-held company may need protection from the market's frequent focus on short-term considerations, so as to be able to concentrate on such long-term goals as productivity and development of competitive products and services. 4. Limited Role of Shareholders - We believe that a shareholder's role in the governance of a publicly-held company is generally limited to monitoring the performance of the company and its managers and voting on matters which properly come to a shareholder vote. We will carefully review proposals that would limit shareholder control or could affect shareholder values. 5. Anti-takeover Proposals - We generally will oppose proposals that seem designed to insulate management unnecessarily from the wishes of a majority of the shareholders and that would lead to a determination of a company's future by a minority of its shareholders. We will generally support proposals that seem to have as their primary purpose providing management with temporary or short-term insulation from outside influences so as to enable them to bargain effectively with potential suitors and otherwise achieve identified long-term goals to the extent such proposals are discrete and not bundled with other proposals. 6. "Social" Issues - On questions of social responsibility where economic performance does not appear to be an issue, we will attempt to ensure that management reasonably responds to the social issues. Responsiveness will be measured by management's efforts to address the particular social issue including, where appropriate, assessment of the implications of the proposal to the ongoing operations of the company. We will pay particular attention to repeat issues where management has failed in the intervening period to take actions previously committed to. With respect to clients having investment policies that require proxies to be cast in a certain manner on particular social responsibility issues, proposals relating to such issues will be evaluated and voted separately 206 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- by the client's portfolio manager in accordance with such policies, rather than pursuant to the procedures set forth in section 7. 7. Proxy Voting Process - Every voting proposal is reviewed, categorized and analyzed in accordance with our written guidelines in effect from time to time. Our guidelines are reviewed periodically and updated as necessary to reflect new issues and any changes in our policies on specific issues. Items that can be categorized will be voted in accordance with any applicable guidelines or referred to the BNY Mellon Proxy Policy Committee (the "Committee"), if the applicable guidelines so require. Proposals that cannot be categorized under the guidelines will be referred to the Committee for discussion and vote. Additionally, the Committee may review any proposal where it has identified a particular company, particular industry or particular issue for special scrutiny. The Committee will also consider specific interests and issues raised by a Subsidiary to the Committee, which interests and issues may require that a vote for an account managed by a Subsidiary be cast differently from the collective vote in order to act in the best interests of such account's beneficial owners. 8. Material Conflicts of Interest - We recognize our duty to vote proxies in the best interests of our clients. We seek to avoid material conflicts of interest through the establishment of our Committee structure, which applies detailed, pre-determined proxy voting guidelines in an objective and consistent manner across client accounts, based on internal and external research and recommendations provided by a third party vendor, and without consideration of any client relationship factors. Further, we engage a third party as an independent fiduciary to vote all proxies for BNY Mellon securities and Fund securities. 9. Securities Lending - We seek to balance the economic benefits of engaging in lending securities against the inability to vote on proxy proposals to determine whether to recall shares, unless a plan fiduciary retains the right to direct us to recall shares. 10. Recordkeeping - We will keep, or cause our agents to keep, the records for each voting proposal required by law. 11. Disclosure - We will furnish a copy of this Proxy Voting Policy and any related procedures, or a description thereof, to investment advisory clients as required by law. In addition, we will furnish a copy of this Proxy Voting Policy, any related procedures, and our voting guidelines to investment advisory clients upon request. The Funds shall include this Proxy Voting Policy and any related procedures, or a description thereof, in their Statements of Additional Information, and shall disclose their proxy votes, as required by law. We recognize that the applicable trust or account document, the applicable client agreement, the Employee Retirement Income Security Act of 1974 (ERISA) and certain laws may require disclosure of other information relating to proxy voting in certain circumstances. This information will only be disclosed to those who have an interest in the account for which shares are voted, and after the shareholder meeting has concluded. 207 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- FIRST TRUST ADVISORS L.P. Proxy Voting Policy 1. It is the Subadviser's policy to seek to ensure that proxies for securities held by a Fund are voted consistently and solely in the best economic interests of the respective Fund. 2. The Subadviser shall be responsible for the oversight of a Fund's proxy voting process and shall assign a senior member of its staff to be responsible for this oversight. 3. The Subadviser has engaged the services of Institutional Shareholder Services, Inc. ("ISS") to make recommendations to the Subadviser on the voting of proxies related to securities held by a Fund. ISS provides voting recommendations based on established guidelines and practices. The Subadviser has adopted these ISS Proxy Voting Guidelines. 4. The Subadviser shall review the ISS recommendations and generally will vote the proxies in accordance with such recommendations. Notwithstanding the foregoing, the Subadviser may not vote in accordance with the ISS recommendations if the Subadviser believes that the specific ISS recommendation is not in the best interests of the respective Fund. 5. If the Subadviser manages the assets or pension fund of a company and any of the Subadviser's clients hold any securities in that company, the Subadviser will vote proxies relating to such company's securities in accordance with the ISS recommendations to avoid any conflict of interest. In addition, if the Subadviser has actual knowledge of any other type of material conflict of interest between itself and the respective Fund with respect to the voting of a proxy, the Subadviser shall vote the applicable proxy in accordance with the ISS recommendations to avoid such conflict of interest. 6. If a Fund requests the Subadviser to follow specific voting guidelines or additional guidelines, the Subadviser shall review the request and follow such guidelines, unless the Subadviser determines that it is unable to follow such guidelines. In such case, the Subadviser shall inform the Fund that it is not able to follow the Fund's request. 7. The Subadviser may have clients in addition to the Funds which have provided the Subadviser with discretionary authority to vote proxies on their behalf. In such cases, the Subadviser shall follow the same policies and procedures. ISS 2007 US Proxy Voting Guidelines ISS 2007 Proxy Voting Guidelines Summary Effective for Meetings Feb 1, 2007 Updated December 15, 2006 1. Operational Items Adjourn Meeting Generally vote AGAINST proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal. Vote FOR proposals that relate specifically to soliciting votes for a merger or transaction if supporting that merger or transaction. Vote AGAINST proposals if the wording is too vague or if the proposal includes "other business." Amend Quorum Requirements Vote AGAINST proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal. Amend Minor Bylaws Vote FOR bylaw or charter changes that are of a housekeeping nature (updates or corrections). Auditor Indemnification and Limitation of Liability 208 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Consider the issue of auditor indemnification and limitation of liability on a CASE-BY-CASE basis. Factors to be assessed include, but are not limited to: o The terms of the auditor agreement- the degree to which these agreements impact shareholders' rights; o Motivation and rationale for establishing the agreements; o Quality of disclosure; and o Historical practices in the audit area. WTHHOLD against members of an audit committee in situations where there is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. Auditor Ratification Vote FOR proposals to ratify auditors, unless any of the following apply: o An auditor has a financial interest in or association with the company, and is therefore not independent, o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position, or o Fees for non-audit services ("Other" fees) are excessive. Non-audit fees are excessive if: Non-audit ("other") fees >audit fees + audit-related fees + tax compliance/preparation fees Tax compliance and preparation include the preparation of original and amended tax returns, refund claims and tax payment planning. All other services in the tax category, such as tax advice, planning or consulting should be added to "Other" fees. If the breakout of tax fees cannot be determined, add all tax fees to "Other" fees. Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services. Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation, taking into account: o The tenure of the audit firm; o The length of rotation specified in the proposal; o Any significant audit-related issues at the company; o The number of Audit Committee meetings held each year; o The number of financial experts serving on the committee; and o Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price. Change Company Name Vote FOR proposals to change the corporate name. Change Date, Time, or Location of Annual Meeting 209 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR management proposals to change the date, time, and/or location of the annual meeting unless the proposed change is unreasonable. Vote AGAINST shareholder proposals to change the date, time, and/or location of the annual meeting unless the current scheduling or location is unreasonable. Transact Other Business Vote AGAINST proposals to approve other business when it appears as voting item. 2. Board of Directors: Voting on Director Nominees in Uncontested Elections Vote CASE-BY-CASE on director nominees, examining, but not limited to, the following factors: o Composition of the board and key board committees; o Attendance at board and committee meetings; o Corporate governance provisions and takeover activity; o Disclosures under Section 404 of Sarbanes-Oxley Act; o Long-term company performance relative to a market and peer index; o Extent of the director's investment in the company; o Existence of related party transactions; o Whether the chairman is also serving as CEO; o Whether a retired CEO sits on the board; o Number of outside boards at which a director serves; o Majority vote standard for director elections without a provision to allow for plurality voting when there are more nominees than seats. WITHHOLD from individual directors who: o Attend less than 75 percent of the board and committee meetings without a valid excuse (such as illness, service to the nation, work on behalf of the company); o Sit on more than six public company boards; o Are CEOs of public companies who sit on the boards of more than two public companies besides their own-- withhold only at their outside boards. WITHHOLD from the entire board of directors, (except from new nominees, who should be considered on a CASE-BY-CASE basis) if: o The company's proxy indicates that not all directors attended 75% of the aggregate of their board and committee meetings, but fails to provide the required disclosure of the names of the directors involved. If this information cannot be obtained, withhold from all incumbent directors; o The company's poison pill has a dead-hand or modified dead-hand feature. Withhold every year until this feature is removed; o The board adopts or renews a poison pill without shareholder approval since the beginning of 2005, does not commit to putting it to shareholder vote within 12 months of adoption, or reneges on a commitment to put the pill to a vote, and has not yet received a withhold recommendation for this issue; o The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year; 210 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years; o The board failed to act on takeover offers where the majority of the shareholders tendered their shares; o At the previous board election, any director received more than 50 percent withhold votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold rate; o The company is a Russell 3000 company that underperformed its industry group (GICS group) under the criteria discussed in the section "Performance Test for Directors". WITHHOLD from Inside Directors and Affiliated Outside Directors (per the Classification of Directors below) when: o The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating; o The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee; o The company lacks a formal nominating committee, even if board attests that the independent directors fulfill the functions of such a committee; o The full board is less than majority independent. WITHHOLD from the members of the Audit Committee if: o The non - audit fees paid to the auditor are excessive (see discussion under Auditor Ratification); o A material weakness identified in the Section 404 Sarbanes-Oxley Act disclosures rises to a level of serious concern; there are chronic internal control issues and an absence of established effective control mechanisms; o There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. WITHHOLD from the members of the Compensation Committee if: o There is a negative correlation between the chief executive's pay and company performance (see discussion under Equity Compensation Plans); o The company reprices underwater options for stock, cash or other consideration without prior shareholder approval, even if allowed in their equity plan; o The company fails to submit one-time transfers of stock options to a shareholder vote; o The company fails to fulfill the terms of a burn rate commitment they made to shareholders; o The company has backdated options (see "Options Backdating" policy); o The company has poor compensation practices (see "Poor Pay Practices" policy). Poor pay practices may warrant withholding votes from the CEO and potentially the entire board as well. WITHHOLD from directors, individually or the entire board, for egregious actions or failure to replace management as appropriate. 2007 Classification of Directors Inside Director (I) o Employee of the company or one of its affiliates(1); o Non-employee officer of the company if among the five most highly paid individuals (excluding interim CEO); o Listed as a Section 16 officer(2); o Current interim CEO; 211 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Beneficial owner of more than 50 percent of the company's voting power (this may be aggregated if voting power is distributed among more than one member of a defined group). Affiliated Outside Director (AO) o Board attestation that an outside director is not independent; o Former CEO of the company; o Former CEO of an acquired company within the past five years; o Former interim CEO if the service was longer than 18 months. If the service was between twelve and eighteen months an assessment of the interim CEO's employment agreement will be made;(3) o Former executive(2) of the company, an affiliate or an acquired firm within the past five years; o Executive(2) of a former parent or predecessor firm at the time the company was sold or split off from the parent/predecessor within the past five years; o Executive, former executive, general or limited partner of a joint venture or partnership with the company; o Relative(4) of a current Section 16 officer of company or its affiliates; o Relative(4) of a current employee of company or its affiliates where additional factors raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates employ relatives of numerous board members; or a non- Section 16 officer in a key strategic role); o Relative(4) of former Section 16 officer, of company or its affiliate within the last five years; o Currently provides (or a relative(4) provides) professional services(5) to the company, to an affiliate of the company or an individual officer of the company or one of its affiliates in excess of $10,000 per year; o Employed by (or a relative(4) is employed by) a significant customer or supplier6; o Has (or a relative(4) has) any transactional relationship with the company or its affiliates excluding investments in the company through a private placement; (6) o Any material financial tie or other related party transactional relationship to the company; o Party to a voting agreement to vote in line with management on proposals being brought to shareholder vote; o Has (or a relative(4) has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation and Stock Option Committee; (7) o Founder 8 of the company but not currently an employee; o Is (or a relative(4) is) a trustee, director or employee of a charitable or non-profit organization that receives grants or endowments6 from the company or its affiliates(1). Independent Outside Director (IO) No material (9) connection to the company other than a board seat. Footnotes: 1 "Affiliate" includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard for applying its affiliate designation. 2 "Executives" (officers subject to Section 16 of the Securities and Exchange Act of 1934) include the chief executive, operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division or policy function). 3 ISS will look at the terms of the interim CEO's employment contract to determine if it contains severance pay, longterm health and pension benefits or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was underway for a full-time CEO at the time. 212 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4 "Relative" follows the SEC's new definition of "immediate family members" which covers spouses, parents, children, step-parents, step-children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company. 5 Professional services can be characterized as advisory in nature and generally include the following: investment banking / financial advisory services; commercial banking (beyond deposit services); investment services; insurance services; accounting/audit services; consulting services; marketing services; and legal services. The case of participation in a banking syndicate by a non-lead bank should be considered a transaction (and hence subject to the associated materiality test) rather than a professional relationship. 6 If the company makes or receives annual payments exceeding the greater of $200,000 or five percent of the recipient's gross revenues. (The recipient is the party receiving the financial proceeds from the transaction). 7 Interlocks include: (a) executive officers serving as directors on each other's compensation or similar committees (or, in the absence of such a committee, on the board) or (b) executive officers sitting on each other's boards and at least one serves on the other's compensation or similar committees (or, in the absence of such a committee, on the board). 8 The operating involvement of the Founder with the company will be considered. Little to no operating involvement may cause ISS to deem the Founder as an independent outsider. 9 For purposes of ISS' director independence classification, "material" will be defined as a standard of relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one's objectivity in the boardroom in a manner that would have a meaningful impact on an individual's ability to satisfy requisite fiduciary standards on behalf of shareholders. Age Limits Vote AGAINST shareholder or management proposals to limit the tenure of outside directors through mandatory retirement ages. Board Size Vote FOR proposals seeking to fix the board size or designate a range for the board size. Vote AGAINST proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval. Classification/Declassification of the Board Vote AGAINST proposals to classify the board. Vote FOR proposals to repeal classified boards and to elect all directors annually. Cumulative Voting Generally vote AGAINST proposals to eliminate cumulative voting. Generally vote FOR proposals to restore or provide for cumulative voting unless the company meets all of the following criteria: o Majority vote standard in director elections, including a carve-out for plurality voting in contested situations; o Annually elected board; Two-thirds of the board composed of independent directors; o Nominating committee composed solely of independent directors; o Confidential voting; however, there may be a provision for suspending confidential voting during proxy contests; o Ability of shareholders to call special meetings or act by written consent with 90 days' notice; o Absence of superior voting rights for one or more classes of stock; o Board does not have the right to change the size of the board beyond a stated range that has been approved by shareholders; 213 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o The company has not under-performed its both industry peers and index on both a one-year and three-year total shareholder returns basis*, unless there has been a change in the CEO position within the last three years; and o No director received a WITHHOLD vote level of 35% or more of the votes cast in the previous election. * Starting in 2007, the industry peer group used for this evaluation will change from the 4-digit GICS group to the average of the 12 companies in the same 6-digit GICS group that are closest in revenue to the company. To fail, the company must under-perform its index and industry group on all 4 measures (1 and 3 year on industry peers and index). Director and Officer Indemnification and Liability Protection Vote CASE-BY-CASE on proposals on director and officer indemnification and liability protection using Delaware law as the standard. Vote AGAINST proposals to eliminate entirely directors' and officers' liability for monetary damages for violating the duty of care. Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to liability for acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness. Vote AGAINST proposals that would expand the scope of indemnification to provide for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification for at the discretion of the company's board (i.e. "permissive indemnification") but that previously the company was not required to indemnify. Vote FOR only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if both of the following apply: o If the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company; and o If only the director's legal expenses would be covered. Establish/Amend Nominee Qualifications Vote CASE-BY-CASE on proposals that establish or amend director qualifications. Votes should be based on how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board. Vote AGAINST shareholder proposals requiring two candidates per board seat. Filling Vacancies/Removal of Directors Vote AGAINST proposals that provide that directors may be removed only for cause. Vote FOR proposals to restore shareholders' ability to remove directors with or without cause. Vote AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies. Vote FOR proposals that permit shareholders to elect directors to fill board vacancies. Independent Chair (Separate Chair/CEO) Generally vote FOR shareholder proposals requiring the position of chair be filled by an independent director unless there are compelling reasons to recommend against the proposal, such as a counterbalancing governance structure. This should include all of the following: o Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties. (The role may alternatively reside with a presiding director, vice chairman, or rotating lead director; however the director must serve a minimum of one year in order to qualify as a lead director.) At a minimum these should include: - Presides at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors, 214 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - Serves as liaison between the chairman and the independent directors, - Approves information sent to the board, - Approves meeting agendas for the board, - Approves meetings schedules to assure that there is sufficient time for discussion of all agenda items, - Has the authority to call meetings of the independent directors, - If requested by major shareholders, ensures that he is available for consultation and direct communication; o Two-thirds independent board; o All-independent key committees; o Established governance guidelines; o The company should not have underperformed both its industry peers and index on both a one-year and three-year total shareholder returns basis*, unless there has been a change in the Chairman/CEO position within that time; o The company does not have any problematic governance issues. * Starting in 2007, the industry peer group used for this evaluation will change from the 4-digit GICS group to the average of the 12 companies in the same 6-digit GICS group that are closest in revenue to the company. To fail, the company must under-perform its index and industry group on all 4 measures (1 and 3 year on industry peers and index). Majority of Independent Directors/Establishment of Committees Vote FOR shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS' definition of independent outsider. (See Classification of Directors.) Vote FOR shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard. Majority Vote Shareholder Proposals Generally vote FOR precatory and binding resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats. Companies are strongly encouraged to also adopt a post-election policy (also know as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director. Office of the Board Generally vote FOR shareholders proposals requesting that the board establish an Office of the Board of Directors in order to facilitate direct communications between shareholders and nonmanagement directors, unless the company has all of the following: o Established a communication structure that goes beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board; o Effectively disclosed information with respect to this structure to its shareholders; o Company has not ignored majority-supported shareholder proposals or a majority withhold vote on a director nominee; and o The company has an independent chairman or a lead/presiding director, according to ISS' definition. This individual must be made available for periodic consultation and direct communication with major shareholders. Open Access 215 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Generally vote FOR reasonably crafted shareholder proposals providing shareholders with the ability to nominate director candidates to be included on management's proxy card, provided the proposal substantially mirrors the SEC's proposed two-trigger formulation (see the proposed "Security Holder Director Nominations" rule (http://www.sec.gov/rules/proposed/34-48626.htm) or ISS' comment letter to the SEC dated 6/13/2003, available on ISS website under Governance Center- ISS Position Papers). Performance Test for Directors WITHHOLD from directors of Russell 3000 companies that underperformed relative to their industry peers. The criterion used to evaluate such underperformance is a combination of four performance measures: One measurement will be a market-based performance metric and three measurements will be tied to the company's operational performance. The market performance metric in the methodology is five-year Total Shareholder Return (TSR) on a relative basis within each four-digit GICS group. The three operational performance metrics are sales growth, EBITDA growth, and pre-tax operating Return on Invested Capital (ROIC) on a relative basis within each four-digit GICS group. All four metrics will be time-weighted as follows: 40 percent on the trailing 12 month period and 60 percent on the 48 month period prior to the trailing 12 months. This methodology emphasizes the company's historical performance over a five-year period yet also accounts for near-term changes in a company's performance. The table below summarizes the new framework:
Metrics Basis of Weighting 2nd Evaluation Weighting ---------------------------------- ------------------------------- Operational 50% Performance --------------------------- 5-year Management 33.3% Average efficiency pre-tax in deploying operating ROIC assets 5-year Sales Top-Line 33.3% Growth 5-year EBITDA Core-earnings 33.3% Growth ---------------------------------- Sub Total 100% ---------------------------------- ------------------------------- Stock 50% Performance ------------------------------- --------------------------- 5-year TSR Market ---------------------------------- Total 100%
Adopt a two-phased approach. In 2007 (Year 1), the worst performers (bottom five percent) within each of the 24 GICS groups will automatically receive cautionary language, except for companies that have already received cautionary language or withhold votes in 2006 under the current policy. The latter may be subject to withhold votes in 2007. For 2008 (Year 2), WITHHOLD votes from director nominees if a company continues to be in the bottom five percent within its GICS group for that respective year and/or shows no improvement in its most recent trailing 12 months operating and market performance relative to its peers in its GICS group. This policy would be applied on a rolling basis going forward. 216 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Stock Ownership Requirements Generally vote AGAINST shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While stock ownership on the part of directors is desired, the company should determine the appropriate ownership requirement. Vote CASE-BY-CASE on shareholder proposals asking that the company adopt a holding or retention period for its executives (for holding stock after the vesting or exercise of equity awards), taking into account any stock ownership requirements or holding period/retention ratio already in place and the actual ownership level of executives. Term Limits Vote AGAINST shareholder or management proposals to limit the tenure of outside directors through term limits. However, scrutinize boards where the average tenure of all directors exceeds 15 years for independence from management and for sufficient turnover to ensure that new perspectives are being added to the board. 3. Proxy Contests Voting for Director Nominees in Contested Elections Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors: o Long-term financial performance of the target company relative to its industry; o Management's track record; o Background to the proxy contest; o Qualifications of director nominees (both slates); o Strategic plan of dissident slate and quality of critique against management; o Likelihood that the proposed goals and objectives can be achieved (both slates); o Stock ownership positions. Reimbursing Proxy Solicitation Expenses Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses associated with the election. Confidential Voting Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators, and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived. Vote FOR management proposals to adopt confidential voting. 4. Antitakeover Defenses and Voting Related Issues Advance Notice Requirements for Shareholder Proposals/Nominations Vote CASE-BY-CASE on advance notice proposals, supporting those proposals which allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible. Amend Bylaws without Shareholder Consent Vote AGAINST proposals giving the board exclusive authority to amend the bylaws. 217 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR proposals giving the board the ability to amend the bylaws in addition to shareholders. Poison Pills Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either: o Shareholders have approved the adoption of the plan; or o The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e. the "fiduciary out" provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within twelve months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate. Vote FOR shareholder proposals calling for poison pills to be put to a vote within a time period of less than one year after adoption. If the company has no non-shareholder approved poison pill in place and has adopted a policy with the provisions outlined above, vote AGAINST the proposal. If these conditions are not met, vote FOR the proposal, but with the caveat that a vote within twelve months would be considered sufficient. Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes: o No lower than a 20% trigger, flip-in or flip-over; o A term of no more than three years; o No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill; o Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, ten percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill. Shareholder Ability to Act by Written Consent Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent. Vote FOR proposals to allow or make easier shareholder action by written consent. Shareholder Ability to Call Special Meetings Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings. Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management. Supermajority Vote Requirements Vote AGAINST proposals to require a supermajority shareholder vote. Vote FOR proposals to lower supermajority vote requirements. 5. Mergers and Corporate Restructurings Overall Approach For mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including: o Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale. 218 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal. o Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions. o Negotiations and process - Were the terms of the transaction negotiated at arm's-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value. o Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the "ISS Transaction Summary" section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists. o Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance. Appraisal Rights Vote FOR proposals to restore, or provide shareholders with, rights of appraisal. Asset Purchases Vote CASE-BY-CASE on asset purchase proposals, considering the following factors: o Purchase price; o Fairness opinion; o Financial and strategic benefits; o How the deal was negotiated; o Conflicts of interest; o Other alternatives for the business; o Non-completion risk. Asset Sales Vote CASE-BY-CASE on asset sales, considering the following factors: o Impact on the balance sheet/working capital; o Potential elimination of diseconomies; o Anticipated financial and operating benefits; o Anticipated use of funds; o Value received for the asset; o Fairness opinion; o How the deal was negotiated; o Conflicts of interest. 219 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Bundled Proposals Vote CASE-BY-CASE on bundled or "conditional" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote AGAINST the proposals. If the combined effect is positive, support such proposals. Conversion of Securities Vote CASE-BY-CASE on proposals regarding conversion of securities. When evaluating these proposals the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest. Vote FOR the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved. Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans Vote CASE-BY-CASE on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, taking into consideration the following: o Dilution to existing shareholders' position; o Terms of the offer; o Financial issues; o Management's efforts to pursue other alternatives; o Control issues; o Conflicts of interest. Vote FOR the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved. Formation of Holding Company Vote CASE-BY-CASE on proposals regarding the formation of a holding company, taking into consideration the following: o The reasons for the change; o Any financial or tax benefits; o Regulatory benefits; o Increases in capital structure; o Changes to the articles of incorporation or bylaws of the company. Absent compelling financial reasons to recommend the transaction, vote AGAINST the formation of a holding company if the transaction would include either of the following: o Increases in common or preferred stock in excess of the allowable maximum (see discussion under "Capital Structure"); o Adverse changes in shareholder rights. Going Private Transactions (LBOs, Minority Squeezeouts, and Going Dark) Vote CASE-BY-CASE on going private transactions, taking into account the following: o Offer price/premium; o Fairness opinion; 220 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o How the deal was negotiated; o Conflicts of interest; o Other alternatives/offers considered; and o Non-completion risk. Vote CASE-BY-CASE on "going dark" transactions, determining whether the transaction enhances shareholder value by taking into consideration: o Whether the company has attained benefits from being publicly-traded (examination of trading volume, liquidity, and market research of the stock); o Cash-out value; o Whether the interests of continuing and cashed-out shareholders are balanced; and o The market reaction to public announcement of transaction. Joint Ventures Vote CASE-BY-CASE on proposals to form joint ventures, taking into account the following: o Percentage of assets/business contributed; o Percentage ownership; o Financial and strategic benefits; o Governance structure; o Conflicts of interest; o Other alternatives; o Noncompletion risk. Liquidations Vote CASE-BY-CASE on liquidations, taking into account the following: o Management's efforts to pursue other alternatives; o Appraisal value of assets; and o The compensation plan for executives managing the liquidation. Vote FOR the liquidation if the company will file for bankruptcy if the proposal is not approved. Mergers and Acquisitions/ Issuance of Shares to Facilitate Merger or Acquisition Vote CASE-BY-CASE on mergers and acquisitions, determining whether the transaction enhances shareholder value by giving consideration to items listed under "Mergers and Corporate Restructurings: Overall Approach." Private Placements/Warrants/Convertible Debentures Vote CASE-BY-CASE on proposals regarding private placements, taking into consideration: o Dilution to existing shareholders' position; o Terms of the offer; o Financial issues; o Management's efforts to pursue other alternatives; o Control issues; 221 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Conflicts of interest. Vote FOR the private placement if it is expected that the company will file for bankruptcy if the transaction is not approved. Spinoffs Vote CASE-BY-CASE on spin-offs, considering: o Tax and regulatory advantages; o Planned use of the sale proceeds; o Valuation of spinoff; o Fairness opinion; o Benefits to the parent company; o Conflicts of interest; o Managerial incentives; o Corporate governance changes; o Changes in the capital structure. Value Maximization Proposals Vote CASE-BY-CASE on shareholder proposals seeking to maximize shareholder value by hiring a financial advisor to explore strategic alternatives, selling the company or liquidating the company and distributing the proceeds to shareholders. These proposals should be evaluated based on the following factors: o Prolonged poor performance with no turnaround in sight; o Signs of entrenched board and management; o Strategic plan in place for improving value; o Likelihood of receiving reasonable value in a sale or dissolution; and o Whether company is actively exploring its strategic options, including retaining a financial advisor. 6. State of Incorporation Control Share Acquisition Provisions Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares. Vote FOR proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders. Vote AGAINST proposals to amend the charter to include control share acquisition provisions. Vote FOR proposals to restore voting rights to the control shares. Control Share Cash-out Provisions Control share cash-out statutes give dissident shareholders the right to "cash-out" of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price. 222 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR proposals to opt out of control share cash-out statutes. Disgorgement Provisions Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company's stock to disgorge, or pay back, to the company any profits realized from the sale of that company's stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor's gaining control status are subject to these recapture-of-profits provisions. Vote FOR proposals to opt out of state disgorgement provisions. Fair Price Provisions Vote CASE-BY-CASE on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price. Generally, vote AGAINST fair price provisions with shareholder vote requirements greater than a majority of disinterested shares. Freeze-out Provisions Vote FOR proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company. Greenmail Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders. Vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments. Vote CASE-BY-CASE on anti-greenmail proposals when they are bundled with other charter or bylaw amendments. Reincorporation Proposals Vote CASE-BY-CASE on proposals to change a company's state of incorporation, taking into consideration both financial and corporate governance concerns, including: o The reasons for reincorporating; o A comparison of the governance provisions; o Comparative economic benefits; and o A comparison of the jurisdictional laws. Vote FOR re-incorporation when the economic factors outweigh any neutral or negative governance changes. Stakeholder Provisions Vote AGAINST proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination. State Antitakeover Statutes Vote CASE-BY-CASE on proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions). 7. Capital Structure 223 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Adjustments to Par Value of Common Stock Vote FOR management proposals to reduce the par value of common stock. Common Stock Authorization Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance using a model developed by ISS. Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain. In addition, for capital requests less than or equal to 300 percent of the current authorized shares that marginally fail the calculated allowable cap (i.e., exceed the allowable cap by no more than 5 percent), on a CASE-BY-CASE basis, vote FOR the increase based on the company's performance and whether the company's ongoing use of shares has shown prudence. Factors should include, at a minimum, the following: o Rationale; o Good performance with respect to peers and index on a five-year total shareholder return basis; o Absence of non-shareholder approved poison pill; o Reasonable equity compensation burn rate; o No non-shareholder approved pay plans; and o Absence of egregious equity compensation practices. Dual-Class Stock Vote AGAINST proposals to create a new class of common stock with superior voting rights. Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights. Vote FOR proposals to create a new class of nonvoting or sub-voting common stock if: o It is intended for financing purposes with minimal or no dilution to current shareholders; o It is not designed to preserve the voting power of an insider or significant shareholder. Issue Stock for Use with Rights Plan Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder approved shareholder rights plan (poison pill). Preemptive Rights Vote CASE-BY-CASE on shareholder proposals that seek preemptive rights, taking into consideration: the size of a company, the characteristics of its shareholder base, and the liquidity of the stock. Preferred Stock Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock). Vote FOR proposals to create "declawed" blank check preferred stock (stock that cannot be used as a takeover defense). Vote FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. 224 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company's industry and performance in terms of shareholder returns. Recapitalization Vote CASE-BY-CASE on recapitalizations (reclassifications of securities), taking into account the following: o More simplified capital structure; o Enhanced liquidity; o Fairness of conversion terms; o Impact on voting power and dividends; o Reasons for the reclassification; o Conflicts of interest; and o Other alternatives considered. Reverse Stock Splits Vote FOR management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. Vote FOR management proposals to implement a reverse stock split to avoid delisting. Vote CASE-BY-CASE on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue based on the allowable increased calculated using the Capital Structure model. Share Repurchase Programs Vote FOR management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. Stock Distributions: Splits and Dividends Vote FOR management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance as determined using a model developed by ISS. Tracking Stock Vote CASE-BY-CASE on the creation of tracking stock, weighing the strategic value of the transaction against such factors as: o Adverse governance changes; o Excessive increases in authorized capital stock; o Unfair method of distribution; o Diminution of voting rights; o Adverse conversion features; o Negative impact on stock option plans; and o Alternatives such as spin-off. 8. Executive and Director Compensation Equity Compensation Plans 225 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply: o The total cost of the company's equity plans is unreasonable; o The plan expressly permits the repricing of stock options without prior shareholder approval; o There is a disconnect between CEO pay and the company's performance; o The company's three year burn rate exceeds the greater of 2% and the mean plus 1 standard deviation of its industry group; or o The plan is a vehicle for poor pay practices. Each of these factors is further described below: Cost of Equity Plans Generally, vote AGAINST equity plans if the cost is unreasonable. For non-employee director plans, vote FOR the plan if certain factors are met (see Director Compensation section). The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders' equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised. All award types are valued. For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full value awards), the assumption is made that all awards to be granted will be the most expensive types. See discussion of specific types of awards. The Shareholder Value Transfer is reasonable if it falls below the company-specific allowable cap. The allowable cap is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers' historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company-specific performance measures, size and cash compensation into the industry cap equations to arrive at the company's allowable cap. Repricing Provisions Vote AGAINST plans that expressly permit the repricing of underwater stock options without prior shareholder approval, even if the cost of the plan is reasonable. Also, WITHHOLD from members of the Compensation Committee who approved and/or implemented an option exchange program by repricing and buying out underwater options for stock, cash or other consideration or canceling underwater options and regranting options with a lower exercise price without prior shareholder approval, even if such repricings are allowed in their equity plan. Vote AGAINST plans if the company has a history of repricing options without shareholder approval, and the applicable listing standards would not preclude them from doing so. Pay-for Performance Disconnect Generally vote AGAINST plans in which: o there is a disconnect between the CEO's pay and company performance (an increase in pay and a decrease in performance); o the main source of the pay increase (over half) is equity-based, and o the CEO is a participant of the equity proposal. Performance decreases are based on negative one- and three-year total shareholder returns. CEO pay increases are based on the CEO's total direct compensation (salary, cash bonus, present value of stock options, face value of restricted stock, value of non-equity incentive payouts, change in pension value and nonqualified deferred compensation earnings, and all other compensation) increasing over the previous year. 226 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- WITHHOLD votes from the Compensation Committee members when the company has a pay for performance disconnect. On a CASE-BY-CASE basis, vote for equity plans and FOR compensation committee members with a pay-for-performance disconnect if compensation committee members can present strong and compelling evidence of improved committee performance. This evidence must go beyond the usual compensation committee report disclosure. This additional evidence necessary includes all of the following: o The compensation committee has reviewed all components of the CEO's compensation, including the following: - Base salary, bonus, long-term incentives; - Accumulative realized and unrealized stock option and restricted stock gains; - Dollar value of perquisites and other personal benefits to the CEO and the total cost to the company; - Earnings and accumulated payment obligations under the company's nonqualified deferred compensation program; - Actual projected payment obligations under the company's supplemental executive retirement plan (SERPs). o A tally sheet with all the above components should be disclosed for the following termination scenarios: - Payment if termination occurs within 12 months: $_____; - Payment if "not for cause" termination occurs within 12 months: $_____; - Payment if "change of control" termination occurs within 12 months: $_____. o The compensation committee is committed to providing additional information on the named executives' annual cash bonus program and/or long-term incentive cash plan for the current fiscal year. The compensation committee will provide full disclosure of the qualitative and quantitative performance criteria and hurdle rates used to determine the payouts of the cash program. From this disclosure, shareholders will know the minimum level of performance required for any cash bonus to be delivered, as well as the maximum cash bonus payable for superior performance. The repetition of the compensation committee report does not meet ISS' requirement of compelling and strong evidence of improved disclosure. The level of transparency and disclosure is at the highest level where shareholders can understand the mechanics of the annual cash bonus and/or long-term incentive cash plan based on the additional disclosure. o The compensation committee is committed to granting a substantial portion of performance-based equity awards to the named executive officers. A substantial portion of performance-based awards would be at least 50 percent of the shares awarded to each of the named executive officers. Performance-based equity awards are earned or paid out based on the achievement of company performance targets. The company will disclose the details of the performance criteria (e.g., return on equity) and the hurdle rates (e.g., 15 percent) associated with the performance targets. From this disclosure, shareholders will know the minimum level of performance required for any equity grants to be made. The performance-based equity awards do not refer to non-qualified stock options1 or performance-accelerated grants.2 Instead, performance-based equity awards are performance-contingent grants where the individual will not receive the equity grant by not meeting the target performance and vice versa. The level of transparency and disclosure is at the highest level where shareholders can understand the mechanics of the performance-based equity awards based on the additional disclosure. o The compensation committee has the sole authority to hire and fire outside compensation consultants. The role of the outside compensation consultant is to assist the compensation committee to analyze executive pay packages or contracts and understand the company's financial measures. Three-Year Burn Rate/Burn Rate Commitment Generally vote AGAINST plans if the company's most recent three-year burn rate exceeds one standard deviation in excess of the industry mean (per the following Burn Rate Table) and is over two percent of common shares outstanding. The three-year burn rate policy does not apply to non-employee director plans unless outside directors receive a significant portion of shares each year. 227 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- However, vote FOR equity plans if the company fails this burn rate test but the company commits in a public filing to a three-year average burn rate equal to its GICS group burn rate mean plus one standard deviation (or 2%, whichever is greater), assuming all other conditions for voting FOR the plan have been met. If a company fails to fulfill its burn rate commitment, vote to WITHHOLD from the compensation committee. 1 Non-qualified stock options are not performance-based awards unless the grant or the vesting of the stock options is tied to the achievement of a pre-determined and disclosed performance measure. A rising stock market will generally increase share prices of all companies, despite of the company's underlying performance. 2 Performance-accelerated grants are awards that vest earlier based on the achievement of a specified measure. However, these grants will ultimately vest over time even without the attainment of the goal(s).
2007 Burn Rate Table Russell 3000 Non-Russell 3000 - ---------------- ------------------------- ------------------------------------ --------------------------------------- - ---------------- ------------------------- ----------- ------------ ----------- ------------ ------------- ------------ GICS Description Mean Standard Mean + Mean Standard Mean + Deviation STDEV Deviation STDEV 1010 Energy 1.37% 0.92% 2.29% 1.76% 2.01% 3.77% 1510 Materials 1.23% 0.62% 1.85% 2.21% 2.15% 4.36% 2010 Capital Goods 1.60% 0.98% 2.57% 2.34% 1.98% 4.32% 2020 Commercial Services & 2.39% 1.42% 3.81% 2.25% 1.93% 4.18% Supplies 2030 Transportation 1.30% 1.01% 2.31% 1.92% 1.95% 3.86% 2510 Automobiles & 1.93% 0.98% 2.90% 2.37% 2.32% 4.69% Components 2520 Consumer Durables & 1.97% 1.12% 3.09% 2.02% 1.68% 3.70% Apparel 2530 Hotels Restaurants & 2.22% 1.19% 3.41% 2.29% 1.88% 4.17% Leisure 2540 Media 1.78% 0.92% 2.70% 3.26% 2.36% 5.62% 2550 Retailing 1.95% 1.10% 3.05% 2.92% 2.21% 5.14% 3010, 3020, Food & Staples 1.66% 1.25% 2.91% 1.90% 2.00% 3.90% 3030 Retailing 3510 Health Care Equipment 2.87% 1.32% 4.19% 3.51% 2.31% 5.81% & Services 3520 Pharmaceuticals & 3.12% 1.38% 4.50% 3.96% 2.89% 6.85% Biotechnology 4010 Banks 1.31% 0.89% 2.20% 1.15% 1.10% 2.25% 4020 Diversified 2.13% 1.64% 3.76% 4.84% 5.03% 9.87% Financials 4030 Insurance 1.34% 0.88% 2.22% 1.60% 1.96% 3.56% 228 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4040 Real Estate 1.21% 1.02% 2.23% 1.21% 1.02% 2.23% 4510 Software & Services 3.77% 2.05% 5.82% 5.33% 3.13% 8.46% 4520 Technology Hardware & 3.05% 1.65% 4.70% 3.58% 2.34% 5.92% Equipment 4530 Semiconductors & 3.76% 1.64% 5.40% 4.48% 2.46% 6.94% Semiconductor Equip. 5010 Telecommunication Services 1.71% 0.99% 2.70% 2.98% 2.94% 5.92% 5510 Utilities 0.84% 0.51% 1.35% 0.84% 0.51% 1.35% For companies that grant both full value awards and stock options to their employees, ISS shall apply a premium on full value awards for the past three fiscal years. The guideline for applying the premium is as follows: Annual Characteristics Stock Premium Price Volatility High annual 53% 1 full-value award will count as volatility and 1.5 option shares higher Moderate annual 25% - 1 full-value award will count as volatility 52% 2.0 option shares Low annual Less 1 full-value award will count as volatility than 4.0 option shares 25%
Poor Pay Practices Vote AGAINST equity plans if the plan is a vehicle for poor compensation practices. WITHHOLD from compensation committee members, CEO, and potentially the entire board, if the company has poor compensation practices. The following practices, while not exhaustive, are examples of poor compensation practices that may warrant withholding votes: o Egregious employment contracts (e.g., those containing multi-year guarantees for bonuses and grants); o Excessive perks that dominate compensation (e.g., tax gross-ups for personal use of corporate aircraft); o Huge bonus payouts without justifiable performance linkage or proper disclosure; o Performance metrics that are changed (e.g., canceled or replaced during the performance period without adequate explanation of the action and the link to performance); o Egregious pension/SERP (supplemental executive retirement plan) payouts (e.g., the inclusion of additional years of service not worked or inclusion of performance-based equity awards in the pension calculation); o New CEO awarded an overly generous new hire package (e.g., including excessive "make whole" provisions or any of the poor pay practices listed in this policy); 229 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Excessive severance provisions (e.g., including excessive change in control payments); o Change in control payouts without loss of job or substantial diminution of job duties; o Internal pay disparity; o Options backdating (covered in a separate policy); and o Other excessive compensation payouts or poor pay practices at the company. Specific Treatment of Certain Award Types in Equity Plan Evaluations: Dividend Equivalent Rights Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured. Liberal Share Recycling Provisions Under net share counting provisions, shares tendered by an option holder to pay for the exercise of an option, shares withheld for taxes or shares repurchased by the company on the open market can be recycled back into the equity plan for awarding again. All awards with such provisions should be valued as full-value awards. Stock-settled stock appreciation rights (SSARs) will also be considered as full-value awards if a company counts only the net shares issued to employees towards their plan reserve. Other Compensation Proposals and Policies 401(k) Employee Benefit Plans Vote FOR proposals to implement a 401(k) savings plan for employees. Director Compensation Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the cost of the plans against the company's allowable cap. On occasion, director stock plans that set aside a relatively small number of shares when combined with employee or executive stock compensation plans exceed the allowable cap. Vote for the plan if ALL of the following qualitative factors in the board's compensation are met and disclosed in the proxy statement: o Director stock ownership guidelines with a minimum of three times the annual cash retainer. o Vesting schedule or mandatory holding/deferral period: - A minimum vesting of three years for stock options or restricted stock; or - Deferred stock payable at the end of a three-year deferral period. o Mix between cash and equity: - A balanced mix of cash and equity, for example 40% cash/60% equity or 50% cash/50% equity; or - If the mix is heavier on the equity component, the vesting schedule or deferral period should be more stringent, with the lesser of five years or the term of directorship. o No retirement/benefits and perquisites provided to non-employee directors; and o Detailed disclosure provided on cash and equity compensation delivered to each nonemployee director for the most recent fiscal year in a table. The column headers for the table may include the following: name of each non- 230 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- employee director, annual retainer, board meeting fees, committee retainer, committee-meeting fees, and equity grants. Director Retirement Plans Vote AGAINST retirement plans for non-employee directors. Vote FOR shareholder proposals to eliminate retirement plans for non-employee directors. Employee Stock Ownership Plans (ESOPs) Vote FOR proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares). Employee Stock Purchase Plans-- Qualified Plans Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR employee stock purchase plans where all of the following apply: o Purchase price is at least 85 percent of fair market value; o Offering period is 27 months or less; and o The number of shares allocated to the plan is ten percent or less of the outstanding shares. Vote AGAINST qualified employee stock purchase plans where any of the following apply: o Purchase price is less than 85 percent of fair market value; or o Offering period is greater than 27 months; or o The number of shares allocated to the plan is more than ten percent of the outstanding shares. Employee Stock Purchase Plans-- Non-Qualified Plans Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features: o Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company); o Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary; o Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value; o No discount on the stock price on the date of purchase since there is a company matching contribution. Vote AGAINST nonqualified employee stock purchase plans when any of the plan features do not meet the above criteria. If the company matching contribution exceeds 25 percent of employee's contribution, evaluate the cost of the plan against its allowable cap. Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related Compensation Proposals) Vote FOR proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m). Vote FOR proposals to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) unless they are clearly inappropriate. Vote CASE-BY-CASE on amendments to existing plans to increase shares reserved and to qualify for favorable tax treatment under the provisions of Section 162(m) as long as the plan does not exceed the allowable cap and the plan does not violate any of the supplemental policies. 231 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Generally vote FOR cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes under the provisions of Section 162(m) if no increase in shares is requested. Options Backdating In cases where a company has practiced options backdating, WITHHOLD on a CASE-BY-CASE basis from the members of the compensation committee, depending on the severity of the practices and the subsequent corrective actions on the part of the board. WITHHOLD from the compensation committee members who oversaw the questionable options grant practices or from current compensation committee members who fail to respond to the issue proactively, depending on several factors, including, but not limited to: o Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes; o Length of time of options backdating; o Size of restatement due to options backdating; o Corrective actions taken by the board or compensation committee, such as canceling or repricing backdated options, or recoupment of option gains on backdated grants; o Adoption of a grant policy that prohibits backdating, and creation of a fixed grant schedule or window period for equity grants going forward. Option Exchange Programs/Repricing Options Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options taking into consideration: o Historic trading patterns--the stock price should not be so volatile that the options are likely to be back "in-the-money" over the near term; o Rationale for the re-pricing--was the stock price decline beyond management's control? o Is this a value-for-value exchange? o Are surrendered stock options added back to the plan reserve? o Option vesting--does the new option vest immediately or is there a black-out period? o Term of the option--the term should remain the same as that of the replaced option; o Exercise price--should be set at fair market or a premium to market; o Participants--executive officers and directors should be excluded. If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company's three-year average burn rate. In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company's stock price demonstrates poor timing. Repricing after a recent decline in stock price triggers additional scrutiny and a potential AGAINST vote on the proposal. At a minimum, the decline should not have happened within the past year. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price. Vote FOR shareholder proposals to put option repricings to a shareholder vote. Stock Plans in Lieu of Cash Vote CASE-by-CASE on plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock. 232 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR non-employee director only equity plans which provide a dollar-for-dollar cash for stock exchange. Vote CASE-by-CASE on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation. Transfer Programs of Stock Options One-time Transfers: WITHHOLD votes from compensation committee members if they fail to submit one-time transfers for to shareholders for approval. Vote CASE-BY-CASE on one-time transfers. Vote FOR if: o Executive officers and non-employee directors are excluded from participating; o Stock options are purchased by third-party financial institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other appropriate financial models; o There is a two-year minimum holding period for sale proceeds (cash or stock) for all participants. Additionally, management should provide a clear explanation of why options are being transferred and whether the events leading up to the decline in stock price were beyond management's control. A review of the company's historic stock price volatility should indicate if the options are likely to be back "in-the-money" over the near term. Shareholder Proposals on Compensation Advisory Vote on Executive Compensation (Say-on-Pay) Generally, vote FOR shareholder proposals that call for non-binding shareholder ratification of the compensation of the named Executive Officers and the accompanying narrative disclosure of material factors provided to understand the Summary Compensation Table. Compensation Consultants- Disclosure of Board or Company's Utilization Generally vote FOR shareholder proposals seeking disclosure regarding the Company, Board, or Board committee's use of compensation consultants, such as company name, business relationship(s) and fees paid. Disclosure/Setting Levels or Types of Compensation for Executives and Directors Generally, vote FOR shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company. Vote AGAINST shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation. Vote AGAINST shareholder proposals requiring director fees be paid in stock only. Vote CASE-BY-CASE on all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. Option Repricing Vote FOR shareholder proposals to put option repricings to a shareholder vote. Pay for Superior Performance 233 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Generally vote FOR shareholder proposals based on a case-by-case analysis that requests the board establish a pay-for-superior performance standard in the company's executive compensation plan for senior executives. The proposals call for: o the annual incentive component of the plan should utilize financial performance criteria that can be benchmarked against peer group performance, and provide that no annual bonus be awarded based on financial performance criteria unless the company exceeds the median or mean performance of a disclosed group of peer companies on the selected financial criteria; o the long-term equity compensation component of the plan should utilize financial and/or stock price performance criteria that can be benchmarked against peer group performance, and any options, restricted shares, or other equity compensation used should be structured so that compensation is received only when company performance exceeds the median or mean performance of the peer group companies on the selected financial and stock price performance criteria; and o the plan disclosure should allow shareholders to monitor the correlation between pay and performance. Consider the following factors in evaluating this proposal: o What aspects of the company's annual and long -term equity incentive programs are performance driven? o If the annual and long-term equity incentive programs are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed peer group? o Can shareholders assess the correlation between pay and performance based on the current disclosure? o What type of industry and stage of business cycle does the company belong to? Pension Plan Income Accounting Generally vote FOR shareholder proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation. Performance-Based Awards Vote CASE-BY-CASE on shareholder proposal requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps: o First, vote FOR shareholder proposals advocating the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a "substantial" portion of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria to be considered as performance-based awards. Further, premium-priced options should have a premium of at least 25 percent and higher to be considered performance based awards. o Second, assess the rigor of the company's performance-based equity program. If the bar set for the performance-based program is too low based on the company's historical or peer group comparison, generally vote FOR the proposal. Furthermore, if target performance results in an above target payout, vote FOR the shareholder proposal due to program's poor design. If the company does not disclose the performance metric of the performance-based equity program, vote FOR the shareholder proposal regardless of the outcome of the first step to the test. In general, vote FOR the shareholder proposal if the company does not meet both of the above two steps. Severance Agreements for Executives/Golden Parachutes Vote FOR shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. 234 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following: o The triggering mechanism should be beyond the control of management; o The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the year in which the change of control occurs; o Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result of the change in control. Change in control is defined as a change in the company ownership structure. Supplemental Executive Retirement Plans (SERPs) Generally vote FOR shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans. Generally vote FOR shareholder proposals requesting to limit the executive benefits provided under the company's supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive's annual salary and excluding of all incentive or bonus pay from the plan's definition of covered compensation used to establish such benefits. 9. Corporate Responsibility Consumer Issues and Public Safety Animal Rights Generally vote AGAINST proposals to phase out the use of animals in product testing unless: o The company is conducting animal testing programs that are unnecessary or not required by regulation; o The company is conducting animal testing when suitable alternatives are accepted and used at peer firms; o The company has been the subject of recent, significant controversy related to its testing programs. Generally vote FOR proposals seeking a report on the company's animal welfare standards unless: o The company has already published a set of animal welfare standards and monitors compliance; o The company's standards are comparable to or better than those of peer firms; and o There are no serious controversies surrounding the company's treatment of animals. Drug Pricing Generally vote AGAINST proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing. Vote CASE-BY-CASE on proposals requesting that the company evaluate their product pricing considering: o The existing level of disclosure on pricing policies; o Deviation from established industry pricing norms; o The company's existing initiatives to provide its products to needy consumers; o Whether the proposal focuses on specific products or geographic regions. Drug Reimportation Generally vote FOR proposals requesting that companies report on the financial and legal impact of their policies regarding prescription drug reimportation unless such information is already publicly disclosed. 235 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Generally vote AGAINST proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Genetically Modified Foods Vote AGAINST proposals asking companies to voluntarily label genetically engineered (GE) ingredients in their products or alternatively to provide interim labeling and eventually eliminate GE ingredients due to the costs and feasibility of labeling and/or phasing out the use of GE ingredients. Vote CASE-BY-CASE on proposals asking for a report on the feasibility of labeling products containing GE ingredients taking into account: o The relevance of the proposal in terms of the company's business and the proportion of it affected by the resolution; o The quality of the company's disclosure on GE product labeling and related voluntary initiatives and how this disclosure compares with peer company disclosure; o Company's current disclosure on the feasibility of GE product labeling, including information on the related costs; o Any voluntary labeling initiatives undertaken or considered by the company. Vote CASE-BY-CASE on proposals asking for the preparation of a report on the financial, legal, and environmental impact of continued use of GE ingredients/seeds. Evaluate the following: o The relevance of the proposal in terms of the company's business and the proportion of it affected by the resolution; o The quality of the company's disclosure on risks related to GE product use and how this disclosure compares with peer company disclosure; o The percentage of revenue derived from international operations, particularly in Europe, where GE products are more regulated and consumer backlash is more pronounced. Vote AGAINST proposals seeking a report on the health and environmental effects of genetically modified organisms (GMOs). Health studies of this sort are better undertaken by regulators and the scientific community. Vote AGAINST proposals to completely phase out GE ingredients from the company's products or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company's products. Such resolutions presuppose that there are proven health risks to GE ingredients (an issue better left to federal regulators) that outweigh the economic benefits derived from biotechnology. Handguns Generally vote AGAINST requests for reports on a company's policies aimed at curtailing gun violence in the United States unless the report is confined to product safety information. Criminal misuse of firearms is beyond company control and instead falls within the purview of law enforcement agencies. HIV/AIDS Vote CASE-BY-CASE on requests for reports outlining the impact of the health pandemic (HIV/AIDS, malaria and tuberculosis) on the company's Sub-Saharan operations and how the company is responding to it, taking into account: o The nature and size of the company's operations in Sub-Saharan Africa and the number of local employees; o The company's existing healthcare policies, including benefits and healthcare access for local workers; o Company donations to healthcare providers operating in the region. Vote AGAINST proposals asking companies to establish, implement, and report on a standard of response to the HIV/AIDS, TB, and malaria health pandemic in Africa and other developing countries, unless the company has significant operations in these markets and has failed to adopt policies and/or procedures to address these issues comparable to those of industry peers. 236 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Predatory Lending Vote CASE-BY CASE on requests for reports on the company's procedures for preventing predatory lending, including the establishment of a board committee for oversight, taking into account: o Whether the company has adequately disclosed mechanisms in place to prevent abusive lending practices; o Whether the company has adequately disclosed the financial risks of its subprime business; o Whether the company has been subject to violations of lending laws or serious lending controversies; o Peer companies' policies to prevent abusive lending practices. Tobacco Most tobacco-related proposals should be evaluated on a CASE-BY-CASE basis, taking into account the following factors: Second-hand smoke: o Whether the company complies with all local ordinances and regulations; o The degree that voluntary restrictions beyond those mandated by law might hurt the company's competitiveness; o The risk of any health-related liabilities. Advertising to youth: o Whether the company complies with federal, state, and local laws on the marketing of tobacco or if it has been fined for violations; o Whether the company has gone as far as peers in restricting advertising; o Whether the company entered into the Master Settlement Agreement, which restricts marketing of tobacco to youth; o Whether restrictions on marketing to youth extend to foreign countries. Cease production of tobacco-related products or avoid selling products to tobacco companies: o The percentage of the company's business affected; o The economic loss of eliminating the business versus any potential tobacco-related liabilities. Spin-off tobacco-related businesses: o The percentage of the company's business affected; o The feasibility of a spin-off; o Potential future liabilities related to the company's tobacco business. Stronger product warnings: Vote AGAINST proposals seeking stronger product warnings. Such decisions are better left to public health authorities. Investment in tobacco stocks: Vote AGAINST proposals prohibiting investment in tobacco equities. Such decisions are better left to portfolio managers. Toxic Chemicals Generally vote FOR resolutions requesting that a company discloses its policies related to toxic chemicals. Vote CASE-BY-CASE on resolutions requesting that companies evaluate and disclose the potential financial and legal risks associated with utilizing certain chemicals, considering: o Current regulations in the markets in which the company operates; 237 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Recent significant controversy, litigation, or fines stemming from toxic chemicals or ingredients at the company; and o The current level of disclosure on this topic. Generally vote AGAINST resolutions requiring that a company reformulate its products within a certain timeframe unless such actions are required by law in specific markets. Environment and Energy Arctic National Wildlife Refuge Generally vote AGAINST request for reports outlining potential environmental damage from drilling in the Arctic National Wildlife Refuge (ANWR) unless: o New legislation is adopted allowing development and drilling in the ANWR region; o The company intends to pursue operations in the ANWR; and o The company does not currently disclose an environmental risk report for their operations in the ANWR. CERES Principles Vote CASE-BY-CASE on proposals to adopt the CERES Principles, taking into account: o The company's current environmental disclosure beyond legal requirements, including environmental health and safety (EHS) audits and reports that may duplicate CERES; o The company's environmental performance record, including violations of federal and state regulations, level of toxic emissions, and accidental spills; o Environmentally conscious practices of peer companies, including endorsement of CERES; o Costs of membership and implementation. Climate Change In general, vote FOR resolutions requesting that a company disclose information on the impact of climate change on the company's operations unless: o The company already provides current, publicly-available information on the perceived impact that climate change may have on the company as well as associated policies and procedures to address such risks and/or opportunities; o The company's level of disclosure is comparable to or better than information provided by industry peers; and o There are no significant fines, penalties, or litigation associated with the company's environmental performance. Concentrated Area Feeding Operations (CAFOs) Vote FOR resolutions requesting that companies report to shareholders on the risks and liabilities associated with CAFOs unless: o The company has publicly disclosed guidelines for its corporate and contract farming operations, including compliance monitoring; or o The company does not directly source from CAFOs. Environmental-Economic Risk Report Vote CASE-BY-CASE on proposals requesting an economic risk assessment of environmental performance considering: o The feasibility of financially quantifying environmental risk factors; o The company's compliance with applicable legislation and/or regulations regarding environmental performance; o The costs associated with implementing improved standards; 238 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o The potential costs associated with remediation resulting from poor environmental performance; and o The current level of disclosure on environmental policies and initiatives. Environmental Reports Generally vote FOR requests for reports disclosing the company's environmental policies unless it already has well-documented environmental management systems that are available to the public. Global Warming Generally vote FOR proposals requesting a report on greenhouse gas emissions from company operations and/or products unless this information is already publicly disclosed or such factors are not integral to the company's line of business. Generally vote AGAINST proposals that call for reduction in greenhouse gas emissions by specified amounts or within a restrictive time frame unless the company lags industry standards and has been the subject of recent, significant fines or litigation resulting from greenhouse gas emissions. Kyoto Protocol Compliance Generally vote FOR resolutions requesting that companies outline their preparations to comply with standards established by Kyoto Protocol signatory markets unless: o The company does not maintain operations in Kyoto signatory markets; o The company already evaluates and substantially discloses such information; or, o Greenhouse gas emissions do not significantly impact the company's core businesses. Land Use Generally vote AGAINST resolutions that request the disclosure of detailed information on a company's policies related to land use or development unless the company has been the subject of recent, significant fines or litigation stemming from its land use. Nuclear Safety Generally vote AGAINST resolutions requesting that companies report on risks associated with their nuclear reactor designs and/or the production and interim storage of irradiated fuel rods unless: o The company does not have publicly disclosed guidelines describing its policies and procedures for addressing risks associated with its operations; o The company is non-compliant with Nuclear Regulatory Commission (NRC) requirements; or o The company stands out amongst its peers or competitors as having significant problems with safety or environmental performance related to its nuclear operations. Operations in Protected Areas Generally vote FOR requests for reports outlining potential environmental damage from operations in protected regions, including wildlife refuges unless: o The company does not currently have operations or plans to develop operations in these protected regions; or, o The company provides disclosure on its operations and environmental policies in these regions comparable to industry peers. Recycling Vote CASE-BY-CASE on proposals to adopt a comprehensive recycling strategy, taking into account: o The nature of the company's business and the percentage affected; 239 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o The extent that peer companies are recycling; o The timetable prescribed by the proposal; o The costs and methods of implementation; o Whether the company has a poor environmental track record, such as violations of federal and state regulations. Renewable Energy In general, vote FOR requests for reports on the feasibility of developing renewable energy sources unless the report is duplicative of existing disclosure or irrelevant to the company's line of business. Generally vote AGAINST proposals requesting that the company invest in renewable energy sources. Such decisions are best left to management's evaluation of the feasibility and financial impact that such programs may have on the company. Sustainability Report Generally vote FOR proposals requesting the company to report on policies and initiatives related to social, economic, and environmental sustainability, unless: o The company already discloses similar information through existing reports or policies such as an Environment, Health, and Safety (EHS) report; a comprehensive Code of Corporate Conduct; and/or a Diversity Report; or o The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame. General Corporate Issues Charitable/Political Contributions Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as: o The company is in compliance with laws governing corporate political activities; and o The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and not coercive. Vote AGAINST proposals to publish in newspapers and public media the company's political contributions as such publications could present significant cost to the company without providing commensurate value to shareholders. Vote CASE-BY-CASE on proposals to improve the disclosure of a company's political contributions considering: o Recent significant controversy or litigation related to the company's political contributions or governmental affairs; and o The public availability of a policy on political contributions. Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring contributions can put the company at a competitive disadvantage. Vote AGAINST proposals restricting the company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which contributions are in the best interests of the company. Vote AGAINST proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders. Disclosure of Lobbying Expenditures/Initiatives 240 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on proposals requesting information on a company's lobbying initiatives, considering any significant controversy or litigation surrounding a company's public policy activities, the current level of disclosure on lobbying strategy, and the impact that the policy issue may have on the company's business operations. Link Executive Compensation to Social Performance Vote CASE-BY-CASE on proposals to review ways of linking executive compensation to social factors, such as corporate downsizings, customer or employee satisfaction, community involvement, human rights, environmental performance, predatory lending, and executive/employee pay disparities. Such resolutions should be evaluated in the context of: o The relevance of the issue to be linked to pay; o The degree that social performance is already included in the company's pay structure and disclosed; o The degree that social performance is used by peer companies in setting pay; o Violations or complaints filed against the company relating to the particular social performance measure; o Artificial limits sought by the proposal, such as freezing or capping executive pay o Independence of the compensation committee; o Current company pay levels. Outsourcing/Offshoring Vote CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, considering: o Risks associated with certain international markets; o The utility of such a report to shareholders; o The existence of a publicly available code of corporate conduct that applies to international operations. Labor Standards and Human Rights China Principles Vote AGAINST proposals to implement the China Principles unless: o There are serious controversies surrounding the company's China operations; and o The company does not have a code of conduct with standards similar to those promulgated by the International Labor Organization (ILO). Country-specific Human Rights Reports Vote CASE-BY-CASE on requests for reports detailing the company's operations in a particular country and steps to protect human rights, based on: o The nature and amount of company business in that country; o The company's workplace code of conduct; o Proprietary and confidential information involved; o Company compliance with U.S. regulations on investing in the country; o Level of peer company involvement in the country. International Codes of Conduct/Vendor Standards 241 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on proposals to implement certain human rights standards at company facilities or those of its suppliers and to commit to outside, independent monitoring. In evaluating these proposals, the following should be considered: o The company's current workplace code of conduct or adherence to other global standards and the degree they meet the standards promulgated by the proponent; o Agreements with foreign suppliers to meet certain workplace standards; o Whether company and vendor facilities are monitored and how; o Company participation in fair labor organizations; o Type of business; o Proportion of business conducted overseas; o Countries of operation with known human rights abuses; o Whether the company has been recently involved in significant labor and human rights controversies or violations; o Peer company standards and practices; o Union presence in company's international factories. Generally vote FOR reports outlining vendor standards compliance unless any of the following apply: o The company does not operate in countries with significant human rights violations; o The company has no recent human rights controversies or violations; or o The company already publicly discloses information on its vendor standards compliance. MacBride Principles Vote CASE-BY-CASE on proposals to endorse or increase activity on the MacBride Principles, taking into account: o Company compliance with or violations of the Fair Employment Act of 1989; o Company antidiscrimination policies that already exceed the legal requirements; o The cost and feasibility of adopting all nine principles; o The cost of duplicating efforts to follow two sets of standards (Fair Employment and the MacBride Principles); o The potential for charges of reverse discrimination; o The potential that any company sales or contracts in the rest of the United Kingdom could be negatively impacted; o The level of the company's investment in Northern Ireland; o The number of company employees in Northern Ireland; o The degree that industry peers have adopted the MacBride Principles; o Applicable state and municipal laws that limit contracts with companies that have not adopted the MacBride Principles. Military Business Foreign Military Sales/Offsets Vote AGAINST reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales. Landmines and Cluster Bombs 242 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on proposals asking a company to renounce future involvement in antipersonnel landmine production, taking into account: o Whether the company has in the past manufactured landmine components; o Whether the company's peers have renounced future production. o Vote CASE-BY-CASE on proposals asking a company to renounce future involvement in cluster bomb production, taking into account: o What weapons classifications the proponent views as cluster bombs; o Whether the company currently or in the past has manufactured cluster bombs or their components; o The percentage of revenue derived from cluster bomb manufacture; o Whether the company's peers have renounced future production. Nuclear Weapons Vote AGAINST proposals asking a company to cease production of nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Components and delivery systems serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company's business. Operations in Nations Sponsoring Terrorism (e.g., Iran) Vote CASE-BY-CASE on requests for a board committee review and report outlining the company's financial and reputational risks from its operations in a terrorism-sponsoring state, taking into account current disclosure on: o The nature and purpose of the operations and the amount of business involved (direct and indirect revenues and expenses) that could be affected by political disruption; o Compliance with U.S. sanctions and laws. Spaced-Based Weaponization Generally vote FOR reports on a company's involvement in spaced-based weaponization unless: o The information is already publicly available; or o The disclosures sought could compromise proprietary information. Workplace Diversity Board Diversity Generally vote FOR reports on the company's efforts to diversify the board, unless: o The board composition is reasonably inclusive in relation to companies of similar size and business; or o The board already reports on its nominating procedures and diversity initiatives. Generally vote AGAINST proposals that would call for the adoption of specific committee charter language regarding diversity initiatives unless the company fails to publicly disclose existing equal opportunity or non-discrimination policies. Vote CASE-BY-CASE on proposals asking the company to increase the representation of women and minorities on the board, taking into account: o The degree of board diversity; o Comparison with peer companies; o Established process for improving board diversity; o Existence of independent nominating committee; 243 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Use of outside search firm; o History of EEO violations. Equal Employment Opportunity (EEO) Generally vote FOR reports outlining the company's affirmative action initiatives unless all of the following apply: o The company has well-documented equal opportunity programs; o The company already publicly reports on its company-wide affirmative initiatives and provides data on its workforce diversity; and o The company has no recent EEO-related violations or litigation. Vote AGAINST proposals seeking information on the diversity efforts of suppliers and service providers, which can pose a significant cost and administration burden on the company. Glass Ceiling Generally vote FOR reports outlining the company's progress towards the Glass Ceiling Commission's business recommendations, unless: o The composition of senior management and the board is fairly inclusive; o The company has well-documented programs addressing diversity initiatives and leadership development; o The company already issues public reports on its company-wide affirmative initiatives and provides data on its workforce diversity; and o The company has had no recent, significant EEO-related violations or litigation. Sexual Orientation Vote FOR proposals seeking to amend a company's EEO statement in order to prohibit discrimination based on sexual orientation, unless the change would result in excessive costs for the company. Vote AGAINST proposals to extend company benefits to or eliminate benefits from domestic partners. Benefits decisions should be left to the discretion of the company. 10. Mutual Fund Proxies Election of Directors Vote CASE-BY-CASE on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee. Converting Closed-end Fund to Open-end Fund Vote CASE-BY-CASE on conversion proposals, considering the following factors: o Past performance as a closed-end fund; o Market in which the fund invests; o Measures taken by the board to address the discount; and o Past shareholder activism, board activity, and votes on related proposals. Proxy Contests Vote CASE-BY-CASE on proxy contests, considering the following factors: o Past performance relative to its peers; 244 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Market in which fund invests; o Measures taken by the board to address the issues; o Past shareholder activism, board activity, and votes on related proposals; o Strategy of the incumbents versus the dissidents; o Independence of directors; o Experience and skills of director candidates; o Governance profile of the company; o Evidence of management entrenchment. Investment Advisory Agreements Vote CASE-BY-CASE on investment advisory agreements, considering the following factors: o Proposed and current fee schedules; o Fund category/investment objective; o Performance benchmarks; o Share price performance as compared with peers; o Resulting fees relative to peers; o Assignments (where the advisor undergoes a change of control). Approving New Classes or Series of Shares Vote FOR the establishment of new classes or series of shares. Preferred Stock Proposals Vote CASE-BY-CASE on the authorization for or increase in preferred shares, considering the following factors: o Stated specific financing purpose; o Possible dilution for common shares; o Whether the shares can be used for antitakeover purposes. 1940 Act Policies Vote CASE-BY-CASE on policies under the Investment Advisor Act of 1940, considering the following factors: o Potential competitiveness; o Regulatory developments; o Current and potential returns; and o Current and potential risk. Generally vote FOR these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation. Changing a Fundamental Restriction to a Nonfundamental Restriction Vote CASE-BY-CASE on proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors: o The fund's target investments; o The reasons given by the fund for the change; and 245 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o The projected impact of the change on the portfolio. Change Fundamental Investment Objective to Nonfundamental Vote AGAINST proposals to change a fund's fundamental investment objective to nonfundamental. Name Change Proposals Vote CASE-BY-CASE on name change proposals, considering the following factors: o Political/economic changes in the target market; o Consolidation in the target market; and o Current asset composition. Change in Fund's Subclassification Vote CASE-BY-CASE on changes in a fund's sub-classification, considering the following factors: o Potential competitiveness; o Current and potential returns; o Risk of concentration; o Consolidation in target industry. Disposition of Assets/Termination/Liquidation Vote CASE-BY-CASE on proposals to dispose of assets, to terminate or liquidate, considering the following factors: o Strategies employed to salvage the company; o The fund's past performance; o The terms of the liquidation. Changes to the Charter Document Vote CASE-BY-CASE on changes to the charter document, considering the following factors: o The degree of change implied by the proposal; o The efficiencies that could result; o The state of incorporation; o Regulatory standards and implications. Vote AGAINST any of the following changes: o Removal of shareholder approval requirement to reorganize or terminate the trust or any of its series; o Removal of shareholder approval requirement for amendments to the new declaration of trust; o Removal of shareholder approval requirement to amend the fund's management contract, allowing the contract to be modified by the investment manager and the trust management, as permitted by the 1940 Act; o Allow the trustees to impose other fees in addition to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a fund's shares; o Removal of shareholder approval requirement to engage in and terminate subadvisory arrangements; o Removal of shareholder approval requirement to change the domicile of the fund. Changing the Domicile of a Fund 246 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on re-incorporations, considering the following factors: o Regulations of both states; o Required fundamental policies of both states; o The increased flexibility available. Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval Vote AGAINST proposals authorizing the board to hire/terminate subadvisors without shareholder approval. Distribution Agreements Vote CASE-BY-CASE on distribution agreement proposals, considering the following factors: o Fees charged to comparably sized funds with similar objectives; o The proposed distributor's reputation and past performance; o The competitiveness of the fund in the industry; o The terms of the agreement. Master-Feeder Structure Vote FOR the establishment of a master-feeder structure. Mergers Vote CASE-BY-CASE on merger proposals, considering the following factors: o Resulting fee structure; o Performance of both funds; o Continuity of management personnel; o Changes in corporate governance and their impact on shareholder rights. Shareholder Proposals for Mutual Funds Establish Director Ownership Requirement Generally vote AGAINST shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. Reimburse Shareholder for Expenses Incurred Vote CASE-BY-CASE on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote FOR the reimbursement of the proxy solicitation expenses. Terminate the Investment Advisor Vote CASE-BY-CASE on proposals to terminate the investment advisor, considering the following factors: o Performance of the fund's Net Asset Value (NAV); o The fund's history of shareholder relations; o The performance of other funds under the advisor's management. 247 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- FOUNDERS ASSET MANAGEMENT LLC PROXY VOTING Founders, through its participation on BNY Mellon's Proxy Policy Committee (the "PPC"), applies BNY Mellon's Proxy Voting Policy, related procedures, and voting guidelines when voting proxies on behalf of the AZIM Dreyfus Founders Equity Growth Fund. Founders recognizes that an investment adviser is a fiduciary that owes its clients, including funds it manages, a duty of utmost good faith and full and fair disclosure of all material facts. An investment adviser's duty of loyalty requires an adviser to vote proxies in a manner consistent with the best interest of its clients and precludes the adviser from subrogating the clients' interests to its own. In addition, an investment adviser voting proxies on behalf of a fund must do so in a manner consistent with the best interests of the fund and its shareholders. Founders seeks to avoid material conflicts of interest by participating in the PPC, which applies detailed, pre-determined written proxy voting guidelines (the "Voting Guidelines") in an objective and consistent manner across client accounts, based on internal and external research and recommendations provided by a third party vendor, and without consideration of any client relationship factors. Further, Founders and its affiliates engage a third party as an independent fiduciary to vote all proxies of funds managed by Mellon or its affiliates (including the Fund), and may engage an independent fiduciary to vote proxies of other issuers at its discretion. All proxies received by the Fund are reviewed, categorized, analyzed and voted in accordance with the Voting Guidelines. The guidelines are reviewed periodically and updated as necessary to reflect new issues and any changes in BNY Mellon's or Founders' policies on specific issues. Items that can be categorized under the Voting Guidelines are voted in accordance with any applicable guidelines or referred to the PPC, if the applicable guidelines so require. Proposals that cannot be categorized under the Voting Guidelines are referred to the PPC for discussion and vote. Additionally, the PPC may review proposals where it has identified a particular company, industry or issue for special scrutiny. With regard to voting proxies of foreign companies, Founders weighs the cost of voting and potential inability to sell the securities (which may occur during the voting process) against the benefit of voting the proxies to determine whether or not to vote. When evaluating proposals, the PPC recognizes that the management of a publicly held company may need protection from the market's frequent focus on short-term considerations, so as to be able to concentrate on such long-term goals as productivity and development of competitive products and services. In addition, the PPC generally supports proposals designed to provide management with short-term insulation from outside influences so as to enable them to bargain effectively with potential suitors to the extent such proposals are discrete and not bundled with other proposals. The PPC believes that a shareholder's role in the governance of a publicly-held company is generally limited to monitoring the performance of the company and its management and voting on matters which properly come to a shareholder vote. However, the PPC generally opposes proposals designed to insulate an issuer's management unnecessarily from the wishes of a majority of shareholders. Accordingly, the PPC generally votes in accordance with management on issues that the PPC believes neither unduly limit the rights and privileges of shareholders nor adversely affect the value of the investment. On questions of social responsibility where economic performance does not appear to be an issue, the PPC attempts to ensure that management reasonably responds to the social issues. Responsiveness will be measured by management's efforts to address the particular social issue including, where appropriate, assessment of the implications of the proposal to the ongoing operations of the company. The PPC will pay particular attention to repeat issues where management has failed in its commitment in the intervening period to take actions on issues. In evaluating proposals regarding incentive plans and restricted stock plans, the PPC typically employs a shareholder value transfer model. This model seeks to assess the amount of shareholder equity flowing out of the company to executives as options are exercised. After determining the cost of the plan, the PPC evaluates whether the cost is reasonable based on a number of factors, including industry classification and historical performance information. The PPC generally votes against proposals that permit the repricing or replacement of stock options without shareholder approval or that are silent on repricing and the company has a history of repricing stock options in a manner that the PPC believes is detrimental to shareholders. 248 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- THE BANK OF NEW YORK MELLON CORPORATION PROXY VOTING POLICY (Approved: October 12, 2007) 1. Scope of Policy - This Proxy Voting Policy has been adopted by certain of the investment advisory subsidiaries of The Bank of New York Mellon Corporation ("BNY Mellon"), the investment companies advised by such subsidiaries (the "Funds"), and the banking subsidiaries of BNY Mellon (BNY Mellon's investment advisory and banking subsidiaries are hereinafter referred to individually as a "Subsidiary" and collectively as the "Subsidiaries"). 2. Fiduciary Duty - We recognize that an investment adviser is a fiduciary that owes its clients a duty of utmost good faith and full and fair disclosure of all material facts. We further recognize that the right to vote proxies is an asset, just as the economic investment represented by the shares is an asset. An investment adviser's duty of loyalty precludes the adviser from subrogating its clients' interests to its own. Accordingly, in voting proxies, we will seek to act solely in the best financial and economic interests of our clients, including the Funds and their shareholders, and for the exclusive benefit of pension and other employee benefit plan participants. With regard to voting proxies of foreign companies, a Subsidiary weighs the cost of voting, and potential inability to sell, the shares against the benefit of voting the shares to determine whether or not to vote. 3. Long-Term Perspective - We recognize that management of a publicly-held company may need protection from the market's frequent focus on short-term considerations, so as to be able to concentrate on such long-term goals as productivity and development of competitive products and services. 4. Limited Role of Shareholders - We believe that a shareholder's role in the governance of a publicly-held company is generally limited to monitoring the performance of the company and its managers and voting on matters which properly come to a shareholder vote. We will carefully review proposals that would limit shareholder control or could affect shareholder values. 5. Anti-takeover Proposals - We generally will oppose proposals that seem designed to insulate management unnecessarily from the wishes of a majority of the shareholders and that would lead to a determination of a company's future by a minority of its shareholders. We will generally support proposals that seem to have as their primary purpose providing management with temporary or short-term insulation from outside influences so as to enable them to bargain effectively with potential suitors and otherwise achieve identified long-term goals to the extent such proposals are discrete and not bundled with other proposals. 6. "Social" Issues - On questions of social responsibility where economic performance does not appear to be an issue, we will attempt to ensure that management reasonably responds to the social issues. Responsiveness will be measured by management's efforts to address the particular social issue including, where appropriate, assessment of the implications of the proposal to the ongoing operations of the company. We will pay particular attention to repeat issues where management has failed in the intervening period to take actions previously committed to. With respect to clients having investment policies that require proxies to be cast in a certain manner on particular social responsibility issues, proposals relating to such issues will be evaluated and voted separately 249 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- by the client's portfolio manager in accordance with such policies, rather than pursuant to the procedures set forth in section 7. 7. Proxy Voting Process - Every voting proposal is reviewed, categorized and analyzed in accordance with our written guidelines in effect from time to time. Our guidelines are reviewed periodically and updated as necessary to reflect new issues and any changes in our policies on specific issues. Items that can be categorized will be voted in accordance with any applicable guidelines or referred to the BNY Mellon Proxy Policy Committee (the "Committee"), if the applicable guidelines so require. Proposals that cannot be categorized under the guidelines will be referred to the Committee for discussion and vote. Additionally, the Committee may review any proposal where it has identified a particular company, particular industry or particular issue for special scrutiny. The Committee will also consider specific interests and issues raised by a Subsidiary to the Committee, which interests and issues may require that a vote for an account managed by a Subsidiary be cast differently from the collective vote in order to act in the best interests of such account's beneficial owners. 8. Material Conflicts of Interest - We recognize our duty to vote proxies in the best interests of our clients. We seek to avoid material conflicts of interest through the establishment of our Committee structure, which applies detailed, pre-determined proxy voting guidelines in an objective and consistent manner across client accounts, based on internal and external research and recommendations provided by a third party vendor, and without consideration of any client relationship factors. Further, we engage a third party as an independent fiduciary to vote all proxies for BNY Mellon securities and Fund securities. 9. Securities Lending - We seek to balance the economic benefits of engaging in lending securities against the inability to vote on proxy proposals to determine whether to recall shares, unless a plan fiduciary retains the right to direct us to recall shares. 10. Recordkeeping - We will keep, or cause our agents to keep, the records for each voting proposal required by law. 11. Disclosure - We will furnish a copy of this Proxy Voting Policy and any related procedures, or a description thereof, to investment advisory clients as required by law. In addition, we will furnish a copy of this Proxy Voting Policy, any related procedures, and our voting guidelines to investment advisory clients upon request. The Funds shall include this Proxy Voting Policy and any related procedures, or a description thereof, in their Statements of Additional Information, and shall disclose their proxy votes, as required by law. We recognize that the applicable trust or account document, the applicable client agreement, the Employee Retirement Income Security Act of 1974 (ERISA) and certain laws may require disclosure of other information relating to proxy voting in certain circumstances. This information will only be disclosed to those who have an interest in the account for which shares are voted, and after the shareholder meeting has concluded. 250 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- FRANKLIN ADVISORY SERVICES, LLC PROXY VOTING POLICIES & PROCEDURES RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES Franklin Advisory Services, LLC (hereinafter "Investment Manager") has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the "Proxy Group"), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, "Advisory Clients") that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager's views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager. HOW INVESTMENT MANAGER VOTES PROXIES Fiduciary Considerations All proxies received by the Proxy Group will be voted based upon Investment Manager's instructions and/or policies. To assist it in analyzing proxies, Investment Manager subscribes to RiskMetrics Group ("RiskMetrics"), an unaffiliated third party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, record keeping and vote disclosure services. In addition, Investment Manager subscribes to Glass Lewis & Co., LLC ("Glass Lewis"), an unaffiliated third party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies. Although RiskMetrics' and/or Glass Lewis' analyses are thoroughly reviewed and considered in making a final voting decision, Investment Manager does not consider recommendations from RiskMetrics, Glass Lewis, or any other third party to be determinative of Investment Manager's ultimate decision. As a matter of policy, the officers, directors and employees of Investment Manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of Advisory Clients. Conflicts of Interest All conflicts of interest will be resolved in the interests of the Advisory Clients. Investment Manager is an affiliate of a large, diverse financial services firm with many affiliates and makes its best efforts to avoid conflicts of interest. However, conflicts of interest can arise in situations where: 1. The issuer is a client(1) of Investment Manager or its affiliates; 251 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates; 3. The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);(2) 4. An Access Person(3) of Investment Manager or its affiliates also serves as a director or officer of the issuer; 5. A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member(4) of such director or trustee, also serves as an officer or director of the issuer; or 6. The issuer is Franklin Resources, Inc. or any of its proprietary investment products. Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer's management. Material conflicts of interest are identified by the Proxy Group based upon analyses of client, broker and vendor lists, information periodically gathered from directors and officers, and information derived from other sources, including public filings. The Proxy Group gathers and analyzes this information on a best efforts basis, as much of this information is provided directly by individuals and groups other than the Proxy Group, and the Proxy Group relies on the accuracy of the information it receives from such parties. In situations where a material conflict of interest is identified, the Proxy Group may defer to the voting recommendation of RiskMetrics, Glass Lewis, or those of another independent third party provider of proxy services or send the proxy directly to the relevant Advisory Clients with the Investment Manager's recommendation regarding the vote for approval. If the conflict is not resolved by the Advisory Client, the Proxy Group may refer the matter, along with the recommended course of action by the Investment Manager, if any, to a Proxy Review Committee comprised of representatives from the Portfolio Management (which may include portfolio managers and/or research analysts employed by Investment Manager), Fund Administration, Legal and Compliance Departments within Franklin Templeton for evaluation and voting instructions. The Proxy Review Committee may defer to the voting recommendation of RiskMetrics, Glass Lewis, or those of another independent third party provider of proxy services or send the proxy directly to the relevant Advisory Clients. Where the Proxy Group or the Proxy Review Committee refers a matter to an Advisory Client, it may rely upon the instructions of a representative of the Advisory Client, such as the board of directors or trustees or a committee of the board in the case of a U. S. registered mutual fund, the conducting officer in the case of an open-ended collective investment scheme formed as a Societe d'investissement a capital variable (SICAV), the Independent Review Committee for Canadian investment funds, or a plan administrator in the case of an employee benefit plan. The Proxy Group or the 252 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proxy Review Committee may determine to vote all shares held by Advisory Clients in accordance with the instructions of one or more of the Advisory Clients. The Proxy Review Committee may independently review proxies that are identified as presenting material conflicts of interest; determine the appropriate action to be taken in such situations (including whether to defer to an independent third party or refer a matter to an Advisory Client); report the results of such votes to Investment Manager's clients as may be requested; and recommend changes to the Proxy Voting Policies and Procedures as appropriate. The Proxy Review Committee will also decide whether to vote proxies for securities deemed to present conflicts of interest that are sold following a record date, but before a shareholder meeting date. The Proxy Review Committee may consider various factors in deciding whether to vote such proxies, including Investment Manager's long-term view of the issuer's securities for investment, or it may defer the decision to vote to the applicable Advisory Client. Where a material conflict of interest has been identified, but the items on which the Investment Manager's vote recommendations differ from Glass Lewis, RiskMetrics, or another independent third party provider of proxy services relate specifically to (1) shareholder proposals regarding social or environmental issues or political contributions, (2) "Other Business" without describing the matters that might be considered, or (3) items the Investment Manager wishes to vote in opposition to the recommendations of an issuer's management, the Proxy Group may defer to the vote recommendations of the Investment Manager rather than sending the proxy directly to the relevant Advisory Clients for approval. To avoid certain potential conflicts of interest, the Investment Manager will employ echo voting, if possible, in the following instances: (1) when a Franklin Templeton investment company invests in an underlying fund in reliance on any one of Sections 12(d)(1)(E), (F), or (G) of the Investment Company Act of 1940, as amended, or pursuant to an SEC exemptive order; (2) when a Franklin Templeton investment company invests uninvested cash in affiliated money market funds pursuant to an SEC exemptive order ("cash sweep arrangement"); or (3) when required pursuant to an account's governing documents or applicable law. Echo voting means that the Investment Manager will vote the shares in the same proportion as the vote of all of the other holders of the fund's shares. Weight Given Management Recommendations One of the primary factors Investment Manager considers when determining the desirability of investing in a particular company is the quality and depth of that company's management. Accordingly, the recommendation of management on any issue is a factor that Investment Manager considers in determining how proxies should be voted. However, Investment Manager does not consider recommendations from management to be determinative of Investment Manager's ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the company's management. Each issue, however, is considered on its own merits, and Investment Manager will not support the position of a company's management in any situation where it determines that the ratification of management's position would adversely affect the investment merits of owning that company's shares. THE PROXY GROUP The Proxy Group is part of the Franklin Templeton Companies, LLC Legal Department and is overseen by legal counsel. Full-time staff members are devoted to proxy voting administration and providing support and assistance where needed. On a daily basis, the Proxy Group will review each proxy upon receipt as well as any agendas, materials and recommendations that they receive from RiskMetrics, Glass Lewis, or other sources. The Proxy Group maintains a log of all shareholder meetings that are scheduled for companies whose securities are held by Investment Manager's managed 253 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- funds and accounts. For each shareholder meeting, a member of the Proxy Group will consult with the research analyst that follows the security and provide the analyst with the meeting notice, agenda, RiskMetrics and/or Glass Lewis analyses, recommendations and any other available information. Except in situations identified as presenting material conflicts of interest, Investment Manager's research analyst and relevant portfolio manager(s) are responsible for making the final voting decision based on their review of the agenda, RiskMetrics and/or Glass Lewis analyses, their knowledge of the company and any other information readily available. In situations where the Investment Manager has not responded with vote recommendations to the Proxy Group by the deadline date, the Proxy Group may defer to the vote recommendations of an independent third party provider of proxy services. Except in cases where the Proxy Group is deferring to the voting recommendation of an independent third party service provider, the Proxy Group must obtain voting instructions from Investment Manager's research analyst, relevant portfolio manager(s), legal counsel and/or the Advisory Client or Proxy Review Committee prior to submitting the vote. GENERAL PROXY VOTING GUIDELINES Investment Manager has adopted general guidelines for voting proxies as summarized below. In keeping with its fiduciary obligations to its Advisory Clients, Investment Manager reviews all proposals, even those that may be considered to be routine matters. Although these guidelines are to be followed as a general policy, in all cases each proxy and proposal will be considered based on the relevant facts and circumstances. Investment Manager may deviate from the general policies and procedures when it determines that the particular facts and circumstances warrant such deviation to protect the interests of the Advisory Clients. These guidelines cannot provide an exhaustive list of all the issues that may arise nor can Investment Manager anticipate all future situations. Corporate governance issues are diverse and continually evolving and Investment Manager devotes significant time and resources to monitor these changes. INVESTMENT MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES Investment Manager's proxy voting positions have been developed based on years of experience with proxy voting and corporate governance issues. These principles have been reviewed by various members of Investment Manager's organization, including portfolio management, legal counsel, and Investment Manager's officers. The Board of Directors of Franklin Templeton's U.S.-registered mutual funds will approve the proxy voting policies and procedures annually. The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior: Board of Directors: The election of directors and an independent board are key to good corporate governance. Directors are expected to be competent individuals and they should be accountable and responsive to shareholders. Investment Manager supports an independent board of directors, and prefers that key committees such as audit, nominating, and compensation committees be comprised of independent directors. Investment Manager will generally vote against management efforts to classify a board and will generally support proposals to declassify the board of directors. Investment Manager will consider withholding votes from directors who have attended less than 75% of meetings without a valid reason. Investment Manager will review the issue of separating Chairman and CEO positions on a case-by-case basis taking into consideration other factors including the company's corporate governance guidelines and performance. Investment Manager evaluates proposals to restore or provide for cumulative voting on a case-by-case basis and considers such factors as corporate governance provisions as well as relative performance. The Investment Manager generally will support non-binding shareholder proposals to require a majority vote standard for the election of directors; however, if these proposals are binding, the Investment Manager will give careful review on a case-by-case basis of the potential ramifications of such implementation. 254 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Ratification of Auditors: In light of several high profile accounting scandals, Investment Manager will closely scrutinize the role and performance of auditors. On a case-by-case basis, Investment Manager will examine proposals relating to non-audit relationships and non-audit fees. Investment Manager will also consider, on a case-by-case basis, proposals to rotate auditors, and will vote against the ratification of auditors when there is clear and compelling evidence of accounting irregularities or negligence attributable to the auditors. Management & Director Compensation: A company's equity-based compensation plan should be in alignment with the shareholders' long-term interests. Investment Manager believes that executive compensation should be directly linked to the performance of the company. Investment Manager evaluates plans on a case-by-case basis by considering several factors to determine whether the plan is fair and reasonable. Investment Manager reviews the RiskMetrics quantitative model utilized to assess such plans and/or the Glass Lewis evaluation of the plan. Investment Manager will generally oppose plans that have the potential to be excessively dilutive, and will almost always oppose plans that are structured to allow the repricing of underwater options, or plans that have an automatic share replenishment "evergreen" feature. Investment Manager will generally support employee stock option plans in which the purchase price is at least 85% of fair market value, and when potential dilution is 5% or less. Severance compensation arrangements will be reviewed on a case-by-case basis, although Investment Manager will generally oppose "golden parachutes" that are considered excessive. Investment Manager will normally support proposals that require that a percentage of directors' compensation be in the form of common stock, as it aligns their interests with those of the shareholders. Anti-Takeover Mechanisms and Related Issues: Investment Manager generally opposes anti-takeover measures since they tend to reduce shareholder rights. However, as with all proxy issues, Investment Manager conducts an independent review of each anti-takeover proposal. On occasion, Investment Manager may vote with management when the research analyst has concluded that the proposal is not onerous and would not harm Advisory Clients' interests as stockholders. Investment Manager generally supports proposals that require shareholder rights plans ("poison pills") to be subject to a shareholder vote. Investment Manager will closely evaluate shareholder rights' plans on a case-by-case basis to determine whether or not they warrant support. Investment Manager will generally vote against any proposal to issue stock that has unequal or subordinate voting rights. In addition, Investment Manager generally opposes any supermajority voting requirements as well as the payment of "greenmail." Investment Manager usually supports "fair price" provisions and confidential voting. Changes to Capital Structure: Investment Manager realizes that a company's financing decisions have a significant impact on its shareholders, particularly when they involve the issuance of additional shares of common or preferred stock or the assumption of additional debt. Investment Manager will carefully review, on a case-by-case basis, proposals by companies to increase authorized shares and the purpose for the increase. Investment Manager will generally not vote in favor of dual-class capital structures to increase the number of authorized shares where that class of stock would have superior voting rights. Investment Manager will generally vote in favor of the issuance of preferred stock in cases where the company specifies the voting, dividend, conversion and other rights of such stock and the terms of the preferred stock issuance are deemed reasonable. Investment Manager will review proposals seeking preemptive rights on a case-by-case basis. Mergers and Corporate Restructuring: Mergers and acquisitions will be subject to careful review by the research analyst to determine whether they would be beneficial to shareholders. Investment Manager will analyze various economic and strategic factors in making the final decision on a merger or acquisition. Corporate restructuring proposals are also subject to a thorough examination on a case-by-case basis. 255 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Social and Corporate Policy Issues: As a fiduciary, Investment Manager is primarily concerned about the financial interests of its Advisory Clients. Investment Manager will generally give management discretion with regard to social, environmental and ethical issues although Investment Manager may vote in favor of those issues that are believed to have significant economic benefits or implications. Global Corporate Governance: Investment Manager manages investments in countries worldwide. Many of the tenets discussed above are applied to Investment Manager's proxy voting decisions for international investments. However, Investment Manager must be flexible in these worldwide markets and must be mindful of the varied market practices of each region. As experienced money managers, Investment Manager's analysts are skilled in understanding the complexities of the regions in which they specialize and are trained to analyze proxy issues germane to their regions. PROXY PROCEDURES The Proxy Group is fully cognizant of its responsibility to process proxies and maintain proxy records pursuant to applicable rules and regulations, including those of the U.S. Securities and Exchange Commission ("SEC") and the Canadian Securities Administrators ("CSA"). In addition, Investment Manager understands its fiduciary duty to vote proxies and that proxy voting decisions may affect the value of shareholdings. Therefore, Investment Manager will attempt to process every proxy it receives for all domestic and foreign securities. However, there may be situations in which Investment Manager cannot vote proxies. For example, if the cost of voting a foreign proxy outweighs the benefit of voting, the Proxy Group may refrain from processing that vote. Additionally, the Proxy Group may not be given enough time to process the vote. For example, the Proxy Group, through no fault of their own, may receive a meeting notice from the company too late, or may be unable to obtain a timely translation of the agenda. In addition, if Investment Manager has outstanding sell orders, or anticipates placing sell orders prior to the date of the shareholder meeting, in certain markets that have blocking restrictions, the proxies for those meetings may not be voted in order to facilitate the sale of those securities. If a security is on loan, Investment Manager may determine that it is not in the best interests of its clients to recall the security for voting purposes. Although Investment Manager may hold shares on a company's record date, should it sell them prior to the company's meeting date, Investment Manager ultimately may decide not to vote those shares. Lastly, the Investment Manager will not vote proxies when prohibited from voting by applicable law. Investment Manager may vote against an agenda item where no further information is provided, particularly in non-U.S. markets. For example, if "Other Business" is listed on the agenda with no further information included in the proxy materials, Investment Manager may vote against the item to send a message to the company that if it had provided additional information, Investment Manager may have voted in favor of that item. Investment Manager may also enter a "withhold" vote on the election of certain directors from time to time based on individual situations, particularly where Investment Manager is not in favor of electing a director and there is no provision for voting against such director. The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager's proxy policy: 1. The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list. 2. All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client's holdings of the securities and that the client is eligible to vote. 256 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 3. The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or legal counsel for review and voting instructions. 4. In determining how to vote, Investment Manager's analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services. 5. The Proxy Group is responsible for maintaining the documentation that supports Investment Manager's voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or the Proxy Review Committee. 6. After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening. 7. The Proxy Group will attempt to submit Investment Manager's vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed. 8. The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group's files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client. 9. If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities. 10. The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC. 257 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 11. The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients' financial statements and disclosure documents. 12. The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations. 13. The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning. 14. The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance. 15. At least annually, the Proxy Group will verify that: o Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines; o Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager; o Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and o Timely filings were made with applicable regulators related to proxy voting. The Proxy Group is responsible for maintaining appropriate proxy voting records. Such records will include, but are not limited to, a copy of all materials returned to the issuer and/or its agent, the documentation described above, listings of proxies voted by issuer and by client, and any other relevant information. The Proxy Group may use an outside service such as RiskMetrics to support this function. All records will be retained for at least five years, the first two of which will be on-site. Advisory Clients may request copies of their proxy voting records by calling the Proxy Group collect at 1-954-527-7678, or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Advisory Clients may review Investment Manager's proxy voting policies and procedures on-line at www.franklintempleton.com and may request additional copies by calling the number above. For U.S. mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.com no later than August 31 of each year. For Canadian mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.ca no later than August 31 of each year. The Proxy Group will periodically review web site posting and update the posting when necessary. In addition, the Proxy Group is responsible for ensuring that the proxy voting policies, procedures and records of the Investment Manager are available as required by law and is responsible for overseeing the filing of such policies, procedures and mutual fund voting records with the SEC, the CSA and other applicable regulators. As of January 2, 2008 258 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- JENNISON ASSOCIATES LLC PROXY VOTING POLICY AND PROCEDURES INTRODUCTION Jennison Associates LLC (the "Adviser") has adopted the following "Proxy Voting Policy and Procedures" ("Policy"), in compliance with Rule 206(4)-6 under the Investment Advisers Act of 1940 (the "Advisers Act") and other applicable fiduciary obligations. The Policy is designed to provide guidance to those Jennison employees (portfolio managers and analysts, hereinafter referred to as "Investment Professionals") who are responsible for discharging the Adviser's proxy voting obligation under the Rule, and to ensure that proxies are voted in the best interests of the Adviser's clients(1). II. STATEMENT OF POLICY It is the policy of the Adviser that where proxy voting authority has been delegated to the Adviser by clients, that all proxies be voted in the best interest of the client without regard to the interests of the Adviser or other related parties. Secondary consideration may be given to the public and social value of each issue. For purposes of the Policy, the "best interests of clients" shall mean, unless otherwise specified by the client, the clients' best economic interests over the long term - that is, the common interest that all clients share in seeing the value of a common investment increase over time. It is further the policy of the Adviser that complete and accurate disclosure concerning its proxy voting policies and procedures and proxy voting records, as required by the Advisers Act be made available to clients. In voting proxies for international holdings, we will generally apply the same principles as those for U.S. holdings. However, in some countries, voting proxies result in additional restrictions that have an economic impact or cost to the security, such as "share blocking," where Jennison would be restricted from selling shares of the security for a period of time if Jennison exercised its ability to vote the proxy. As such, we consider whether the vote, either itself or together with the votes of other shareholders, is expected to have an effect on the value of the investment that will outweigh the cost of voting. Our policy is to not vote these types of proxies when the costs outweigh the benefit of voting, as in share blocking. (1) In the event the Adviser should manage affiliated client accounts, the Adviser, for purposes of this policy, makes no distinction between accounts of affiliated companies, e.g., the General Accounts of Prudential (as well as related insurance companies and entities), and other separately managed accounts, each of which will be treated consistently under the Policy. 259 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- III. PROCEDURES A. Account Set-up and Review Initially, the Adviser must determine whether the client seeks to retain the responsibility of voting proxies or seeks to delegate that responsibility to the Adviser. The responsibility to vote proxies will be specified in the client's investment advisory contract with the Adviser. Where no designation is made, Jennison will vote proxies for such accounts(s) in accordance with this Policy. The client may choose to have the Adviser vote proxies in accordance with the Adviser's standard guidelines. The Adviser, in its discretion, may also permit a client to modify the Adviser's standard guidelines with respect to such client exclusively or may accept direction from a client with respect to the client's proxies and vote in accordance with a client's own guidelines (collectively, "Client Guidelines"). Alternatively, the Adviser may decline to accept authority to vote such client's proxies. Proxy Voting 1. Guidelines for Recurring Issues The Adviser has adopted proxy voting guidelines ("Guidelines") with respect to certain recurring issues. These Guidelines are reviewed as deemed necessary by the Adviser's Proxy Voting Committee and its relevant portfolio management staff, then revised when a determination has been made that a change is appropriate. These Guidelines are meant to convey the Adviser's general approach to voting decisions on certain issues. Nevertheless, the Adviser's Investment Professionals maintain responsibility for reviewing all proxies individually and making final decisions based on the merits of each case. 2. Use of Third Party Proxy Service In an effort to discharge its responsibility, the Adviser has examined third-party services that assist in the researching and voting of proxies and development of voting guidelines. After such review, the Adviser has selected an independent third party proxy voting vendor to assist it in researching and voting proxies. The Adviser will utilize the research and analytical services, operational implementation and recordkeeping and reporting services provided by the proxy voting vendor. The proxy voting vendor will research each proxy and provide a recommendation to the Adviser as to how best to vote on each issue based on its research of the individual facts and circumstances of the proxy issue and its application of its research findings. It is important to note while the Adviser may review the research and analysis provided by the vendor, the vendor's recommendation does not dictate the actual voting instructions nor the Adviser's Guidelines. The proxy voting vendor will cast votes in accordance with the Adviser's Guidelines, unless instructed otherwise by a Jennison Investment Professional, as set forth below, or if the Adviser has accepted direction from a Client, in accordance with the Client's Guidelines. 3. Review of Recommendations The Adviser's Investment Professionals have the ultimate responsibility to accept or reject any proxy voting recommendation - as determined by either the Guidelines or Client's Guidelines ("Recommendation"). Consequently, Investment Professionals shall review and evaluate the Recommendation for each proxy ballot before the proxy voting vendor casts the vote, taking into account the Policy, all guidelines applicable to the account(s), and the best interests of the client(s). The Investment Professionals shall override the Recommendation should he/she not believe that such Recommendation, based on all relevant facts and circumstances at the time the proxy ballot is voted, is in the best interest 260 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- of the client(s). The Adviser will memorialize the basis for any decision to override a Recommendation, including the resolution of any conflicts, if any, as further discussed below (see Exhibit A - Proxy Override of Guidelines Form). The Adviser may vote the same proxy proposal differently for different clients. Also, the Adviser may choose not to vote proxies under the following circumstances: o If the effect on the client's economic interests or the value of the portfolio holding is indeterminable or insignificant; o If the cost of voting the proxy outweighs the possible benefit (such as security lending, see section 5 below); or o If a jurisdiction imposes share blocking restrictions which prevent the Adviser from exercising its voting authority. 4. Addressing Potential Material Conflicts of Interest There may be instances where the interest of the Adviser conflicts or may appear to conflict with the interest of its clients when voting proxies on behalf of those clients ("Material Conflict"). Investment Professionals have an affirmative duty to disclose any potential Material Conflicts known to them related to a proxy vote. Material Conflicts may exist in situations where the Adviser is called to vote on a proxy involving an issuer or proponent of a proxy proposal regarding the issuer where the Adviser or an affiliated person of the Adviser also: o Manages the issuer's or proponent's pension plan; o Administers the issuer's or proponent's employee benefit plan; o Manages money for an employee group. Additional Material Conflicts may exist if an executive of the Adviser or its control affiliates is a close relative of, or has a personal or business relationship with: o An executive of the issuer or proponent; o A director of the issuer or proponent; o A person who is a candidate to be a director of the issuer; o A participant in the proxy contest; or o A proponent of a proxy proposal. Material Conflicts based on business relationships or dealings of affiliates of the Adviser will only be considered to the extent that the applicable portfolio management area of the Adviser has actual knowledge of such business relationships. Whether a relationship creates a Material Conflict will depend on the facts and circumstances at the time the proxy is voted. Even if these parties do not attempt to influence the Adviser with respect to voting, the value of the relationship to the Adviser may create the appearance of or an actual Material Conflict, such as when the issuer is a client of the Adviser. The Adviser may adopt such processes it deems necessary to identify Material Conflicts. When a potential material conflict exists, the Investment Professional (or other designated personnel) must complete the Proxy Voting For Conflicts Documentation Form, attached as Exhibit B, and submit it to Compliance. The Adviser's Proxy Voting Committee will consider the facts and circumstances of all proxy votes where a potential material conflict of interest is identified and the recommendation is to override the Adviser's guidelines. In making the determination as to how to vote the proxy, the Adviser's Proxy Voting Committee may review the following factors, including but not limited to: o Whether the issuer is a client of the Adviser. o The percentage of outstanding securities of the issuer held on behalf of clients by the Adviser. o The nature of the relationship of the issuer with the Adviser, its affiliates or its executive officers. o Whether there has been any attempt to directly or indirectly influence the Investment Professional's decision o Whether the direction (for or against) of the proposed vote would appear to benefit the Adviser or a related party. 261 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Whether an objective decision to vote in a certain way will still create a strong appearance of a conflict. o Whether the vote should be delegated to an independent third party or request an independent third party to provide a recommendation on the vote. All votes that would override the Adviser's Guidelines and involve a potential material conflict of interest, require the approval of the CEO and CCO of the Adviser. Additionally, a committee comprised of both senior business executives and regulatory personnel of Jennison and its affiliated asset management unit, Prudential Investment Management, Inc, reviews these votes. This committee also has a role in identifying Material Conflicts that may affect Jennison due to ownership by a diversified financial organization, Prudential Financial, Inc. The Adviser may not abstain from voting any such proxy for the purpose of avoiding conflict. 5. Lending Jennison may identify a particular issuer that may be subject to a security lending arrangement. In this situation, Jennison will work with either custodian banks or the proxy voting vendor to monitor upcoming meetings and call stock loans, if applicable, in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of their consent on a material matter affecting the investment. In determining whether to call stock loans, the relevant investment professional shall consider whether the benefit to the client in voting the matter outweighs the benefit to the client in keeping the stock on loan. It is important to note that in order to recall securities on loan in time to vote, one must begin the process PRIOR to the record date of the proxy. This is extremely difficult to accomplish as the Adviser is rarely made aware of the record date in advance. C. Proxy Voting Committee The Adviser's Proxy Voting Committee will consist of representatives from various functional areas within the Adviser. It will meet as deemed necessary to address potential Material Conflicts as further described above. The Adviser's Proxy Voting Committee will have the following responsibilities: o Review potential Material Conflicts and decide whether to approve the vote recommendation or override requests made by Investment Professionals. o Review the Guidelines for voting on recurring matters and make revisions as it deems appropriate. o Recommend and adopt changes to the Policy as needed. o Review all overrides by Investment Professionals. o Review proxy voting reports to determine voting consistency with guidelines and this Policy. o Review the performance of the proxy voting vendor and determine whether the Adviser should continue to retain their services. o Review the Adviser's voting record (or applicable summaries of the voting record). o Oversee compliance with the regulatory disclosure requirements. III. Compliance Monitoring The Adviser's Chief Compliance Officer shall be responsible for the administration of this Policy. This Policy will be reviewed annually for adequacy and effectiveness. A. Monitoring of Overrides 262 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Compliance will periodically review proxy voting reports of overrides to confirm that proper override and conflict checking procedures were followed. SUPERVISORY REVIEW The designated supervisor for each Investment Professional will be responsible for ensuring that investment professionals with proxy voting responsibility are acting in accordance with this Policy. Supervisors must approve all requests for overrides and evidence such approval by signing the completed Proxy Override of Guidelines Form. Compliance Reporting to Fund Boards Upon request, the Adviser will provide to each investment company board of directors or trustees for which the Adviser acts as sub-adviser reporting needed to satisfy their regulatory and board requirements. IV. CLIENT REPORTING - -------------------------------------------------------------------------------- A. Disclosure to Advisory Clients The Adviser will also provide a copy of this Policy and the Adviser's Guidelines upon request from a client. The Adviser will provide any client who makes a written or verbal request with a copy of a report disclosing how the Adviser voted securities held in that client's portfolio. The report will generally contain the following information: o The name of the issuer of the security: o The security's exchange ticker symbol; o The security's CUSIP number; o The shareholder meeting date; o A brief identification of the matter voted on; o Whether the matter was proposed by the issuer or by a security holder; o Whether the Adviser cast a vote on the matter; o How the Adviser voted; and o Whether the Adviser voted for or against management. B. Investment Company Disclosures The Adviser will ensure that the proxy voting record for the twelve-month period ending June 30 for each registered investment company client is properly reported to the mutual fund management company so as to meet their filing of Form N-PX no later than August 31 of each year.. V. RECORDKEEPING - -------------------------------------------------------------------------------- Either the Adviser or proxy voting vendor as indicated below will maintain the following records: o 263 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- A copy of the Policy (Adviser) o A copy of the Guidelines i.e. Adviser or client specific guidelines (Adviser and proxy voting vendor) o A copy of each proxy statement received by the Adviser regarding client securities (proxy voting vendor); o A record of each vote cast by the Adviser on behalf of a client (proxy voting vendor); o A copy of all documents created by the Adviser that were material to making a decision on the proxy voting, (or abstaining from voting) of client securities or that memorialize the basis for that decision including the resolution of any conflict, a copy of all Proxy Voting Documentation Forms and all supporting documents (Adviser); o A copy of each written request by a client for information on how the Adviser voted proxies on behalf of the client, as well as a copy of any written response by the Adviser to any request by a client for information on how the adviser voted proxies on behalf of the client. Records of oral requests for information or oral responses will not be kept. (Adviser); and o Agenda of Proxy Voting Committee meetings with supporting documents. (Adviser) Such records must be maintained for at least six years. VI. POLICIES AND PROCEDURES REVISIONS - -------------------------------------------------------------------------------- This policy and related procedures may be changed, amended or revised as frequently as necessary in order to accommodate any changes in operations or by operation of law. Any such change, amendment or revision may be made only by Jennison Compliance in consultation with the business groups or areas impacted by these procedures and consistent with applicable law. Such changes will be promptly distributed to all impacted personnel. Attachments: Exhibit A - Proxy Override of Guidelines Form Exhibit B - Proxy Voting For Conflicts Form 264 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- JENNISON'S DOMESTIC PROXY VOTING GUIDELINES ELECT DIRECTORS ISSUE CODE 1000 Vote FOR Directors in uncontested elections The board of directors is in the best position to assess the corporation's needs and to recruit individuals whose skills and experience will help the company elect and monitor the performance of a strong management team. WITHHOLD votes from any director nominee who has attended less than 75 percent of the board and committee meetings that he or she was scheduled to attend during the previous fiscal year. Companies need directors who are fully committed to their responsibilities as representatives of the company's owners - the shareholders. To be effective representatives, directors need to attend scheduled meetings, voice their concerns and cast their votes. When directors do not attend meetings, they are unable to contribute to board discussions and deliberations, for which directors are paid. Absentee directors are not fulfilling their fiduciary duties to shareholders. Setting the threshold at 75 percent of the scheduled meetings allows for unexpected emergencies and occasional conflicts. It is also the level that SEC guidelines require a company to disclose in the annual proxy statement. CONTESTED ELECTION OF DIRECTORS ISSUE CODE 1001 Case by Case RATIFY SELECTION OF AUDITORS ISSUE CODE 1010 Vote FOR management's selection of accountants to audit the corporation's books and records, unless we are aware of a significant controversy in a particular case (i.e. Arthur Andersen in 2002). We will vote for management's selection of accountants to audit the corporation's books and records, unless we are aware of significant controversy in a particular case. APPROVE NAME CHANGE ISSUE CODE 1020 Vote FOR a management proposal to change the company's name. A corporation's management, subject to review by its board of directors, is responsible for running the day-to-day operations of its businesses. Management is best able to judge whether the corporation's name adequately and accurately reflects the business goals of the company. APPROVE OTHER BUSINESS ISSUE CODE 1030 Vote AGAINST management proposals to approve other business. Giving management "carte blanche" to vote a proxy undermines the proxy system. Shareholders deserve the opportunity to consider all specific voting items that come up for a vote at a meeting. To simply give away that right because a voting item has, for one reason or another, been omitted from the proxy card could empower management to vote for a proposal that the shareholders would not support. If a voting matter should arise after the mailing date or during the meeting, the meeting should, if necessary, be postponed and the company should mail supplementary proxy materials so that shareholders may make an informed decision on the proposal. 265 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ADJOURN MEETING ISSUE CODE 1035 Vote FOR a management proposal to adjourn the meeting. Management is in the best position to evaluate the importance of each issue and if the company would benefit by taking additional time to solicit votes. Adjourning the meeting to a later time will save the company the cost of calling another meeting to decide on the issue APPROVE TECHNICAL AMENDMENTS ISSUE CODE 1040 Vote FOR a management proposal to make technical amendments to the charter and/or bylaws. For this guideline, technical amendments include restatements to omit spelling or grammatical errors, elimination of references to classes of stock that are no longer outstanding or applicable, or restatement of the business purpose it if such restatement does not alter the company's purpose. They do not include amendments that could affect shareholder rights or claims on the company or that could be deemed to be anti-takeover measures. The charters of many companies require shareholder approval to restate or amend the company's charter or bylaws. In instances in which shareholder rights are no affected by the restatement, such as a restatement to eliminate grammatical errors, or to change the company's domicile within a state, the restatement is simply a technicality and should be supported because an accurate charter and bylaw is necessary to conduct business. APPROVE FINANCIAL STATEMENTS ISSUE CODE 1050 Vote FOR a management proposals to approve the company's financial statements for the fiscal year. This is a routine proposal to be voted in support of management. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Corporation laws in many countries require firms to present the previous year's accounts to shareholders at the annual meeting. Vote AGAINST IF it discharges the directors from responsibility for decisions taken over the year. INCREASE AUTHORIZED COMMON STOCK ISSUE CODE 1100 Vote FOR a management proposal to increase authorized common stock. We will generally vote FOR an increase in authorized shares, unless it is determined that the increased shares are likely to be used for anti-takeover purposes. If an increase in authorized shares is part of a takeover defense or is considered "excessive" (JALLC determines "excessive" to be more than a 300% dilution), we normally will vote AGAINST an increase. These proposals are often necessary for the normal operation of an issuer's business. Consequently, a vote in favor is generally recommended. DECREASE AUTHORIZED COMMON STOCK ISSUE CODE 1101 Vote FOR a management proposal to decrease authorized common stock. A corporation's management team, subject to review by its board of directors, is responsible for day-to-day operations and strategic planning for the corporation. Management is best qualified to judge the corporation's current and future requirements for capital. AMEND AUTHORIZED COMMON STOCK ISSUE CODE 1102 Vote CASE-BY-CASE to amend authorized common stock. 266 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPROVE COMMON STOCK ISSUANCE ISSUE CODE 1103 Vote FOR a management proposal to approve the issuance of authorized common stock. Vote AGAINST a management proposal to approve the issuance of common stock IF the proposed issuance creates potential dilution of more that 300% of total outstanding voting power before the stock issuance. APPROVE ISSUANCE OR EXERCISE OF STOCK WARRANTS 1104 Vote CASE BY CASE AUTHORIZE PREFERRED STOCK ISSUE CODE 1110 Vote FOR a management proposal to authorize preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for raising additional capital. Preferred stock is commonly used by many U.S. corporations to raise capital. It provides management with a way to raise additional capital without diluting common shareholders' equity. Placing limits on the ability of management and the board to issue shares of preferred stock to fund the corporation's current operations and future growth is unnecessary and may reduce the corporation's ability to meet its capital needs. Vote AGAINST a management proposal to authorize preferred stock IF the board has asked for the unlimited right to set the terms and conditions for the class and may issue the shares for anti-takeover purposes without shareholder approval (known as blank check preferred stock). INCREASE AUTHORIZED PREFERRED STOCK ISSUE CODE 1111 Vote FOR a management proposal to increase authorized preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for raising additional capital. Preferred stock is commonly used by many U.S. corporations to raise capital. It provides management with a way to raise additional capital without diluting common shareholders' equity. Placing limits on the ability of management and the board to issue shares of preferred stock to fund the corporation's current operations and future growth is unnecessary and may reduce the corporation's ability to meet its capital needs. Vote AGAINST a management proposal to increase authorized preferred stock IF the proposed increase creates potential dilution of more than 300% of authorized preferred shares. Vote AGAINST a management proposal to increase the authorized preferred stock IF the board has asked for (or currently has) the unlimited right to set the terms and conditions of the preferred stock and may issue it for anti-takeover purposes without shareholder approval (known as blank check preferred stock). DECREASE AUTHORIZED PREFERRED STOCK ISSUE CODE 1112 Vote FOR a management proposal to decrease authorized preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for additional capital. 267 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- CANCEL SERIES OF PREFERRED STOCK ISSUE CODE 1113 Vote FOR a management proposal to cancel a class or series of preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for capital. Typically these preferred shares have already been redeemed by the company. AMEND AUTHORIZED PREFERRED STOCK ISSUE CODE 1114 Vote FOR a management proposal to amend preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for capital. Limiting the ability of management and the board to amend preferred stock is unnecessary and may reduce the corporation's ability to meet its capital needs. APPROVE ISSUANCE OR CONVERSION OF PREFERRED STOCK ISSUE CODE 1115 Vote FOR a management proposal to issue preferred stock. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's requirements for raising additional capital. Preferred stock is commonly used by many U.S. corporations to raise capital. It provides management with the ability to raise additional capital without diluting common shareholders' equity interests. Placing limits on the ability of management and the board to issue shares of preferred stock to fund the corporation's current operations and future growth is unnecessary and may reduce the corporation's ability to meet its capital needs. Vote AGAINST a management proposal to approve the issuance of preferred stock IF the voting power represented by the proposed issuance creates potential dilution of more than 300% of the total outstanding voting power before the stock issuance. Vote AGAINST a management proposal to issue preferred stock IF the shares are issued with voting rights superior to those available to other shareholders. ELIMINATE PREEMPTIVE RIGHTS ISSUE CODE 1120 Vote CASE-BY-CASE on a management proposal to eliminate preemptive rights. RESTORE PREEMPTIVE RIGHT ISSUE CODE 1121 Vote CASE-BY-CASE on a management proposal to restore preemptive rights. AUTHORIZE DUAL CLASS STOCK ISSUE CODE 1130 Vote AGAINST a management proposal to authorize dual class common stock There should only be one class of common stock and all common stock holders should have the same rights and privileges. Dual or multiple classes of common stock are often used to entrench the board and management of corporations. Economic studies show that adoption of additional classes of common stock negatively affects the value of an existing class of common stock. 268 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ELIMINATE DUAL CLASS STOCK ISSUE CODE 1131 Vote FOR a management proposal to eliminate authorized dual or multiple classes of common stock. There should only be one class of common stock and all common stock holders should have the same rights and privileges. Dual or multiple classes of common stock are often used to entrench the board and management of corporations. Economic studies show that adoption of additional classes of common stock negatively affects the value of an existing class of common stock. AMEND DUAL CLASS STOCK ISSUE CODE 1132 Vote AGAINST a management proposal to amend authorized dual class or multiple classes of common stock. There should only be one class of common stock and all common stock holders should have the same rights and privileges. Dual or multiple classes of common stock are often used to entrench the board and management of corporations. Economic studies show that adoption of additional classes of common stock negatively affects the value of an existing class of common stock. INCREASE AUTHORIZED DUAL CLASS STOCK ISSUE CODE 1133 Vote AGAINST a management proposal to increase authorized shares of one or more classes of dual or multiple class common stocks. There should only be one class of common stock and all common stock holders should have the same rights and privileges. Dual or multiple classes of common stock are often used to entrench the board and management of corporations. Economic studies show that adoption of additional classes of common stock negatively affects the value of an existing class of common stock. APPROVE SHARE REPURCHASE ISSUE CODE 1140 Vote FOR a management proposal to approve share repurchase. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future requirements for raising additional capital and the means for raising such capital. APPROVE STOCK SPLIT ISSUE CODE 1150 Vote FOR a management proposal to approve a stock split. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future capital structure. We generally will vote for these proposals, which are normally made to facilitate market trading in the issuer's securities. APPROVE REVERSE STOCK SPLIT ISSUE CODE 1151 Vote FOR a management proposal to approve a reverse stock split. A corporation's management team, subject to review by its board of directors, is responsible for the company's day-to-day operations and strategic planning. Therefore, management is best suited to judge the corporation's current and future capital structure. 269 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- We generally will vote for these proposals, which are normally made to facilitate market trading in the issuer's securities. APPROVE MERGER/ACQUISITION ISSUE CODE 1200 Vote CASE-BY-CASE on a management proposal to approve merger/acquisition. The economic impact of each proposal will be analyzed individually. APPROVE RECAPITALIZATION ISSUE CODE 1209 Vote CASE-BY-CASE on a management proposal to approve re-capitalization. The economic impact of each proposal will be analyzed individually. APPROVE RESTRUCTING ISSUE CODE 1210 Vote CASE-BY-CASE on a management proposal to approve restructuring. The economic impact of each proposal will be analyzed individual APPROVE BANKRUPTCY RESTRUCTURING 1211 Vote CASE-BY-CASE on a management proposal to approve bankruptcy restructuring. The economic impact of each proposal will be analyzed individual APPROVE LIQUIDATION ISSUE CODE 1212 Vote CASE BY CASE The economic impact of each proposal will be analyzed individual APPROVE REINCORPORATION ISSUE CODE 1220 Vote FOR a management proposal to approve reincorporation. A company's board is best qualified to determine the regulatory environment that is best suited to the company's needs. The board should be allowed to take advantage of the statutory structure that it believes offers it the maximum benefits in carrying out its responsibilities. A company may propose a reincorporation for a variety of reasons. These considerations should include the legal structure that best allows the board to respond to real or perceived threats to the corporation and its shareholders. State anti-takeover laws enable management to run the company with a long-term view, free from the distractions of unexpected takeover bids. As a result, these laws are in the best long-term interests of shareholders. APPROVE LEVERAGED BUYOUT ISSUE COEE 1230 Vote CASE-BY-CASE on a management proposal to approve a leveraged buyout. The economic impact of each proposal will be analyzed individual APPROVE SPIN OFF ISSUE CODE 1240 Vote CASE-BY-CASE on a management proposal to approve a spin-off. The economic impact of each proposal will be analyzed individual 270 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPROVE SALE OF ASSETS ISSUE CODE 1250 Vote CASE BY CASE The economic impact of each proposal will be analyzed individual ELIMINATE CUMULATIVE VOTING ISSUE CODE 1300 Vote FOR a management proposal to eliminate cumulative voting. Directors' fiduciary duties apply to the interests of all shareholders, not a single constituency. Cumulative voting promotes single interest representation on the board, which may not represent the overriding interests and concerns of all shareholders. All directors, as shareholders' representatives, should be elected by a majority of shareholders. ADOPT CUMULATIVE VOTING ISSUE CODE 1301 Vote AGAINST a management proposal to adopt cumulative voting. Directors' fiduciary duties apply to the interests of all shareholders, not a single constituency. Cumulative voting promotes single interest representation on the board, which may not represent the overriding interests and concerns of all shareholders. All directors, as shareholders' representatives, should be elected by a majority of shareholders. ADOPT DIRECTOR LIABILITY PROVISION ISSUE CODE 1310 Vote CASE-BY-CASE on a management proposal to adopt director liability provision. AMEND DIRECTOR LIABILITY PROVISION ISSUE CODE 1311 Vote CASE-BY-CASE on a management proposal to amend director liability provision. ADOPT INDEMNIFICATION PROVISION ISSUE CODE 1321 We generally support these proposals, since they help corporations attract and retain qualified individuals to serve as directors. Jennison will oppose proposals to indemnify directors for liabilities arising from any of the following: 1.Breach of the director's duty of loyalty 2.Intentional misconduct, acts not in good faith, or acts in knowing violation of the law 3.Acts involving unlawful purchase or redemption of stock 4.Payment of unlawful dividends 5.Receipt of improper personal benefits APPROVE BOARD SIZE ISSUE CODE 1332 Vote FOR a management proposal to approval board size. The board of directors and management of the company are in the best position to determine the optimum size of the corporation's board. Vote AGAINST a management proposal to set the board size IF the proposed minimum board size is less than 4 directors. 271 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NO SHAREHOLDER APPROVAL TO FILL VACANCY ISSUE CODE 1340 Vote AGAINST a management proposal to allow the directors to fill vacancies on the board without shareholder approval. Directors serve as the representatives of the shareholders. Shareholders should have the right to approve the appointment of all directors to the board. GIVE BOARD AUTHORITY TO SET BOARD SIZE ISSUE CODE 1341 Vote AGAINST a management proposal to give the board the authority to set the size of the board without shareholder approval. Directors represent the interests of shareholders. Shareholders should have the final say in determining the size of the board of directors. REMOVAL OF DIRECTORS ISSUE CODE 1342 Vote FOR a management proposal regarding the removal of directors. Vote AGAINST a management proposal regarding the removal of directors IF the proposal limits the removal to cases where there is legal cause. Directors have a fiduciary responsibility to represent all shareholders, as dictated by law. If they fail to adhere to the laws related to their service, they should be removed. Allowing for directors to be removed without legal cause makes it possible for prejudices or whims to enter into the appraisal process. APPROVE NON-TECHNICAL CHARTER AMENDMENTS ISSUE CODE 1350 Vote AGAINST a management's proposal to approve multiple amendments to the company's certificate of incorporation IF an amendment would have the affect of reducing shareholders' rights. Limitations of any kind on shareholders' rights should be avoided. In some cases, these proposals include numerous issues bundled into one proposal. Bundling proposals that limit shareholders' rights with other issues that shareholders routinely would approve does not justify approval if ultimately shareholders' rights would in any way be reduced. APPROVE CLASSIFIED BOARD ISSUE CODE 1400 Vote AGAINST a management proposal to adopt a classified board. Classified boards may serve to entrench management. Since only a fraction of the directors stand for election each year, shareholders do not have the ability to vote out any other directors who may be acting in a fashion that is against their interests. The entire board should be accountable to shareholders on an annual basis. Arguments for classified boards include: (a) they allow stability and continuity in company policies; (b) they give management a means of maintaining experienced members on a board during a transition; and (c) they allow directors to have a long-term perspective. On the other hand, directors who are doing a good job are likely to continue to be re-elected. This provides stability while continuing to allow shareholders to evaluate directors annually. AMEND CLASSIFIED BOARD ISSUE CODE 1401 Vote AGAINST a management proposal to amend a classified board. Classified boards may serve to entrench management. Since only a fraction of the directors stand for election each year, shareholders do not have the ability to vote out any other directors who may be acting in a fashion that is against their 272 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- interests. The entire board should be accountable to shareholders on an annual basis. Arguments for classified boards include: (a) they allow stability and continuity in company policies; (b) they give management a means of maintaining experienced members on a board during a transition; and (c) they allow directors to have a long-term perspective. On the other hand, directors who are doing a good job are likely to continue to be re-elected. This provides stability while continuing to allow shareholders to evaluate directors annually. REPEAL CLASSIFIED BOARD ISSUE CODE 1402 Vote FOR a management proposal to repeal a classified board. An entire board should be accountable to shareholders annually. With staggered board terms, shareholders' ability to affect the makeup of the board is limited because it would take at least two elections to replace a majority of directors. Classified boards may serve to entrench management. Because only a fraction of the directors stand for election each year, shareholders do not have the ability to vote out any other directors who may be acting in a fashion that is against their interests. Economic studies have shown that adoption of a classified board tends to depress a company's stock price. ADOPT POISON PILL ISSUE CODE 1410 Vote AGAINST a management proposal to ratify or adopt a shareholder rights plan (poison pill). Poison pills take decisions on mergers and tender offers out of shareholders' hands by providing directors virtual veto power over an offer. They strip shareholders of their basic right to decide when, to whom and upon what terms to sell their shares. Poison pills harm shareholder value and entrench management by deterring stock acquisition offers that are not favored by the board of directors. Instead of fostering negotiations, poison pills are designed to discourage or thwart offers before they are ever made. This results in management entrenchment to the detriment of shareholders. Poison pills tend to depress stock price and promote poor corporate performance. Studies and other analyses point to a drop in share value at the time a right plan is adopted. REDEEM POISON PILL ISSUE CODE 1411 Vote FOR a management proposal to redeem a shareholder rights plan (poison pill). Poison pills take decisions on mergers and tender offers out of shareholders' hands by providing directors virtual veto power over an offer. They strip shareholders of their basic right to decide when, to whom and upon what terms to sell their shares. Poison pills harm shareholder value and entrench management by deterring stock acquisition offers that are not favored by the board of directors. Instead of fostering negotiations, poison pills are designed to discourage or thwart offers before they are ever made. This results in management entrenchment to the detriment of shareholders. Poison pills tend to depress stock price and promote poor corporate performance. Studies and other analyses point to a drop in share value at the time a right plan is adopted. ELIMINATE SPECIAL MEETING ISSUE CODE 1420 Vote AGAINST a management proposal to eliminate shareholders' right to call a special meeting. Limiting or eliminating shareholders' rights to call a special meeting could make it easier for management to thwart a takeover. A potential acquirer may exercise his right to call a shareholders' meeting s the shareholders and not management are able to decide on his offer. Since a limitation on the right to convene a shareholder meeting could have an anti-takeover effect, we will vote against the proposal. RESTORE SPECIAL MEETING ISSUE CODE 1422 Vote FOR a management proposal to restore shareholders' right to call a special meeting. 273 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The ability of shareholders to ball a special meeting is an important right. Without the right, shareholders may have to wait for the annual meeting to take action. Such delays may not be in the best interest of shareholders. Shareholders should have access to procedures that permit them, the owners of the corporation, to bring special circumstances to the attention of the other owners. Limitations on shareholder actions can entrench management, render a corporation less attractive as a takeover candidate and give management a decided advantage in a takeover. ELIMINATE WRITTEN CONSENT ISSUE CODE 1430 Vote AGAINST a management proposal to eliminate shareholders' right to act by written consent. The ability to act through written consent enables shareholders to replace the board, to amend bylaws or to take actions to effect a change in control without having to call a special meeting or wait for the annual meeting. Elimination of this right would make it more difficult for shareholders to act without the board's consent. LIMIT WRITTEN CONSENT ISSUE CODE 1431 Vote AGAINST a management proposal to limit shareholders' right to act by written consent. The ability to act through written consent enables shareholders to replace the board, to amend bylaws or to take actions to effect a change in control without having to call a special meeting or wait for the annual meeting. Elimination of this right would make it more difficult for shareholders to act without the board's consent. RESTORE WRITTEN CONSENT ISSUE CODE 1432 Vote FOR a management proposal to restore shareholders' right to act by written consents. Written consents allow shareholders to initiate actions without calling a special meeting or waiting until the annual meeting. Shareholders should have access to procedures that permit them, the owners of the corporation, to bring special circumstances to the attention of thee other owners. Limitations on shareholder actions can entrench management, render a corporation less attractive as a takeover candidate and give management a decided advantage in a takeover. ADOPT SUPERMAJORITY REQUIREMENT ISSUE CODE 1440 Vote AGAINST a management proposal to establish a supermajority vote provision to approve a merger or other business combination. Supermajority vote provisions may stifle bidder interest in a company altogether and thereby devalue its stock. Supermajority requirements are often set so high that they discourage tender offers altogether. Economic studies have shown slight negative stock price effects on the adoption of supermajority vote provisions. Also, companies sometimes are unable to get a supermajority even when they want it. AMEND SUPERMAJORITY REQUIREMENT ISSUE CODE 1443 Vote FOR a management proposal to amend a supermajority vote provision to approve a merger or other business combination. Supermajority vote requirements to approve mergers or other business combinations help guard against two-tiered tender offers, in which a raider offers a substantially higher cash bid for an initial and often controlling stake in a company and then offers a lower price for the remaining shares. The coercive pressures associated with two-tiered offers may force shareholders to tender before they have considered all relevant facts. Requiring supermajority approval of transactions provides protection to minority shareholders. 274 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ELIMINATE SUPERMAJORITY REQUIREMENT ISSUE CODE 1444 Vote FOR a management proposal to eliminate a supermajority vote provision to approve a merger or other business combination. Supermajority vote requirements stifle bidder interest and discourage tender offers. Shareholder value could suffer if acquisitions or mergers fail to develop because of a voting requirement that makes the transaction's approval uncertain. ADOPT SUPERMAJORITY LOCK IN ISSUE CODE 1445 Always vote AGAINST this proposal. Supermajority vote requirements prevent a simple majority from enforcing its will. In many cases, supermajority lock-in vote requirements apply to anti-takeover provisions. The high vote requirements exceed the normal anticipated level of shareholder participation at a meeting, making approval of a proposed action highly unlikely. AMEND SUPERMAJORITY LOCK IN ISSUE CODE 1446 Always vote AGAINST this proposal. Supermajority vote requirements prevent a simple majority from enforcing its will. In many cases, supermajority lock-in vote requirements apply to anti-takeover provisions. The high vote requirements exceed the normal anticipated level of shareholder participation at a meeting, making approval of a proposed action highly unlikely ELIMINATE SUPERMAJORITY LOCK IN ISSUE CODE 1447 Vote FOR a management proposal to eliminate supermajority vote requirements (lock-ins) to change certain bylaw or charter provisions. Supermajority vote requirements detract from a simple majority's power to enforce its will. In many cases, the high vote requirements exceed the normal anticipated level of shareholder participation at a meeting, making passage of the proposed action all but impossible. CONSIDER NON-FINANCIAL EFFECTS OF MERGER ISSUE CODE 1450 Vote AGAINST a management proposal to expand or clarify the authority of the board of directors to consider factors other than the interests of shareholders in assessing a takeover bid. The traditional method of corporate governance requires that corporate officers and directors fulfill their fiduciary duty and recognize their first priority is to the owners of their corporation, its shareholders. "Stakeholder" provisions authorize the board to consider factors other than their fiduciary obligation to shareholders. These provisions undermine the preeminence of shareholders. The provisions seek to allow directors to take into account a wide range of discretionary considerations when evaluating a business proposal. As a result, management could cite the effect on other constituencies to justify rejecting a takeover offer that might be in the best interests of the shareholders. ADOPT FAIR PRICE PROVISION ISSUE CODE 1460 Vote FOR a management proposal to establish a fair price provision. Fair price provisions help guard against two-tiered tender offers, in which a raider offers a substantially higher cash bid for an initial and often controlling stake in a company and then offers a lower price for the remaining 275 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shares. The coercive pressures associated with two-tiered offers may force shareholders to tender heir holdings before they have considered all relevant facts. These provisions guarantee an equal price for all shareholders. These provisions are designed to protect shareholders in the event the corporation is acquired under a plan not approved by the Board. Normally, they require that any tender offer made by a third party be made to all shareholders at the same price. Fair pricing provisions attempt to limit "two-tiered takeovers", where a bidder initially offers a premium for enough shares to garner control and thereafter offers a much lower price to the remaining holders (usually smaller investors). Most of these provisions do not apply if an offer is approved by a target's board or if the bidder obtains a specified level of approval from the target's shareholders. While we support fair pricing provisions, we will not vote for them if they are tied to other anti-takeover provisions (such as excessive supermajority rules) that we oppose. Vote FOR a management proposal to establish a fair price provision. AMEND FAIR PRICE PROVISION ISSUE CODE 1461 Vote AGAINST a management proposal to amend a fair price provision. Fair price provisions may stifle bidder interest in a company altogether and thereby devalue its stock. Some economic studies have shown slight negative stock price effects on the adoption of fair price amendments. These provisions often include supermajority vote requirements, which are so high that shareholders feel they may discourage tender offers altogether. REPEAL FAIR PRICE PROVISION ISSUE CODE 1462 Vote AGAINST a management proposal to repeal a fair price provision. Fair price provisions help guard against two-tiered tender offers, in which a raider offers a substantially higher cash bid for an initial and often controlling stake in a company and then offers a lower price for the remaining shares. The coercive pressures associated with two-tiered offers may force shareholders to tender their holdings before they have considered all relevant facts. These provisions guarantee an equal price for all shareholders. ADOPT ANTI GREENMAIL PROVISION ISSUE CODE 1470 Vote FOR a management proposal to limit the payment of greenmail. Greenmail is the name given to certain discriminatory share repurchases. Typically, it refers to payments that a raider receives from a company in exchange for the raider's shares and a guarantee he will terminate a takeover bid. This payment is usually a premium above the market price, so while greenmail can ensure the continued independence of a company, it discriminates against the other stockholders. Buying out the shares of one owner at a price not available to others is unfair. The payment of greenmail may also have an adverse effect on the company's image, among both business associates and consumers. Economic studies show that greenmail devalues a company's stock price. ADOPT ADVANCE NOTICE REQUIREMENT ISSUE CODE 1480 Vote AGAINST a management proposal to adopt advance notice requirements. Advance notice limits shareholders' right to present business or nominate directors at the annual meeting. Limiting shareholders' rights by assuring that management has complete knowledge of all presentations and 276 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholder nominations serves to entrench management by providing it time to counterattack any issue that it does not support, or by allowing it to dismiss business or a shareholder's nomination for director if not presented in accordance with the notice provisions. OPT OUT OF STATE TAKEOVER LAW ISSUE CODE 1490 Vote CASE BY CASE OPT INTO STATE TAKEOVER LAW ISSUE CODE 1491 Vote CASE BY CASE ADOPT STOCK INCENTIVE PLAN ISSUE CODE 1500 Vote CASE-BY-CASE on a management proposal to adopt a stock option plan for employees. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the dilution represented by the proposal, as calculated by ISS, is more than 10 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF potential dilution from all company plans, including this proposal, as calculated by ISS, is more than 15 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows the plan administrators to re-price or replace underwater options. Vote AGAINST a management proposal to adopt a stock incentive plan IF the plan has a share replenishment feature --that is, it adds a specified number or percentage of outstanding shares for award each year. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows non-qualified options to be priced at less than 90% of the fair market value on the grant date. DILUTION: Vote AGAINST a new plan if the shares set aside exceed 10% of the company's outstanding shares or vote AGAINST if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. AND Vote AGAINST new plans that allow re-pricing (i.e. Underwater Options). Proposals on compensation for executives and directors are the issues submitted most frequently to shareholder vote (after the election of directors and appointment of accountants). The number of proposals in these areas has increased as the result of tax law changes. The most recent tax bill makes "excessive" executive pay non-deductible unless a shareholder-approved "pay for performance" plan is in place. Jennison generally supports compensation plans that link employee and director pay to shareholder returns. We also believe that actual participants in an industry have the best understanding of the compensation levels needed to attract and retain key personnel. We support cash-based compensation plans because they are generally tied to performance goals and because they do not create dilution. On the other hand, stock-based compensation plans can be detrimental to 277 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholder interests if not carefully constructed. For example, stock option plans can lead to severe dilution of outside shareholders or can insulate executives from a falling share price and, as a result, from shareholder interests. We will oppose compensation plans under the following circumstances Dilution: In order to prevent excessive dilution, we would oppose a new plan if the shares set aside exceed 10% of the company's outstanding shares or if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding "Evergreen" Plans: Unlike most current stock options plans, which must be reauthorized annually, "evergreen" plans have no termination date. While annual dilution is normally very low (typically 1% per year), shareholders may suffer from "creeping dilution" over an extended period of time. We believe that shareholder should retain control over compensation plans and, therefore, will oppose plans without termination dates Discounted Options: We will also oppose plans that establish an option exercise price more than 10% below the current market price of the stock's Re-pricing of Underwater Options: Underwater stock options are those where the exercises price is above the current market price (making the option worthless to the holder). Many companies propose resetting the exercise price when this occurs. We will oppose re-pricing when the stock decline is due to company specific factors but support a reset if the decline is due to general market conditions. We will also oppose new stock option plans that permit re-pricing of underwater options without shareholder approval. We will be monitoring developments in the area of broad-based employee stock option plans. We support efforts to include the stock option plans in a company's financial statements. If option costs were included in earnings (as are all other compensation expenses), we would see less need for specific shareholder approval. AMEND STOCK INCENTIVE PLAN ISSUE CODE 1501 Vote CASE-BY-CASE on a management proposal to amend a stock option plan for employees. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the dilution represented by the proposal, as calculated by ISS, is more than 10 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF potential dilution from all company plans, including this proposal, as calculated by ISS, is more than 15 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows the plan administrators to re-price or replace underwater options. Vote AGAINST a management proposal to adopt a stock incentive plan IF the plan has a share replenishment feature --that is, it adds a specified number or percentage of outstanding shares for award each year. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows non-qualified options to be priced at less than 90% of the fair market value on the grant date. Proposals on compensation for executives and directors are the issues submitted most frequently to shareholder vote (after the election of directors and appointment of accountants). The number of proposals in these areas has increased as the result of tax law changes. The most recent tax bill makes "excessive" executive pay non-deductible unless a shareholder-approved "pay for performance" plan is in place. Jennison generally supports compensation plans that link employee and director pay to shareholder returns. We also believe that actual participants in an industry have the best understanding of the compensation levels needed to attract and retain key personnel. We support cash-based compensation plans because they are generally tied to performance goals and because they do not create dilution. On the other hand, stock-based compensation plans can be detrimental to 278 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholder interests if not carefully constructed. For example, stock option plans can lead to severe dilution of outside shareholders or can insulate executives from a falling share price and, as a result, from shareholder interests. We will oppose compensation plans under the following circumstances Dilution: In order to prevent excessive dilution, we would oppose a new plan if the shares set aside exceed 10% of the company's outstanding shares or if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding "Evergreen" Plans: Unlike most current stock options plans, which must be reauthorized annually, "evergreen" plans have no termination date. While annual dilution is normally very low (typically 1% per year), shareholders may suffer from "creeping dilution" over an extended period of time. We believe that shareholder should retain control over compensation plans and, therefore, will oppose plans without termination dates Discounted Options: We will also oppose plans that establish an option exercise price more than 10% below the current market price of the stock's Re-pricing of Underwater Options: Underwater stock options are those where the exercises price is above the current market price (making the option worthless to the holder). Many companies propose resetting the exercise price when this occurs. We will oppose re-pricing when the stock decline is due to company specific factors but support a reset if the decline is due to general market conditions. We will also oppose new stock option plans, which permit re-pricing of underwater options without shareholder approval. We will be monitoring developments in the area of broad-based employee stock option plans. We support efforts to include the stock option plans in a company's financial statements. If option costs were included in earnings (as are all other compensation expenses), we would see less need for specific shareholder approval. ADD SHARES TO STOCK INCENTIVE PLAN ISSUE CODE 1502 Vote CASE-BY-CASE on a management proposal to add shares to a stock option plan for employees. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the dilution represented by the proposal, as calculated by ISS, is more than 10 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF potential dilution from all company plans, including this proposal, as calculated by ISS, is more than 15 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows the plan administrators to re-price or replace underwater options. Vote AGAINST a management proposal to adopt a stock incentive plan IF the plan has a share replenishment feature --that is, it adds a specified number or percentage of outstanding shares for award each year. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows non-qualified options to be priced at less than 90% of the fair market value on the grant date. Proposals on compensation for executives and directors are the issues submitted most frequently to shareholder vote (after the election of directors and appointment of accountants). The number of proposals in these areas has increased as the result of tax law changes. The most recent tax bill makes "excessive" executive pay non-deductible unless a shareholder-approved "pay for performance" plan is in place. Jennison generally supports compensation plans that link employee and director pay to shareholder returns. We also believe that actual participants in an industry have the best understanding of the compensation levels needed to attract and retain key personnel. We support cash-based compensation plans because they are generally tied to performance goals and because they do not create dilution. On the other hand, stock-based compensation plans can be detrimental to 279 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholder interests if not carefully constructed. For example, stock option plans can lead to severe dilution of outside shareholders or can insulate executives from a falling share price and, as a result, from shareholder interests. We will oppose compensation plans under the following circumstances: Dilution: In order to prevent excessive dilution, we would oppose a new plan if the shares set aside exceed 10% of the company's outstanding shares or if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. "Evergreen" Plans: Unlike most current stock options plans, which must be reauthorized annually, "evergreen" plans have no termination date. While annual dilution is normally very low (typically 1% per year), shareholders may suffer from "creeping dilution" over an extended period of time. We believe that shareholder should retain control over compensation plans and, therefore, will oppose plans without termination dates. Discounted Options: We will also oppose plans that establish an option exercise price more than 10% below the current market price of the stock. Re-pricing of Underwater Options: Underwater stock options are those where the exercises price is above the current market price (making the option worthless to the holder). Many companies propose resetting the exercise price when this occurs. We will oppose re-pricing when the stock decline is due to company specific factors but support a reset if the decline is due to general market conditions. We will also oppose new stock option plans that permit re-pricing of underwater options without shareholder approval. We will be monitoring developments in the area of broad-based employee stock option plans. We support efforts to include the stock option plans in a company's financial statements. If option costs were included in earnings (as are all other compensation expenses), we would see less need for specific shareholder approval. LIMIT PER-EMPLOYEE AWARD ISSUE CODE 1503 Vote CASE-BY-CASE on a management proposal to limit per-employee annual option awards. EXTEND TERM OF STOCK INCENTIVE PLAN ISSUE CODE 1505 Vote CASE BY CASE Vote CASE-BY-CASE on a management proposal to add shares to a stock option plan for employees. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the dilution represented by the proposal, as calculated by ISS, is more than 10 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF potential dilution from all company plans, including this proposal, as calculated by ISS, is more than 15 %. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows the plan administrators to re-price or replace underwater options. Vote AGAINST a management proposal to adopt a stock incentive plan IF the plan has a share replenishment feature --that is, it adds a specified number or percentage of outstanding shares for award each year. Vote AGAINST a management proposal to adopt a stock incentive plan for employees IF the plan allows non-qualified options to be priced at less than 90% of the fair market value on the grant date. Proposals on compensation for executives and directors are the issues submitted most frequently to shareholder vote (after the election of directors and appointment of accountants). The number of proposals in these areas has increased as the result of tax law changes. The most recent tax bill makes "excessive" executive pay non- 280 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- deductible unless a shareholder-approved "pay for performance" plan is in place. Jennison generally supports compensation plans that link employee and director pay to shareholder returns. We also believe that actual participants in an industry have the best understanding of the compensation levels needed to attract and retain key personnel. We support cash-based compensation plans because they are generally tied to performance goals and because they do not create dilution. On the other hand, stock-based compensation plans can be detrimental to shareholder interests if not carefully constructed. For example, stock option plans can lead to severe dilution of outside shareholders or can insulate executives from a falling share price and, as a result, from shareholder interests. We will oppose compensation plans under the following circumstances: Dilution: In order to prevent excessive dilution, we would oppose a new plan if the shares set aside exceed 10% of the company's outstanding shares or if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. "Evergreen" Plans: Unlike most current stock options plans, which must be reauthorized annually, "evergreen" plans have no termination date. While annual dilution is normally very low (typically 1% per year), shareholders may suffer from "creeping dilution" over an extended period of time. We believe that shareholder should retain control over compensation plans and, therefore, will oppose plans without termination dates. Discounted Options: We will also oppose plans that establish an option exercise price more than 10% below the current market price of the stock. Re-pricing of Underwater Options: Underwater stock options are those where the exercises price is above the current market price (making the option worthless to the holder). Many companies propose resetting the exercise price when this occurs. We will oppose re-pricing when the stock decline is due to company specific factors but support a reset if the decline is due to general market conditions. We will also oppose new stock option plans that permit re-pricing of underwater options without shareholder approval. We will be monitoring developments in the area of broad-based employee stock option plans. We support efforts to include the stock option plans in a company's financial statements. If option costs were included in earnings (as are all other compensation expenses), we would see less need for specific shareholder approval. ADOPT DIRECTOR STOCK INCENTIVE PLAN ISSUE CODE 1510 Vote AGAINST a management proposal to adopt a stock option plan for non-employee directors. In light of the significant role of outside directors, Jennison believes that outside directors deserve reasonable compensation for their services. Jennison believes that outside director compensation should be in the form of cash or awards of stock, but should not include any other option, pension or benefit plans. Jennison believes that providing such option, pension or benefit plans to outside directors may create a conflict of interest and compromise such directors' ability to vote independently on executive management and employee option, pension and benefit plans. AMEND DIRECTOR STOCK INCENTIVE PLAN ISSUE CODE 1511 Vote AGAINST a management proposal to amend a stock option plan for non-employee directors. In light of the significant role of outside directors, Jennison believes that outside directors deserve reasonable compensation for their services. Jennison believes that outside director compensation should be in the form of cash or awards of stock, but should not include any other option, pension or benefit plans. Jennison believes that providing such option, pension or benefit plans to outside directors may create a conflict of interest and compromise such directors' ability to vote independently on executive management and employee option, pension and benefit plans. 281 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- ADD SHARES TO DIRECTOR STOCK INCENTIVE PLAN ISSUE CODE 1512 Vote AGAINST a management proposal to add shares to a stock option plan for non-employee directors. In light of the significant role of outside directors, Jennison believes that outside directors deserve reasonable compensation for their services. Jennison believes that outside director compensation should be in the form of cash or awards of stock, but should not include any other option, pension or benefit plans. Jennison further believes that providing such option, pension or benefit plans to outside directors may create a conflict of interest and compromise such directors' ability to vote independently on executive management and employee option, pension and benefit plans. ADOPT EMPLOYEE STOCK PURCHASE PLAN ISSUE CODE 1520 Vote CASE-BY-CASE on a management proposal to adopt an employee stock purchase plan. Vote AGAINST a management proposal to adopt an employee stock purchase plan IF the proposed plan allows employees to purchase stock at prices of less than 85% of the stock's fair market value. Vote AGAINST a management proposal to adopt an employee stock purchase plan IF the equity dilution represented by the proposed plan, as calculated by ISS, is more than 10% Vote AGAINST a management proposal to adopt an employee stock purchase plan IF the potential dilution of all plans, as calculated by ISS, is more than 15%. Employee stock purchase plans allow the employees of a company to purchase the company's stock at market or below-market prices. In principle we encourage such plans as the employees become shareholders and their interests are aligned with ours. However, we do want to prevent excessive dilution stemming from plans that allow employees to purchase stock at significant market discounts. We will support employee stock purchase plans if the cost basis to the employee is at least 85% of the fair market value (i.e. discount is less than 15%). If the cost basis is greater than 75% but less than 85% of fair market value (discount of 15% to 25%) we will support the plan only if it passes a dilution test which requires that the dilution from the plan does not exceed 10% of the company's outstanding stock and the total dilution from all employee stock option and stock purchase plans (old and new) does not exceed 15%. If the cost basis is below 76% of the fair market value (discount greater than 25%) we will oppose the plan. Vote AGAINST new plans that allow re-pricing (i.e. Underwater Options). AMEND EMPLOYEE STOCK PURCHASE PLAN ISSUE CODE 1521 Vote CASE-BY-CASE on a management proposal to amend an employee stock purchase plan. Employee stock purchase plans allow the employees of a company to purchase the company's stock at market or below-market prices. In principle we encourage such plans as the employees become shareholders and their interests are aligned with ours. However, we do want to prevent excessive dilution stemming from plans, which allow employees to purchase stock at significant market discounts. We will support employee stock purchase plans if the cost basis to the employee is at least 85% of the fair market value (i.e. discount is less than 15%). If the cost basis is greater than 75% but less than 85% of fair market value (discount of 15% to 25%) we will support the plan only if it passes a dilution test which requires that the dilution from the plan does not exceed 10% of the 282 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- company's outstanding stock and the total dilution from all employee stock option and stock purchase plans (old and new) does not exceed 15%. If the cost basis is below 76% of the fair market value (discount greater than 25%) we will oppose the plan. ADD SHARES TO EMPLOYEE STOCK PURCHASE PLAN ISSUE CODE 1522 Vote CASE-BY-CASE on a management proposal to add shares to an employee stock purchase plan. Vote AGAINST a management proposal to add shares to an employee stock purchase plan IF the proposed plan allows employees to purchase stock at prices of less than 85% of the stock's fair market value. Vote AGAINST a management proposal to add shares to an employee stock purchase plan IF the dilution represented by this proposal is more than 10% of the outstanding common equity. Vote AGAINST a management proposal to add shares to an employee stock purchase plan IF the potential dilution of all plans, as calculated by ISS, is more than 15%. Employee stock purchase plans allow the employees of a company to purchase the company's stock at market or below-market prices. In principle we encourage such plans as the employees become shareholders and their interests are aligned with ours. However, we do want to prevent excessive dilution stemming from plans, which allow employees to purchase stock at significant market discounts. We will support employee stock purchase plans if the cost basis to the employee is at least 85% of the fair market value (i.e. discount is less than 15%). ADOPT STOCK AWARD PLAN ISSUE CODE 1530 Vote CASE-BY-CASE on a management proposal to adopt a stock award plan for executives. DILUTION: Vote AGAINST a new plan if the shares set aside exceed 10% of the company's outstanding shares or vote AGAINST if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. AMEND STOCK AWARD PLAN ISSUE CODE 1531 Vote CASE-BY-CASE on a management proposal to amend a stock award plan for executives. DILUTION: Vote AGAINST a new plan if the shares set aside exceed 10% of the company's outstanding shares or vote AGAINST if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. ADD SHARES TO STOCK AWARD PLAN ISSUE CODE 1532 Vote CASE-BY-CASE on a management proposal to add shares to a stock award plan for executives. DILUTION: 283 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST a new plan if the shares set aside exceed 10% of the company's outstanding shares or vote AGAINST if the total set aside under all executive and directors compensation plans (old and new), exceeds 15% of shares outstanding. AND Vote AGAINST new plans that allow re-pricing (i.e. Underwater Options). ADOPT DIRECTOR STOCK AWARD PLAN ISSUE CODE 1540 Vote CASE-BY-CASE on a management proposal to adopt a stock award plan for non-employee directors. Vote AGAINST a management proposal to adopt a stock award plan for non-employee directors IF the dilution represented by this proposal, as calculated by ISS, is more than 10%. Vote AGAINST a management proposal to adopt a stock award plan for non-employee directors IF the potential dilution from all plans (including this proposal), as calculated by ISS, is more than 15%. In light of the significant role of outside directors, Jennison believes that outside directors deserve reasonable compensation for their services. Furthermore, Jennison believes that outside director compensation should be in the form of cash or awards of stock, but should not include any other option, pension or benefit plans. Jennison believes that providing such option, pension or benefit plans to outside directors may create a conflict of interest and compromise such directors' ability to vote independently on executive management and employee option, pension and benefit plans. AMEND DIRECTOR STOCK AWARD PLAN ISSUE CODE 1541 Vote CASE-BY-CASE on a management proposal to amend a stock award plan for non-employee directors. Vote AGAINST a management proposal to amend a stock award plan for non-employee directors IF the potential dilution represented by this proposal, as calculated by ISS, is more than 10%. Vote AGAINST a management proposal to amend a stock award plan for non-employee directors IF the potential dilution from all plans, including this proposal, as calculated by ISS (overhang), is more than 15%. ADD SHARES TO DIRECTOR STOCK AWARD PLAN ISSUE CODE 1542 Vote CASE-BY-CASE on a management proposal to add shares to a stock award plan for non-employee directors. Vote AGAINST a management proposal to a stock award plan for non-employee directors IF the dilution represented by the proposal is more than 10% of the outstanding common stock. AND Vote AGAINST a management proposal to add shares to a stock award plan for non-employee directors IF the potential dilution from all plans, including this proposal, as calculated by ISS (overhang), is more than 15%. APPROVE ANNUAL BONUS PLAN ISSUE CODE 1560 284 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE-BY-CASE on a management proposal to approve an annual bonus plan. Bonus plans generally serve to attract, retain and motivate qualified executives. Payouts under these plans may be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. Since bonus plans are generally tied to performance, these proposals should be supported. Vote AGAINST a management proposal to approve an annual bonus plan IF the maximum per-employee payout is not disclosed. The maintenance of favorable tax treatment for executive compensation benefits shareholders. Companies should follow all requirements necessary to qualify compensation for the performance exemption. Any loss of income to the corporation stemming from a company's failure to retain this tax deduction would come out of the pockets of its shareholders. Failure to disclose the maximum per-employee payouts may cost an exemption from the $1 million limit on the amount of "non-performance-based pay" that a public company may deduct for income tax purposes. As a result, all management proposals to approve bonus plans that do not disclose maximum per-employee payouts should be opposed. Vote AGAINST a management proposal to approve an annual bonus plan IF performance criteria are not disclosed. Shareholders may reasonably expect to be informed of the performance measures related to management bonuses. As a result, management proposals to approve bonus plans that do not disclose performance criteria should be opposed. APPROVE SAVINGS PLAN ISSUE CODE 1561 Vote FOR a management proposal to adopt a savings plan. The Internal Revenue Service limits the extent to which "highly paid" employees may participate in company-sponsored employee stock purchase plans and savings plans such as 401k savings plans. These proposals allow highly paid executives to enjoy the benefits extended to a broad base of company employees. APPROVE OPTION/STOCK AWARDS ISSUE CODE 1562 Vote CASE-BY-CASE on a management proposal to grant a one-time stock option. Vote AGAINST a management proposal to grant a one-time stock option IF the option is priced at less than 90% of the fair market value on the grant date. Vote AGAINST a management proposal to grant one-time option/stock award IF the dilution represented by the award, as calculated by ISS, is more than 10% percent. Vote AGAINST a management proposal to approve a stock option or stock award IF minimum equity overhang from all company plans including this proposal, as calculated by ISS, is more than 15% of the total outstanding common equity. ADOPT DEFERRED COMPENSATION PLAN ISSUE CODE 1563 Vote CASE-BY-CASE on a management proposal to adopt a deferred compensation plan. 285 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- APPROVE LONG-TERM BONUS PLAN ISSUE CODE 1564 Vote FOR a management proposal to approve a long-term bonus plan. Bonus plans generally serve to attract, retain and motivate qualified executives. Payouts under these plans may be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. Since bonus plans are generally tied to performance, these proposals should be supported. Vote AGAINST a management proposal to approve a long-term bonus plan IF the maximum per-employee payout is not disclosed. The maintenance of favorable tax treatment for executive compensation benefits shareholders. Companies should follow all requirements necessary to qualify compensation for the performance exemption. Any loss of income to the corporation stemming from a company's failure to retain this tax deduction would come out of the pockets of its shareholders. Failure to disclose the performance criteria used to generate executive bonus payouts may cost an exemption from the $1 million limit on the amount of "non-performance based pay" that a public company may deduct for income tax purposes. In addition, shareholders may reasonably expect to be informed of the performance measures related to management bonuses. As a result, management proposals to approve bonus plans that do not disclose performance criteria should be opposed. APPROVE EMPLOYMENT AGREEMENTS ISSUE CODE 1565 Vote FOR a management proposal to approve an employment agreement or contract. Employment agreements/contracts are necessary to attract, retain and motivate executives. Companies must offer these arrangements to key executives to remain competitive. AMEND DEFERRED COMPENSATION PLAN ISSUE CODE 1566 Vote FOR a management proposal to amend a deferred compensation plan. Companies frequently sponsor deferred compensation plans that allow executives and non-employee directors to defer pay and any related taxes until some later date. The deferred amounts usually may be deposited into interest-bearing accounts or invested in company stock accounts. Frequently, payouts under deferred compensation plans are made in cash. These plans represent a fairly standard component of executive and non-employee director compensation packages. Since these plans do not constitute a significant addition to executive and non-employee director pay packages, proposals to adopt deferred compensation plans should be supported. EXCHANGE UNDERWATER OPTIONS ISSUE CODE 1570 Vote AGAINST a management proposal to exchange underwater options (options with a per-share exercise price that exceeds the underlying stock's current market price). Shareholders are harmed by the practice of re-pricing or replacing so-called "underwater" options. This practice constitutes a giveaway to executives. Shareholders do not have the same protection from falling prices. It negates the notion of tying management incentives to stock performance. AMEND ANNUAL BONUS PLAN ISSUE CODE 1581 286 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR a management proposal to amend an annual bonus plan. Bonus plans generally serve to attract, retain and motivate qualified executives. Payouts under these plans may be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. Since bonus plans are generally tied to performance, these proposals should be supported. REAPPROVE OPTION/BONUS FOR OBRA ISSUE CODE 1582 Vote FOR a management proposal to re-approve a stock option or bonus plan for satisfying requirements of the OBRA. Incentive plans generally serve to attract, retain and motivate qualified executives. Payouts under these plans may be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. Since incentive plans are generally tied to performance, these proposals should be supported. Maintaining performance-based qualifications under Section 162(m) are important so that the company is not charged an accounting expense for the compensation issued under these plans. Vote AGAINST a management proposal to re-approve a stock option or bonus plan IF the maximum per-employee payout is not disclosed. Vote AGAINST a management proposal to re-approve a stock option or bonus plan for employees if performance criteria are not disclosed. Vote AGAINST a management proposal to re-approve a stock option or bonus plan for employees IF the company authorized the re-pricing or replacement of underwater options without shareholder approval within the past three years. AMEND LONG TERM BONUS PLAN ISSUE CODE 1586 Vote FOR a management proposal to amend a long-term bonus plan. Bonus plans generally serve to attract, retain and motivate qualified executives. Payouts under these plans may be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. Since bonus plans are generally tied to performance, these proposals should be supported. SP-SHAREHOLDER APPROVAL OF AUDITIORS ISSUE CODE 2000 Vote AGAINST a shareholder proposal calling for stockholder ratification of auditors. The company, through the audit committee, is in the best position to select an auditor. Shareholders should defer to management in this matter. SP-AUDITORS MUST ATTEND ANNUAL MEETING ISSUE CODE 2001 Vote AGAINST a shareholder proposal calling for auditors to attend the annual meeting. Meeting attendance by the auditor serves no useful purpose, since the Securities and Exchange Commission mandates detailed financial disclosure by the company in its annual report, 10-K and other filings. 287 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-LIMIT CONSULTING BY AUDITORS ISSUE CODE 2002 Vote AGAINST a shareholder proposal to limit consulting by a company's independent auditors. The Sarbanes-Oxley Act of 2002 ("the Act") contains provisions that establish safeguards that promote auditor independence. Since the Act requires audit committees to pre-approve non-audit services, there is no need to set arbitrary limitations on the provision of these services. An independent oversight board, which the SEC oversees, is responsible for setting audit, quality control, and ethical standards for audits and is responsible for inspecting, investigating and disciplining firms and their accountants. Subject to regulatory restrictions, audit committees should have discretion to determine whether to use their outside audit firm or another firm for services not related to the audit process. An accountant's familiarity with the company's financial structure, gained through providing non-audit services, can improve the quality of the audit. SP-ROTATE AUDITORS ISSUE CODE 2003 Vote AGAINST a shareholder proposal asking the company to rotate its auditors. Mandatory auditor rotation could prevent an auditor from developing a detailed understanding of a company's business, operations, systems, legal structure and accounting practices, and therefore, would reduce the quality and efficiency of the audit process. In addition, it could be costly to the company. Because of the limited pool of accounting firms, auditor rotation may be difficult to implement. SP-RESTORE PREEMPTIVE RIGHTS ISSUE CODE 2010 Vote FOR a shareholder proposal to restore preemptive rights. In the absence of preemptive rights, direct stock issuances dilute the positions of stockholders. These rights permit investors to maintain their relative equity position in a company. Preemptive rights reinforce the notion that shareholders own the corporation and are entitled to anything of value distributed by the company, including the opportunity to buy potentially valuable new securities. These rights enable shareholders to maintain their proportional ownership in a company and preserve their voting interests. Moreover, studies indicate that preemptive rights offerings are less expensive than underwritten offerings. SP-STUDY SALE OR SPIN-OFF ISSUE CODE 2030 Vote CASE BY CASE SP-ADOPT CONFIDENTIAL VOTING ISSUE CODE 2100 Vote FOR a shareholder proposal asking the board to adopt confidential voting and independent tabulation of proxy ballots. The entire corporate governance system is built on the foundation of the proxy voting process. If the voting system is not fair, the system will not work. It is essential that corporations provide confidential treatment to shareholders and tabulation by a third party for all proxies, ballots and voting authorizations. Proxy voting should be conducted under the same rules of confidentiality that apply to voting in political elections. Open balloting allows companies to re-solicit shareholders to urge them to change their votes--which shareholder proponents do not have an opportunity to do--and creates an opportunity for coercion. Confidential voting minimizes the possibility 288 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- that shareholders, especially money managers, will be subject to conflicts of interests. Any minimal costs that must be incurred in implementing a confidential voting policy are outweighed by the benefits to shareholders. SP-COUNTING SHAREHOLDER VOTES ISSUE CODE 2101 Vote FOR a shareholder proposal asking the company to refrain from counting abstentions and broker non-votes in vote tabulations. The true measure of support in any voting system is the number of votes cast for and against a particular proposal. A ballot marked "abstain" or a non-vote represents the absence of any real indication of support. When such votes are tabulated, however, they have the effect of a vote against the resolution. SP-NO DISCRETIONARY VOTING ISSUE CODE 2102 Vote FOR a shareholder proposal to eliminate the company's discretion to vote unmarked proxy ballots. The board of directors should not have the right to vote signed but unvoted ballots. The true measure of support in any voting system is the number of votes cast for and against a particular proposal. An unmarked ballot represents the absence of any real indication of support. SP-EQUAL ACCESS TO THE PROXY ISSUE CODE 2110 Vote AGAINST a shareholder proposal to provide equal access to the proxy materials for shareholders. SEC proxy rules already provide ample means for shareholders to participate in the voting process. Under the proxy rules, shareholders have the right to have proposals included in the proxy statement. Many companies also provide shareholders with the right to suggest director candidates to the nominating committee. It would be unworkable to open the proxy mechanism because of the large number of shareholders who might wish to insert comments or offer nominations. Implementing this proposal would put this company at a disadvantage because other companies are not required to do so. SP-IMPROVE MEETING REPORTS ISSUE CODE 2120 Vote AGAINST a shareholder proposal to improve annual meeting reports. SEC proxy rules already provide ample means for shareholders to participate in the voting process. Under the proxy rules, shareholders have the right to have proposals included in the proxy statement. Many companies also provide shareholders with the right to suggest director candidates to the nominating committee. It would be unworkable to open the proxy mechanism because of the large number of shareholders who might wish to insert comments or offer nominations. Implementing this proposal would put this company at a disadvantage because other companies are not required to do so. SP-CHANGE ANNUAL MEETING DATE ISSUE CODE 2130 Vote AGAINST a shareholder proposal to change the annual meeting location. The location of the annual meeting is a non-issue. Attendance at the meeting by proxy is always an option. The vast majority of shareholders choose not to attend annual meetings in person, even those that are held in major 289 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- metropolitan areas. Keeping it at a fixed location can be cost-effective and reasonable, and it is best to leave the issue to the discretion of management and the board. SP-CHANGE ANNUAL MEETING DATE ISSUE CODE 2131 Vote AGAINST a shareholder proposal to change the annual meeting date. Changing the annual meeting date could delay the annual meeting and result in increased costs by requiring separate mailings of the proxy statement and the annual report. In addition, because the fiscal years of many companies end in December, meeting date conflicts are inevitable. Finally, most shareholders do not attend the annual meetings in person and choose to do so by proxy. SP-BOARD INCLUSIVENESS ISSUE CODE 2201 Vote FOR a shareholder proposal asking the board to include more women and minorities as directors. Diversity on the board is important. A vote for a non-binding shareholder proposal seeking to increase the participation of women and minorities on the board sends the proper signal to the board, but it does not compromise the flexibility of the board to search for the best possible candidates. SP-INCREASE BOARD INDEPENDENCE ISSUE CODE 2202 Vote AGAINST a shareholder proposal to increase board independence. The board of directors and management of the company are in the best position to determine a workable, efficient structure for the board of directors. The board should be free to identify the individuals who will best serve the shareholders without being hindered by arbitrary limits. Many factors contribute to a successful and well-run board, including the skills, insights and experiences that are offered by directors classified by many as affiliates. "Independence" is not easily defined. The use of an arbitrary standard for "independence" would limit the board's ability to nominate the best candidates. SP-DIRECTOR TENURE/RETIREMENT AGE ISSUE CODE 2203 Vote AGAINST a shareholder proposal seeking to limit the period of time a director can serve by establishing a retirement or tenure policy. We believe that experienced board members can bring continuity and insight into the management of a company. Term limits may result in the loss of good board members. Therefore, we will vote against term limit proposals. SP-MINIMUM STOCK OWNERSHIP BY DIRECTORS ISSUE CODE 2204 Vote FOR a shareholder proposal to require minimum stock ownership by directors. We encourage directors to own stock and thereby more closely align themselves with the stockholders. We recognize that management may choose to seek directors from a wide range of economic backgrounds. We believe, therefore, that minimum stock ownership requirement should be set at reasonable levels SP-ALLOW UNION/EMPLOYEE REPRESENTATIVES ON THE BOARD ISSUE CODE 2205 290 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote CASE BY CASE SP-DIRECTOR'S ROLE IN CORPORATE STRATEGY ISSUE CODE 2206 Vote AGAINST a shareholder proposal seeking to increase disclosure regarding the board's role in the development and monitoring of the company's long-term strategic plan. Strategy planning tasks are within the normal definition of the directors' role and do not need to be specifically disclosed, and/or are adequately defined in most companies' existing documents. Too much disclosure regarding strategy formation may put the company at a competitive disadvantage. SP-INCREASE NOMINATING COMMITTEE INDEPENDENCE ISSUE CODE 2210 Vote FOR a shareholder proposal calling for an all-independent nominating committee. These proposals suggest that an independent nominating committee (without any management representatives) be established to choose new board candidates. Proponents of this amendment suggest that an independent nominating committee is essential to ensure an independent and accountable board. We agree. Management can be involved in the selection of outside directors by providing recommendations to the nominating committee SP-CREATE NOMINATING COMMITTEE ISSUE CODE 2211 Vote FOR a shareholder proposal to create a nominating committee of the board. Directors represent shareholder interests and are responsible for selecting and monitoring the corporation's management team. As a result, a nominating committee should be established to ensure that the most qualified directors, including individuals who are free of ties to incumbent management, are nominated to the board. A nominating committee would focus on the structure and membership of the entire board and would allow the full board to concentrate on other issues. SP-CREATE SHAREHOLDER COMMITTEE ISSUE CODE 2212 Vote FOR a shareholder proposal urging the creation of a shareholder committee. Shareholder committees provide shareholders with forums to channel their views to the board. These committees also give shareholders an opportunity to discuss issues relevant to their investments in corporations. SP-INDEPENDENT BOARD CHAIRMAN ISSUE CODE 2214 Vote AGAINST a shareholder proposal asking that the chairman of the board of directors be chosen from among the ranks of the non-employee directors. The directors owe a fiduciary duty to shareholders to enhance the long-term value of the corporation. The board of directors is in the best position to assess the corporation's needs and to create the best possible structure of the company's management. The requirement for an independent chairman would add an unnecessary layer of bureaucracy to the management of the company and could dilute the power of the CEO to provide effective leadership. The board should be able to turn to a non-employee chairman when the circumstances dictate, such as an unexpected vacancy or a transitional period. But arbitrarily forcing a split of the jobs of CEO and chairman of the board may not be in the best interest of the corporation. 291 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-LEAD DIRECTOR ISSUE CODE 2215 Vote FOR a shareholder proposal asking that a lead director be chosen from among the ranks of the non-employee directors. The directors are elected to oversee the corporation on behalf of the owners--the shareholders. A lead director can act as an independent conduit of communication to the board and often is encouraged when the CEO also holds the board chair position. A lead director would be responsible for coordinating the non-employee director's evaluation of the board's performance and the contribution of each board member. Implementation of this proposal would establish a formal structure to promote an active role by independent directors on the board. SP-ADOPT CUMULATIVE VOTING ISSUE CODE 2220 Vote AGAINST a shareholder proposal calling for the adoption of cumulative voting. Cumulative voting may give minority shareholders too much voting control and may divide the board into conflicting special interests, undermining the board's ability to work in the best interests of all shareholders. SP-REQUIRE NOMINEE STATEMENT IN PROXY ISSUE CODE 2230 Vote AGAINST a shareholder proposal to require directors to place a statement of candidacy in the proxy statement. The board is best qualified to select the nominees for the board. Directors are usually selected after a search process that includes personal interviews and background checks. The company should only be required to comply with the Securities and Exchange Commission's disclosure requirements for each nominee and the implementation of this proposal would put the company at a competitive disadvantage. Forcing directors to comply with any further requirements may discourage qualified individuals from serving on the board. SP-DOUBLE BOARD NOMINEES ISSUE CODE 2231 Vote AGAINST a shareholder proposal to nominate two director candidates for each open board seat. This type of election system would create a political environment in which nominees compete with each other for the available board seats. The appropriate role of the directors is to present shareholders with a slate of director candidates who are most qualified and who are ready, willing and able to oversee the management of a company's affairs. The implementation of this proposal would make the recruitment of potential directors more difficult and would preclude the board from fulfilling its fiduciary responsibility of advising shareholders on matters in which they are asked to vote. SP-DIRECTOR LIABLILITY ISSUE CODE 2240 Vote FOR a shareholder proposal to make directors liable for acts or omissions that constitutes a breach of fiduciary care resulting from a director's gross negligence and/or willful neglect. Directors' business decisions while serving on a board can involve serious consequences. Their conduct can have a large impact, financially and otherwise, on the welfare of a company and its shareholders. Increasing directors' personal accountability for their actions on the board will encourage directors to uphold their fiduciary duties in 292 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- making these business decisions. This will cause directors to conduct themselves with increased diligence, and will help prevent corruption and negligence among the board. SP-REPEAL CLASSIFIED BOARD ISSUE CODE 2300 Vote FOR a shareholder proposal to repeal a classified board. Classified boards may serve to entrench management. Since only a minority of the directors stand for election each year, shareholders do not have the ability to out any other directors who may be acting in a fashion that is against the interests of shareholders. SP-REDEEM OR VOTE ON POISON PILL ISSUE CODE 2310 Vote FOR a shareholder proposal asking the board to redeem or to allow shareholders to vote on a poison pill/shareholder rights plan. Poison pill plans go to the heart of who owns the company - shareholders or the board. Poison pills take decisions on mergers and tender offers out of shareholders' hands by providing directors virtual veto power over an offer. They strip shareholders of their basic right to decide when, to whom and upon what terms to sell their shares. Poison pill plans may harm shareholder value, and can entrench management by deterring stock acquisition offers that are not favored by the board of directors. Instead of fostering negotiations, poison pill plans are designed to discourage or thwart offers before they are ever made. This results in management entrenchment to the detriment of shareholders. Pill plans may tend to depress stock price and promote poor corporate performance. Several studies and other analyses point to a drop in share value at the time of the adoption of a rights plan. Shareholders, not the directors, are best qualified to determine when and for what price they will sell their shares. SP-ELIMINATE SUPERMAJORITY PROVISION ISSUE CODE 2320 Vote FOR a shareholder proposal that seeks to eliminate supermajority vote requirements. Supermajority vote provisions may stifle bidder interest in the company altogether and thereby devalue the stock. Supermajority requirements are often set so high that they discourage tender offers altogether. They may also make it nearly impossible for shareholders to amend anti-takeover provisions contained in charters or bylaws. Some economic studies have shown slight negative stock price effects on the adoption of supermajority vote provisions. SP-REDUCE SUPERMAJORITY PROVISION ISSUE CODE 2321 Vote FOR a shareholder proposal that seeks to reduce supermajority vote requirements. Supermajority vote provisions may stifle bidder interest in the company altogether and thereby devalue the stock. Supermajority requirements are often set so high that they discourage tender offers altogether. They may also make it nearly impossible for shareholders to amend anti-takeover provisions contained in charters or bylaws. Some economic studies have shown slight negative stock price effects on the adoption of supermajority vote provisions. SP-REPEAL FAIR PRICE PROVISION ISSUE CODE 2324 293 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST a shareholder proposal that seeks to repeal fair price provisions. Fair price provisions help guard against two-tiered tender offers in which a raider offers a substantially higher cash bid for an initial and often controlling stake in a company and then offers a lower price for the remaining shares. The coercive pressures associated with such an offer may force shareholders to tender before they have considered all relevant facts. These provisions guarantee an equal price for all shareholders. SP-RESTORE RIGHT TO CALL A SPECIAL MEETING ISSUE CODE 2325 Vote FOR a shareholder proposal to restore shareholders' right to call a special meeting. The ability of shareholders to call a special meeting is an important right. Without the right, shareholders may have to wait for the annual meeting to take action. Such delays may not be in the best interest of shareholders. Shareholders should have access to procedures that permit them, the owners of the corporation, to bring special circumstances to the attention of the other owners. Limitations on shareholder actions can entrench management, render a corporation less attractive as a takeover candidate and give management a decided advantage in a takeover. SP-RESTORE RIGHT TO ACT BY WRITTEN CONSENT ISSUE CODE 2326 Vote FOR a shareholder proposal to restore shareholders' right to act by written consents. Written consent allows shareholders to initiate actions without calling a special meeting or waiting until the annual meeting. Shareholders should have access to procedures that permit them, the owners of the corporation, to bring special circumstances to the attention of the other owners. Limitations on shareholder actions can entrench management, render a corporation less attractive as a takeover candidate and give management a decided advantage in a takeover. SP-PROHIBIT TARGETED SHARE PLACEMENT ISSUE CODE 2330 Vote AGAINST a shareholder proposal to limit the board's discretion to issue targeted share placements or to require shareholder approval before such block placements can be made. The corporation's management team, subject to the review of the board of directors, is responsible for the company's day-to-day operations and strategic planning. As a result, it is best suited to judge the corporation's current and future requirements for raising additional capital. Targeted share placements are less expensive to execute than issuing stock, do not require the high interest rate of traditional debt and can be structured to benefit a limited number of parties. Placing limits on the ability of management and the board to issue blocks of preferred stock to fund the corporation's current operations and future growth is unnecessary and may reduce the corporation's ability to meet its capital needs. SP-OPT OUT OF STATE TAKEOVER STATUTE ISSUE CODE 2341 Vote CASE-BY-CASE on a shareholder proposal seeking to force the company to opt out of a state anti-takeover statutory provision. 294 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-REINCORPORATION ISSUE CODE 2342 Vote AGAINST a shareholder proposal to reincorporate the company in another state. The board is best qualified to determine the state regulatory environment that is best suited to the company's needs. The board must have the flexibility to take advantage of the appropriate statutory structure that it believes offers it the flexibility to respond to real or perceived threats to the corporation and its shareholders. Economic studies on state anti-takeover statutes have yielded mixed results. Some studies have found that the adoption of state laws has no significant impact on share value. As a result, there is no clear evidence that the adoption of anti-takeover statutes affect share value or that such laws deter takeovers. SP-ADOPT ANTI-GREENMAIL PROVISION ISSUE CODE 2350 Vote FOR a shareholder proposal to limit greenmail payments. Greenmail is the name given to certain discriminatory share repurchases. Typically, it refers to a payment that a raider receives from a company in exchange for the raider's shares and a guarantee to terminate a takeover bid. This payment is usually a premium above the market price, so while greenmail can ensure the continued independence of a company, it discriminates against the other stockholders. Buying out the shares of one owner at a price not available to others is unfair. The payment of greenmail may also have an adverse effect on corporate image, among both business associates and consumers. Some economic studies show that greenmail devalues a company's stock price. RESTRICT EXECUTIVE COMPENSATION ISSUE CODE 2400 Vote AGAINST a shareholder proposal to restrict executive compensation. Compensation packages may serve to align executive and shareholder interests. Shareholders should not seek to micromanage the board's executive compensation systems, and should defer to the judgment of the board in these matters. Vote AGAINST a shareholder proposal to restrict executive compensation IF the proposal attempts to limit executive pay without linking compensation to a financial performance measure. Executive pay levels can be excessive, which becomes a particular concern when pay levels are not tied sufficiently to financial performance. Linking pay to performance is a key issue for shareholder value, and proposals urging such a link merit support. SP-DISCLOSE EXECUTIVE COMPENSATION ISSUE CODE 2401 Vote AGAINST a shareholder proposal to enhance the disclosure of executive compensation. In 1992, the Securities and Exchange Commission amended the proxy statement disclosure requirements for executive pay. Disclosure of executive compensation beyond what the SEC requires provides no new meaningful information to shareholders and is unnecessary SP-RESTRICT DIRECTOR COMPENSATION ISSUE CODE 2402 Vote AGAINST a shareholder proposal to restrict director compensation. 295 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Compensation packages are necessary to attract, motivate and retain qualified directors. Compensation packages may serve to align director and shareholder interests. Shareholders should not seek to micro-manage the board's existing compensation systems, and should defer to the judgment of the board in these matters. SP-CAP EXECUTIVE PAY ISSUE CODE 2403 Vote AGAINST a shareholder proposal to cap executive pay. Pay caps are not in the best interests of shareholders. Caps may put a company at a competitive disadvantage by negatively affecting its ability to attract, motivate and retain highly qualified executives. A company using pay caps may risk getting stuck with mediocre managers and losing its best talent to higher paying companies. SP-PAY DIRECTORS IN STOCK ISSUE CODE 2405 Vote AGAINST a shareholder proposal calling for directors to be paid solely with company stock. Compensation packages are necessary to attract, motivate and retain qualified directors. Shareholders should not seek to micromanage the board's compensation systems, and should defer to the judgment of the board in determining the proper balance of directors' compensation packages. SP-APPROVE EXECUTIVE COMPENSATION ISSUE CODE 2406 Vote AGAINST a shareholder proposal calling for shareholder votes on executive pay. Shareholders do not have the expertise necessary to determine appropriate and competitive pay levels. Directors are elected by shareholders to oversee the management of the company. Shareholders should defer to the judgment of the board in these matters SP-RESTRICT DIRECTOR PENSIONS ISSUE CODE 2407 Vote FOR a shareholder proposal calling for the termination of director retirement plans. Retirement benefits for non-employee directors are unnecessary and inappropriate. These plans may create a conflict of interest by encouraging directors to remain on the board for no other reason than to receive retirement benefits. Few companies provide these benefits to shareholders. SP-REVIEW/REPORT ON/LINK EXECUTIVE PAY TO SOCIAL PERFORMANCE ISSUE CODE 2408 Vote AGAINST shareholder proposals that ask management to review, report on and/or link executive compensation to non-financial criteria, particularly social criteria. While proposals asking companies to link pay to social performance ostensibly relate to executive compensation, the real intent of the proposal is to change company practices on employee and environmental issues, which fall within the realm of ordinary business matters that should be left to the judgment of managers. Pay should be linked to financial performance, and non-financial criteria can cloud the picture. To the extent that pay should include non-financial criteria, the board should exercise its judgment on appropriate measures, and not be pushed on this issue by shareholders. SP-NO REPRICING OF UNDERWATER OPTIONS ISSUE CODE 2409 296 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote FOR a shareholder resolution seeking shareholder approval to re-price or replace underwater stock options. Stock options can be very lucrative for employees and are justified because they provide a key element in compensation packages aligning the interest of executives with that of shareholders. However, stock options are valuable only if the stock price increases from the day the option is granted. Programs that allow the company to re-price or replace underwater options (turn in options with exercise prices above the current market value of the stock for new options at or below the market value) eliminate the downside exposure executives face to a fall in the stock's price. SP-GOLDEN PARACHUTES ISSUE CODE 2414 Vote AGAINST a shareholder proposal calling for a ban or shareholder vote on future golden parachutes. Golden parachutes, which are severance packages contingent upon a change in control, are in the best interests of shareholders. Since parachutes provide specified benefits, they ensure that executives will continue to devote their time and attention to the business despite the threat of potential job loss due to a change in control. Golden parachutes ensure that executives will not oppose a merger that might be in the shareholders' best interests but may cost the executives their jobs. Even during periods free from takeover threats, golden parachutes are in the best interests of shareholders. They help to attract and retain qualified executives. Golden parachutes have also become a standard component of executive pay packages, so the packages help companies offer competitive compensation packages. In light of these reasons, the board of directors should have the discretion to adopt future golden parachutes. Vote AGAINST a shareholder proposal calling for a ban or shareholder vote on future golden parachutes IF the highest payout formula of current agreements does not exceed 3 times an executive's salary and bonus. Even during periods free from takeover threats, golden parachutes, which are severance packages contingent upon a change in control, are frequently in the best interests of shareholders. They help to attract and retain qualified executives. Golden parachutes have become a standard component of executive pay packages, and may be necessary to remain competitive in attracting key executives. While golden parachutes may be in the best interests of shareholders, some may be excessive. Golden parachutes should be opposed if the potential payouts to any of the covered executives exceed the level set forth in this guideline. SP-AWARD PEFORMANCE BASED STOCK OPTIONS ISSUE CODE 2415 Vote AGAINST a shareholder resolution seeking to award performance-based stock options. Stock options generally are awarded at the fair market value on the day they are granted. Executives should benefit from any increase in the value of the stock after the option is granted, just as shareholders realize the increased value of their holdings. SP-EXPENSE STOCK OPTIONS ISSUE CODE 2416 Vote AGAINST a shareholder proposal establishing a policy of expensing the costs of all future stock options issued by the company in the company's annual income statement. Current accounting rules give companies the choice of reporting stock option expenses annually in the company income statement or as a footnote in the annual report. Most companies report the cost of stock options on a pro- 297 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- forma basis in a footnote in the annual report, rather than include the option costs in determining operating income. Companies will likely cut back on option grants if they are considered an expense, which will ultimately hurt rank and file employees. There is no reliable and standard way to calculate the value of options. Current valuation methods, like the Black-Scholes method, were designed to price short-term tradable options and depend on speculative assumptions. In addition, options are not an expense, but rather a cost incurred by shareholders in the form of dilution, which is reflected in the form of lower earnings per share. Current disclosure is sufficient as the costs are already disclosed in the notes to financial statements in the company's 10-K filing SP-PENSION FUND SURPLUS ISSUE CODE 2417 Vote FOR a shareholder proposal that requests future executive compensation be determined without regard to any pension fund income. Executive incentive compensation should be determined without regard to any pension fund income, so that the compensation of senior executives will be more closely linked to their performance in managing the business. We believe that using "vapor profits," defined as pension fund earnings, in compensation calculations unfairly boost payouts and awards, and distorts the principle of pay for performance. We believe that only true operating income should be considered in determining executive compensation. This would discourage companies from using pension accounting to manage their earnings by changing assumptions to boost the amount of pension income that can be factored into operating income. It may also discourage companies from boosting pension income at the expense of employees and retirees by reducing anticipated benefits or withholding improved benefits. SP-CREATE COMPENSATION COMMITTEE ISSUE CODE 2420 Vote FOR a shareholder proposal to create a compensation committee. Compensation decisions and policies for executive pay should be made by a committee, and this committee should be composed of directors who are not employed by the company and do not have significant personal or business relationships with the company. This ensures that executive pay decisions are made in the best interests of shareholders by directors who are free from potential conflicts of interest. SP-HIRE INDEPENDENT COMPENSATION CONSULTANT ISSUE CODE 2421 Vote AGAINST a shareholder proposal to increase the independence of the compensation committee. Setting an arbitrary standard for the compensation committee is unnecessary and not in the best interests of shareholders. Directors are elected by shareholders to oversee the management of the company, and shareholders should defer to their judgment in establishing the composition and membership of board committees. SP-INCREAS3E COMPENSATION COMMITTEE INDEPENDENCE ISSUE CODE 2422 Vote AGAINST a shareholder proposal to increase the independence of an audit committee. The board of directors and management of the company are in the best position to determine a workable, efficient structure for the board of directors. The board should be free to identify the individuals who will best serve the shareholders without being hindered by arbitrary rules. In addition, regulatory rules ensure the independence of 298 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- these committees. Many factors contribute to a successful and well-run board, including the skills, insights and experiences that are offered by directors classified by many as affiliates. "Independence" is not easily defined. SP-INCREASE KEY COMMITTEE INDEPENDENCE ISSUE CODE 2501 Vote FOR a shareholder proposal to increase the independence of the board's key committees. Directors are charged with selecting and monitoring the corporation's management team. The board must be structured to encourage nominations of "independent" directors--individuals who are free of ties to management. The best way to accomplish this is to limit membership on the board's key committees to directors who have no ties to the company other than those relationships created as a result of their service on the board. SP-DEVELOP/REPORT ON HUMAN RIGHTS POLICY ISSUE CODE 3000 Vote AGAINST shareholder proposals that ask management to develop or report on their human rights policies. Asking management to develop or promote human rights policies could expose its business in certain countries to political retaliation and loss of market share or government contracts. The promotion of human rights overseas is the responsibility of the citizens and governments of those countries and of international diplomacy. We therefore believe it is inappropriate to ask management to develop or report on human rights policies. SP-REVIEW OPERATION'S IMPACT ON LOCAL GROUPS ISSUE CODE 3005 Vote AGAINST shareholder proposals that ask management to review or report on its operations' impact We believe that it is not management's responsibility, but government's, to review, resolve or adjudicate such conflicts. SP-BURMA-LIMIT OR END OPERATIONS ISSUE CODE 3030 Vote AGAINST shareholder proposals that ask management to cut financial and business ties to Burma's military regime, or to withdraw from or suspend operations in Burma. The resolution is unnecessary and inappropriate because the question of whether to operate in Burma is an ordinary business decision. Oversight by shareholders (beyond major financial issues that should be discussed in regular corporate reporting) is not appropriate. SP-BURMA-REVIEW OPERATIONS ISSUE CODE 3031 Vote AGAINST shareholder proposals that ask for a comprehensive report on operations in or contracting from Burma. The resolution is unnecessary and inappropriate because the question of whether to operate in Burma is an ordinary business decision. Oversight by shareholders (beyond major financial issues that should be discussed in regular corporate reporting) is not appropriate. . SP-CHINA NO USE OF FORCED LABOR ISSUE CODE 3040 299 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST a shareholder proposals that ask management to certify that company operations are free of forced labor. We are satisfied that the company maintains reasonable safeguards against developing relationships with organizations that use forced labor. In addition, the attempt to influence such labor practices could complicate commercial and political relationships that may be important to the company. Thus, the certification proposal is unnecessary. SP-CHINA ADOPT CODE OF CONDUCT ISSUE CODE 3041 Vote AGAINST shareholder proposals that ask management to implement and/or increase activity on each of the principles of the U.S. Business Principles for Human Rights of Workers in China or of similar codes. We believe adoption of the code would be inappropriate because U.S. companies should not engage in the internal political affairs of host countries to press for human rights. Moreover, management is in the best position to make decisions about pay and working conditions and environmental management. It is the responsibility of employees, local trade unions and the government--not shareholders--to negotiate and/or regulate appropriate levels of compensation and safety requirements. A fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take the steps necessary to comply with any new regulations. SP-REVIEW MILITARY CONTRACTING CRITERIA ISSUE CODE 3100 Vote AGAINST shareholder proposals that ask management to develop social, economic and ethical criteria that the company could use to determine the acceptability of military contracts and to govern the execution of the contracts. The resolution is unnecessary and inappropriate because management, in the course of pursuing its routine business interests, already considers, acts on, and releases information on many of the criteria that are of concern to the resolution's proponents. Requiring management to create and publicize a special set of guidelines to govern the way it arrives at, and implements, decisions regarding its Pentagon contracts would constitute an unnecessary duplication of effort, a distraction and a costly burden on the company. Moreover, the proponents of the resolution are motivated by political and ideological considerations, which are most appropriately addressed in forums other than corporate proxy statements and annual meetings. SP-REVIEW ECONOMIC CONVERSION ISSUE CODE 3110 Vote AGAINST shareholder proposals that ask management to create a plan for converting company facilities that are dependent on defense contracts toward production for commercial markets. Conversion planning and forays by defense contractors into commercial markets historically have resulted in unacceptably high rates of failure. The preferred solution to the displacements posed by downturns in defense spending is to allow market forces to run their course, and to allow management to respond to the changing market environment to the best of its ability, unencumbered by politically motivated requests for information or courses of action forced upon it by outside parties. SP-REVIEW SPACE WEAPONS ISSUE CODE 3120 300 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST shareholder proposals that ask management to report on the company's government contracts for the development of ballistic missile defense technologies and related space systems. Responsibility for deciding whether developing a certain military technology is essential for the nation's defense resides exclusively with the executive and legislative branches of the U.S. government. Defense contractors have an obligation to participate in programs deemed by our elected officials to be in the national interest. Asking a defense contractor to publicly address the issue of its participation in the development of ballistic missile defense technologies and related space systems would involve management in the inappropriate second-guessing of the national security decisions of the nation's elected representatives. Moreover, shareholders interested in knowing more about corporate participation in the development of ballistic missile defense technologies and related space systems can usually gain a clearer picture of any given company's activities by referring to existing, open sources of information. Preparing a special report on an area that represents a relatively small percentage of the company's total business activities would constitute an unnecessary and costly burden on management. SP-REVIEW FOREIGN MILLITARY SALES ISSUE CODE 3130 Vote AGAINST shareholder proposals that ask management to report on the company's foreign military sales or foreign offset activities. Responsibility for deciding whether to sell military equipment to allied nations (and under what terms) resides exclusively with the U.S. government. Asking a defense contractor to publicly address the issue of its foreign military sales would involve management in the inappropriate second-guessing of the foreign policy decisions of the nation's elected representatives. Similarly, we note that offsets have become a necessary component of successful bids, and that U.S. defense contractors must already report to the U.S. government on the terms of their offset agreements. Although they may have some short-term disadvantages, the long-term benefits can include developing business relationships that could lead to valuable technology upgrade contracts in the future. Responsibility for deciding whether to sell military equipment to allied nations--and under what terms--resides exclusively with the U.S. government, and a definitive U.S. policy is under review according to the terms of the Defense Offsets Disclosure Act of 1999. Provided that the company is in compliance with U.S. law, it should be allowed to pursue its opportunities in foreign markets as it sees fit. Management is in the best position to determine whether the company's foreign military contracts will yield a positive net income in the short run and maintain or improve its competitive position in the long run. It therefore should be able to go about its business unencumbered by politically motivated requests for information or courses of action forced upon it by outside parties. SP-LIMIT OR END NUCLEAR WEAPONS PRODUCTION ISSUE CODE 3150 Vote AGAINST shareholder proposals that ask management to limit or end nuclear weapons production. The company conducts its work on nuclear weapons under contract with the U.S. government and in support of the national security of the United States. We note that since 1991, the governments of the United States, the Soviet Union and its successor states have reached and implemented agreements to reduce their nuclear weapons stockpiles. We also note that the current Bush administration has openly stated that it favors a reduced nuclear arsenal, but that it may need to improve existing nuclear weapons and possibly develop new ones in order to 301 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- destroy an enemy's biological weapons, chemical weapons or weapons of mass destruction. We believe it is inappropriate for us, as shareholders, to second-guess the national security framework developed by our elected leaders, or management's decision to pursue and implement the contract in line with the company's business interests. SP-REVIEW NUCLEAR WEAPONS PRODUCTION ISSUE CODE 3151 Vote AGAINST shareholder proposals that ask management to review nuclear weapons production. The company conducts its work on nuclear weapons under contract with the U.S. government and in support of the national security of the United States. We note that since 1991, the governments of the United States, the Soviet Union and its successor states have reached and implemented agreements to reduce their nuclear weapons stockpiles. We also note that the current Bush administration has openly stated that it favors a reduced nuclear arsenal, but that it may need to improve existing nuclear weapons and possibly develop new ones in order to destroy an enemy's biological weapons, chemical weapons or weapons of mass destruction. We believe it is inappropriate for us, as shareholders, to second-guess the national security framework developed by our elected leaders, or management's decision to pursue and implement the contract in line with the company's business interests. SP-REVIEW CHARITABLE GIVING POLICY ISSUE CODE 3210 Vote AGAINST shareholder proposals that ask companies to review or disclose their charitable giving policy and programs. We believe that corporate giving programs can contribute to shareholder value and serve society. Companies tend to focus their charitable giving in the communities where they operate, and they receive good will and improved customer relations from making these contributions. However, we also believe that charitable contributions are routine business decisions that should be made by management, with oversight from the board of directors and auditors. Therefore, asking management to review or report on its charitable giving program constitutes unwarranted shareholder interference in management's routine business decisions, and we will not support such proposals. Management is best positioned to determine how much to give and to whom and how to structure its program. SP-LIMIT OR END CHARITABLE GIVING ISSUE CODE 3215 Vote AGAINST shareholder proposals to limit or end charitable giving. We believe that the company's giving program contributes to shareholder value and serves society. Companies tend to focus their charitable giving in the communities where they operate, and they receive good will and improved customer relations from making these contributions. Moreover, companies today are broadly expected to maintain charitable giving programs as part of their overall corporate responsibility. We therefore oppose proposals that ask companies to limit or end their charitable giving SP-REVIEW POLITICAL SPENDING ISSUE CODE 3220 Vote AGAINST shareholder proposals that ask companies to increase disclosure of political and PAC contributions and activities. 302 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- It is up to the board of directors and auditors to ensure oversight of political contributions and any company PACs, which are routine business matters. Moreover, adequate disclosure is required by current federal law, so requested reports (particularly on disclosure of PAC contributions) are unnecessary. Corporations are allowed to participate in the political process under certain rules and restrictions, and efforts to further restrict the corporate role or to require greater disclosure should focus on legislative change. SP-LIMIT OR END POLITICAL SPENDING ISSUE CODE 3221 Vote AGAINST shareholder proposals that ask companies to limit or end their political contributions. It is up to the board of directors and auditors to ensure oversight of political contributions, which are routine business matters. Corporations are allowed to participate in the political process under certain rules and restrictions, and efforts to further restrict the corporate role or to require greater disclosure should focus on legislative change. SPDISCLOSE PRIOR GOVERNMENT SERVICE ISSUE CODE 3222 Vote AGAINST shareholder proposals requesting the disclosure of company executives' prior government service. Management is in the best position to determine who is best qualified to meet the needs of the company. The proposals are unnecessary, because management follows the disclosure requirements mandated by the Securities and Exchange Commission in the proxy statement, the 10-K and other company reports. We also respect the right of privacy of the individuals who would be a part of this disclosure. SP-AFFIRM POLITICAL NONPARTISANSHIP ISSUE CODE 3224 Vote AGAINST shareholder proposals requesting affirmation of political nonpartisanship. These proposals are unnecessary. Federal law allows companies to sponsor and provide administrative support to political action committees, but prohibits direct donations or coerced employee participation. Thus, employees already have recourse to legal action should such coercion occur. SP-REVIEW TOBACCO MARKETING ISSUE CODE 3300 Vote AGAINST shareholder proposals that ask management to report on or change tobacco product marketing practices. The regulation of marketing practices is a responsibility of national and local governments as well as the 1998 Master Settlement Agreement, which mandates a series of marketing reforms. Outside of those defined areas of jurisdiction, tobacco companies have rightful discretion over how to market their products. Individual companies should not be asked to report or institute marketing policies that may be addressed through regulatory or legal action. Moreover, management must consider that any actions it takes unilaterally to restrict tobacco product marketing practices, independent of government action or irrespective of local custom, could harm its competitive position if other tobacco companies do not respond in kind. Finally, some may view changes in tobacco product marketing practices as an acknowledgement of past shortcomings, inviting new lawsuits against the companies. We therefore oppose resolutions asking management to report on or change tobacco product marketing practices. SP- REFRAIN FROM CHALLENGING GOVT LAWS 303 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST shareholder proposals that ask a company to refrain from challenging legislation, regulations and government studies related to tobacco. Management is in the best position to decide what actions are needed to ensure the profitable operation of our company. The manufacture, marketing and use of tobacco products is legal in the United States, and it is in our company's best interest to maintain a reputable corporate image in the public eye, and to continue to manufacture and market its products in a free-market economy. For this reason we support a company's right to challenge governmental regulation, legislation and studies related to tobacco. We oppose all proposals that ask a company to give up this right. SP-SEVER LINKS WITH TOBACCO INSUSTRY ISSUE CODE 3307 Vote AGAINST shareholder proposals to sever the company's links to the tobacco industry. Management is generally in the best position to make decisions about what investments and lines of business are suitable for the company. The manufacture, marketing and use of tobacco and related products are legally sanctioned throughout the world. Any further regulations or restrictions on tobacco business activity are rightly the responsibility of governments, not shareholders. Short of such regulation, reporting on or dissolving ties with the tobacco industry by the company is likely to result in unnecessary expenses and/or loss of revenues and profits, and therefore is not in the company's or the shareholders' interests. We therefore oppose all proposals that ask a company to report on or approve dissolution of links with the tobacco industry. SP-REVIEW OR REDUCE TOBACCO HARM TO HEALTH ISSUE CODE 3308 Vote AGAINST shareholder proposals to review or reduce tobacco harm to health IF the proposal concerns adoption of a no-smoking policy for a facility or place of business. The decision to smoke is a personal one and a right protected by law. Some scientific studies suggest smoking may damage the health of non-smokers as well as smokers. In 1993, the U.S. Environmental Protection Agency listed environmental tobacco smoke (ETS) as a class A carcinogen, on a par with asbestos, radon gas and other airborne toxins. However, this ruling has been overturned on court challenges by the tobacco industry. Though the trend over the last 10 years has been toward adoption of smoking restrictions in workplaces, we believe the decision to smoke is a personal one and should be protected wherever it is not regulated by law. Policies concerning workplace smoking should be based on particular circumstances of a given company, facility or group of employees, and should not be decided by shareholders. For these reasons, we oppose proposals that ask a company to adopt a no-smoking policy for a facility or place of business. SP-REVIEW OR PROMOTE ANIMAL WELFARE ISSUE CODE 3320 Vote AGAINST shareholder proposals that ask management to review or promote animal welfare. Government regulation is the most appropriate mechanism for ensuring that farm and laboratory animals are treated humanely, protecting human health. Product testing and maintaining a properly run chain of supply for food animals used for company products also are quintessentially ordinary business matters that are most properly the purview of management. Suggesting additional levels of management oversight for animal welfare at farms that produce animals used for company products would be burdensome and expensive. The company can have little control over conditions at its food suppliers, beyond insisting that legal standards for animal welfare and sanitation are met. 304 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Companies at times must use animal tests to ensure product safety; the science is simply not yet there to allow for the complete replacement of all animal tests. In addition, no animal tests may be more expensive, and federal law still encourages many animal safety tests, as do foreign governments. At any rate, companies generally use the lowest possible number of animals in product safety tests, exhausting all alternatives before turning to animals; animal use has fallen substantially as a result. Any requested reports might well be misused by animal protection groups to further attack the company on other related grounds. SP-REVIEW DRUG PRICING OR DISTRIBUTION ISSUE CODE 3340 Vote AGAINST shareholder proposals that ask companies to report or take action on pharmaceutical drug pricing or distribution. Pricing policy is a quintessential ordinary business issue that should not be brought to shareholders. Further, price restraint policy is a bad business idea because it would tie the hands of management, which needs to be as flexible as possible in hostile market conditions. Adopting a price restraint policy would threaten research and development investments, which are the lifeblood of the industry. It is also not in the best interest of fiduciaries to lobby for price restraint, which could lower profit margins for the company and its shareholders. Further, to adopt a price restraint policy unilaterally would put the company at a competitive disadvantage compared with other firms in the industry that do not have a similar policy. Reports on how the company prices its products are unnecessary because this is an ordinary business matter that is properly only the purview of management. A report also might reveal information that competitors could use to undercut the company, something we particularly cannot afford in today's difficult business climate. Information on pricing policy also might be misused by industry critics, who have a long record of twisting reports to suit their own political agenda; this is a risk we cannot afford given the U.S. health care debate, possible domestic price constraints imposed by government, and tricky questions of international markets. We therefore vote against all proposals asking for drug price restraint or disclosure. SP-OPPOSE EMBRYO/FETAL DESTRUCTION ISSUE CODE 3350 Vote AGAINST shareholder proposals that ask companies to take action on embryo or fetal destruction. This is an ordinary business decision. SP-REVIEW NUCLEAR FACILITY/WAST ISSUE CODE 3400 Vote AGAINST shareholder proposals that ask companies to review or report on nuclear facilities or nuclear waste. The nuclear power industry is closely regulated in the United States. The U.S. National Regulatory Commission, which has oversight responsibility for both commercial nuclear reactors and research reactors, annually conducts about 2,000 inspections of nuclear material licensees. These inspections cover areas such as training of personnel who use materials, radiation protection programs and security of nuclear materials. The NRC also requires reactor operators to have defenses against commando attack by several skilled attackers and to conduct background checks on employees. Moreover, the NRC posts quarterly updates, on its website, of its assessments of every nuclear plant operating in the United States. 305 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Given the regulatory oversight that already exists and detailed assessment reports that are already available to the public, we believe that proposals that ask companies to issue special reports or conduct special reviews for their shareholders on their nuclear operations are redundant and an unjustifiable drain on company resources SP-REVIEW ENERGY EFFICIENCY & RENEWABLES ISSUE CODE 3410 Vote AGAINST shareholder proposals that ask companies to reduce their reliance on nuclear and fossil fuels, to develop or use solar and wind power, or to promote energy efficiency, or to review or report these issues. We believe that decisions about the level or mix of energy to use or develop are business strategy matters best left to management to make in response to regulatory requirements, technological developments, and supply and demand. We note that U.S. government agencies such as the Nuclear Regulatory Commission and the Environmental Protection Agency already impose certain restrictions on energy producers to protect environmental and human health. Achieving energy efficiency gains or installing renewable technologies almost always entails added capital investments and expenses. If cost-effective ways of reducing energy use are available, one can assume the company already is exploiting such opportunities, because it is in its financial interest to do so. Similarly, if a company is not using or purchasing renewable energy, one can assume that no cost-effective sites or purchasing options are available. The costs of regulatory compliance, plus the price signals generated by energy supply and demand, generate sufficient information to management for it to determine which energy path is most cost-effective, making special reviews and reports to shareholders unnecessary. Therefore, we oppose all proposals that ask management to report on or increase energy efficiency or to report, use or develop wind and solar power. SP-ENDORSE CERES PRINCIPLES ISSUE CODE 3420 Vote FOR shareholder proposals that ask management to endorse the Ceres principles. Virtually all corporations affect the environment and have a responsibility to protect it. With costs of environmental compliance rising, companies that pay close attention to the environment are in a better position to control these costs and maintain their profitability. In addition, a strong environmental focus may lead to product innovations that fulfill growing demand for environmentally sound products and services. The Ceres principles, as a broad statement of environmental policy, encourage companies to take a pro-active approach in managing their environmental affairs. While the principles are generic, and meant to apply to all industries, companies may tailor them to suit their own circumstances. Major corporations such as BankAmerica, Coca-Cola, General Motors, Nike and Northeast Utilities have endorsed the Ceres principles yet maintain their own company-specific set of environmental principles as well. Some investors and consumers are skeptical of claims made by corporations about their commitments to protect the environment. A company that endorses the Ceres principles and completes the Ceres Report form may bolster its public standing - -- and thus its economic well-being -- by sharing information with its stakeholders: investors, employees, neighboring communities and consumers. An endorsing company may also find that interaction with environmental and investor groups that belong to Ceres constitutes a low-cost sounding board or consultant for its environmental affairs. One final economic consideration is that companies implementing environmental compliance monitoring and self-audit programs tend to fare better in enforcement proceedings than companies that do not, according to 306 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Environmental Protection Agency and Department of Justice guidelines. Companies that promptly report and fully remedy compliance violations are less likely to face criminal penalties (although civil actions remain an enforcement option). Endorsing the Ceres principles and completing the Ceres Report may augment such a disclosure process. Moreover, information disclosed to the public in the Ceres Report may bring corporations one step closer toward standardized, accountable measures of environmental performance, which will aid investors in making future investment decisions. SP-CONTROL GENERATION OF POLLUTANTS ISSUE CODE 3422 Vote AGAINST shareholder proposals that ask management to control emissions of pollutants. Emission of pollutants is an inevitable consequence of most manufacturing processes. The authority to restrict these emissions is properly vested in the government and should not be usurped by shareholders. Concerned shareholders have an opportunity to take part in the public rulemaking process, just as corporations do. It is not appropriate for them to use the shareholder resolution process as a platform for their ideas. Moreover, controlling emissions of pollutants usually entails added capital investments and expenses. If cost-effective ways of controlling emissions are available, one can assume that the company already is exploiting such opportunities, because it is in its financial interest to do so. If the company is not controlling emissions to the extent desired by the proponent, it may be because such controls would be costly to implement, provide little added benefit to the environment and/or adversely affect the company's competitive position. SP-REPORT ON ENVIORNMENTAL IMPACT OR PLANS ISSUE CODE 3423 Vote AGAINST shareholder proposals that ask companies to report on their environment impact or plans. Industry and government have responded to the public's desire for information on corporate environmental impacts and plans. The 1969 National Environmental Policy Act requires companies to issue environmental impact assessments for major domestic projects. Congress has also passed several important right-to-know laws to compel disclosure of Material Safety Data Sheets and other environment, health and safety information to employees and neighbors of manufacturing plants. In addition, many companies have set up Community Advisory Panels in communities where their plants are located. Now it is even commonplace for large industrial companies to issue stand-alone annual environmental reports outlining their progress on major environmental initiatives. Therefore, we believe shareholder requests for additional information on corporate environmental impacts or plans are already addressed in a number of government regulations and industry programs, making further communication and information exchanges duplicative and unnecessary. At the same time, a willingness to respond to such requests could lead to a costly and open-ended process with opponents of the company's operations and/or development plans. Their ultimate desire may be to generate negative publicity and introduce opposing views in the company's decision making process that results in costly and perhaps unwarranted changes in project development plans. As shareholders, it is not prudent to invite such risks by encouraging communication and disclosure beyond that required by law. SP-REPORT OR TAKE ACTION ON CLIMATE CHANGE ISSUE CODE 3425 307 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote AGAINST shareholder proposals that ask management to report or take action on climate change. We believe major uncertainties remain about climate change and the appropriateness of policies to address it. In 2001, President George W. Bush withdrew U.S. support of the Kyoto Protocol, an international treaty that sets targets and timetables to reduce greenhouse gas emissions in industrialized countries. Most U.S. companies support the President's move. We believe it is not appropriate or in shareholders' best interests to ask management to report or take action on climate change unilaterally. Moreover, estimating the potential costs, benefits and liabilities of addressing climate change is highly uncertain in light of the remaining scientific, political and legislative uncertainties. Concerned shareholders have other opportunities to take part in the public debate over global warming and should not use the shareholder resolution process as a platform for their views. Management is vested with responsibility to take action when it is in the financial interest of the company to do so -- and to report to shareholders when and if it determines that developments may materially affect the company. Accordingly, there is no need for shareholders to make this special request of management. REVIEW OR CURB BIOENGINEERING ISSUE CODE 3430 Vote AGAINST shareholder proposals that ask management to report on, label or restrict sales of bioengineered products. There are no substantive differences between foods made with ingredients from genetically modified plants and foods from plants that have been conventionally bred. The introduction of a single gene into a plant is a natural improvement on the plant crossbreeding that began with the domestication of wild grain. Scientists have been studying genetic modification for decades and the U.S. government reviews new genetically modified plants to ensure that they do not pose a threat to humans or the environment. The genetically modified plants currently being grown benefit the environment and farmers by increasing crop yields and reducing the amount of pesticides required. Rice that has been genetically modified to contain Vitamin A is already available in countries where a lack of that vitamin kills and blinds hundreds of thousands of children each year; in the future genetic modification may lead to plants that contain other nutrients, allowing people worldwide to lead longer and healthier lives. A significant backlash against genetic modification could impede this life-saving scientific progress. A substantial percentage of farmers prefer to grow genetically modified crops--in 2001, 63 percent of all soybeans and 24 percent of all corn grown in the United States were genetically modified varieties. Corn and soybeans are used for ingredients including cooking oils, sweeteners and starches, and are therefore present in the vast majority of foods. In many cases, however, the genetic modification affects only a plant's leaves, which are not eaten and are therefore absent from food products made from the plant. Many grain dealers mix modified and non-modified crops, so raw agricultural materials available in the open market are assumed to contain some genetically modified materials unless they have been certified otherwise. These certified agricultural products are more expensive, and quantities large enough for all of a major food manufacturer's products may be difficult to obtain. Labeling of foods made from genetically modified plants, as some resolutions request, would put companies at a serious competitive disadvantage. At present, the only foods including information on genetic modification on their labels are made by companies that do not use genetically modified plants. A label simply stating that a food was made from genetically modified plant materials might cause consumers to buy the product of a competitor that also used genetically modified plants, but did not say so on the package label. FDA's current labeling 308 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- requirements do not leave sufficient room on many packages to explain to consumers that genetically modified plants are safe to eat and may help the environment. SP-PRESERVE/REPORT ON NATURAL HABITAT ISSUE CODE 3440 Vote AGAINST shareholder proposals that ask companies to preserve natural habitat. We believe that decisions on preserving open space and wilderness areas are the purview of government policymakers at local, regional and national levels. Companies should be free to make investments and site facilities wherever such land use is not barred by laws or regulation. For shareholders to impose further restrictions on management's investment, exploration and development options could put the company at a competitive disadvantage and harm shareholder value. SP-REVIEW DEVELOPING COUNTRY DEBT ISSUE CODE 3500 Vote AGAINST shareholder proposals asking companies to review their developing country debt and lending criteria and to report to shareholders on their findings. We believe that risk management policies and procedures are best left to management's discretion and that it is inappropriate for shareholders to request that management report on its criteria for lending to developing and/or emerging market economies SP-REVIEW SOCIAL IMPACT OF FINANCIAL VENTURES ISSUE CODE 3503 Vote AGAINST shareholder proposals that request companies to assess the environmental, public health, human rights, labor rights or other socio-economic impacts of their credit decisions. We feel it is the responsibility of members of local civil society and governments--not shareholders--to determine what kinds of development projects and lending activities are appropriate. A fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take the steps necessary to comply with any new regulations; however, we do not think the shareholder resolution process should be used to raise issues that are more appropriately dealt with by government regulators. In addition, reports on the subject could distract management or attract unwanted scrutiny of the company's practices and only serve to support arguments that commercial banks should incorporate social or environmental criteria into decisions on loans. SP-REVIEW FAIR LENDING POLICY ISSUE CODE 3520 Vote AGAINST shareholder proposals requesting reports and/or reviews of plans and/or policies on fair lending practices. Beyond assessments based on creditworthiness, risk and other financial matters, we feel it is the responsibility of governments--not shareholders--to establish regulations on lending. Several laws already bar various discriminatory or predatory lending practices. These include the Community Reinvestment Act, which obligates banks to meet the credit and deposit needs of all the communities in which they are chartered, and the three major laws that protect consumers in the mortgage-lending arena: the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA) and the Home Ownership and Equity Protection Act (HOEPA). A fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take 309 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- the steps necessary to comply with any new regulations; however, we do not think the shareholder resolution process should be used to raise issues that are more appropriately dealt with by government regulators. SP-REVIEW PLANT CLOSINGS ISSUE CODE 3600 Vote AGAINST shareholder proposals that ask companies to establish committees to consider issues related to facilities closure and relocation of work. The proposed committee is an unnecessary distraction for board members, and inappropriately involves employees and outside community representatives in decisions about plant closings and relocation of work. These decisions should be made by management and the board based on their analysis of what is in the best interest of the company and its shareholders. With rapid technological and other changes leading to rapid changes in production and employment, it is important that management have a free hand to respond quickly to new opportunities. The proposed committee could hamper management in making appropriate investment decisions. SP-REPORT ON EEO ISSUE CODE 3610 Vote FOR shareholder proposals that ask management to report on the company's affirmative action policies and programs, including releasing its EEO-1 forms and providing statistical data on specific positions within the company. Equal employment opportunity is an appropriate area of concern for shareholders. Effective equal employment opportunity policy provides a company with two significant economic benefits: the avoidance of costly settlement or fines for violating federal discrimination laws and potentially increased earnings from a diverse work force able to compete in an increasingly global marketplace. An independent, overall assessment of a company's equal employment opportunity programs and policies is beneficial, yet obtaining information from the government about a company's work force can be time-consuming or costly. Moreover, such information is not available in all instances. If a company is not a federal contractor or has not been involved in litigation, its EEO-1 reports are not available from the government, and even if it is the Department of Labor also may decline to release its EEO-1 reports. Furthermore, the company itself is the only source of some information, such as a summary of its affirmative action programs and policies and data on specific job categories that are more narrowly defined than in the EEO-1 reports. Because of federal reporting requirements, the costs to companies of complying with shareholder resolutions requesting EEO reporting are relatively small. More disclosure from management to shareholders on affirmative action programs is generally desirable. We believe that reporting to shareholders on affirmative action keeps the issue high on a company's agenda, reaffirms a commitment to equal employment opportunity, and bolsters its standing with employees and the public and thus its economic well-being. Vote AGAINST shareholder proposals that ask management to report on the company's affirmative action policies and programs IF the company's EEO-1 reports and compliance record indicate it has an average or above-average employment record. While a company's willingness to disclose its EEO-1 reports is a significant factor, a company's record in the area of affirmative action is ultimately the criterion by which it should be judged. If the representation of women and minorities in a company's work force is below the industry average, particularly in upper-tier job categories, it 310 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- would be helpful for the company to provide supplemental or interpretive data explaining the company's particular challenges in meeting its affirmative action goals. Shareholders also would find a summary of the company's affirmative action program helpful in assessing management's efforts to recruit and retain women and minorities. Similar explanatory data would provide little benefit to shareholders of a company that has an average or above-average employment record, because its record suggests it already is addressing affirmative action issues in a satisfactory manner. SP-DROP SEXUAL ORIENTATION FROM EEO POLICY ISSU CODE 3614 Vote AGAINST shareholder proposals that ask management to drop sexual orientation from EEO policy. An explicit company ban on anti-gay discrimination is the most important step a company can take to deter anti-gay harassment and discrimination in its workplace. In the absence of a federal prohibition on discrimination based on sexual orientation, gay and lesbian employees are dependent on local laws and corporate policies for protection. Only 12 states and fewer than 150 cities and counties have adopted laws barring sexual orientation discrimination in private employment. Furthermore, being dependent on local laws can hamper an employee's ability to transfer within a company or to take advantage of other job opportunities. Equal employment for lesbians and gay men is a financial as well as a legal issue for corporations. Barring discrimination based on sexual orientation is essential to recruiting and retaining talented gay employees; nearly 60 percent of the companies in the Fortune 500 have such a policy in place. Companies that ignore equal protection also will open themselves to eventual litigation, as well as adverse publicity. The company would likely become the target of gay groups if it were to drop the reference to sexual orientation. Another rationale to vote against this proposal is that equal employment opportunity practices are ordinary business matters that are up to management to decide. SP-ADOPT SEXUAL ORIENTATION ANTI-BIAS POLICY ISSUE CODE 3615 Vote AGAINST shareholder proposals that ask management to adopt a sexual orientation non-discrimination policy. Equal employment opportunity practices are ordinary business matters that are up to management to decide. Moreover, nearly every company has a corporate-wide non-discrimination statement designed to prohibit harassment or discrimination on any basis in its workplace. Such policies are sufficient; references to specific groups of people should be limited to classes protected under federal legislation, such as racial minorities or women. Listing additional groups in non-discrimination policies would divert attention from the basic need for a workplace free of harassment and employment discrimination and would open the door for other groups to request specific mention as well. The company also could become the target of adverse publicity from conservative groups if it were to adopt such a policy. SP-REVIEW MEXICAN WORK FORCE CONDITIONS ISSUE CODE 3621 Vote AGAINST shareholder proposals that ask management to report on or review Mexican operations. Management is in the best position to make decisions about pay, working conditions and environmental protection procedures. It is the responsibility of employees, local trade unions and the government--not shareholders--to negotiate and/or regulate appropriate levels of compensation and safety requirements. Mexican law defines the 311 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- environmental precautions that companies must follow, and a fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take the steps necessary to comply with any new regulations; however, we do not think the shareholder resolution process should be used to raise environmental issues that are more appropriately dealt with by government regulators. A review or report to shareholders on Mexican operations also could hamper management's handling of those operations and produce unnecessary scrutiny of its activities. We therefore vote against resolutions asking companies to review or report on Mexican operations. SP-ADOPT STANDARDS FOR MEXICAN OPERATION ISSUE CODE 3622 Vote AGAINST shareholder proposals that ask management to adopt standards for Mexican operations. This is an ordinary business decision. SP-REVIEW OR IMPLEMENT MACBRIDE PRINCIPLES ISSUE CODE 3630 Vote AGAINST shareholder proposals that ask management to review or implement the MacBride principles. Matters relating to the conduct of corporate activity in a foreign country generally should be determined by the government of that country. Moreover, we are satisfied that Northern Ireland's fair employment laws provide reasonable safeguards against discrimination, and there is no reason to ask the company to implement the MacBride principles. Management should not be hamstrung in implementing policy in this sensitive area by broad-stroke requirements placed on management by shareholders. The practical meaning of the MacBride principles is not clear, and we have reservations about the wording of some of the principles. Thus, the MacBride code at best is unnecessary and at worst is counterproductive. SP-URGE MACBRIDE ON CONTRACTOR/FRANCHISEE ISSUE CODE 3632 Vote AGAINST shareholder proposals that ask companies to encourage their contractors and franchisees to implement the MacBride principles. We believe that companies whose presence in Northern Ireland is through franchises or subcontractors have limited control over the fair employment policies and practices of these businesses. Attempts to influence those policies could complicate commercial relationships that may be important to the company. Thus, we do not believe the company should try to get those with whom it does business in Northern Ireland to implement the MacBride principles. This position is reinforced by our view that matters relating to the conduct of corporate activity in a foreign country generally should be determined by the government of that country. Moreover, we are satisfied that Northern Ireland's fair employment law provides reasonable safeguards against discrimination. Contractors and franchisees should not be hamstrung in implementing policy in this sensitive area by broad-stroke principles urged on them by the company's shareholders. SP-REVIEW GLOBAL LABOR PRACTICES ISSUE CODE 3680 Vote AGAINST shareholder proposals that ask management to report on or review their global labor practices or those of their contractors. Management is in the best position to make decisions about pay and working conditions and environmental management. It is the responsibility of employees, local trade unions and governments--not shareholders--to 312 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- negotiate and/or regulate appropriate levels of compensation and safety requirements. A fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take the steps necessary to comply with any new regulations; however, we do not think the shareholder resolution process should be used to raise issues that are more appropriately dealt with by government regulators. A review or report to shareholders on company and contractor labor practices also could hamper management's handling of those operations and produce unnecessary scrutiny of its activities. We therefore vote against resolutions asking companies to review or report on labor standards. SP-MONITOR/ADOPT ILO CONVENTIONS ISSUE CODE 3681 Vote AGAINST shareholder proposals that ask management to adopt, implement or enforce a global workplace code of conduct based on the International Labor Organization's (ILO) core labor conventions. Management is in the best position to make decisions about workplace rules. It is the responsibility of employees, local trade unions and governments--not shareholders--to negotiate and/or regulate appropriate levels of compensation and safety requirements. A fundamental tenet of business is to obey local laws. Should these laws change, we believe management will take the steps necessary to comply with any new regulations; however, we do not think the shareholder resolution process should be used to raise issues that are more appropriately dealt with by government regulators. Moreover, a code based on the ILO's core conventions may conflict with local government laws and therefore pose obstacles for enforcement, such as guaranteeing freedom of association for workers at supplier or company-owned facilities located in China. In addition, such a policy might undermine business models based on flexible supply chains, since enforcing a code would require time-consuming inspections and might limit the number of suppliers available at any given time to produce products, causing profits to drop and shareholder returns to diminish. We therefore vote against resolutions asking companies to enforce core ILO conventions. SP-REPORT ON SUSTAINABILITY ISSUE CODE 3700 Always vote AGAINST shareholder proposals requesting reports on sustainability. Companies operating in the United States are already required to report extensively on financial, materially significant environmental matters, diversity policy and other issues that relate to sustainability. With regard to environmental reporting, the 1969 National Environmental Policy Act requires companies to issue environmental impact assessments for major domestic projects. Congress has also passed several important right-to-know laws to compel disclosure of Material Safety Data Sheets and other environment, health and safety information to employees and neighbors of manufacturing plants. Major U.S. employers are also required to report to the government on their workforce, by race and sex, in each of nine major job categories, and, if they are federal contractors, to issue affirmative action plans. There are many more example of U.S. corporate reporting requirements on social and environmental issues. Therefore, we believe shareholder requests for additional information on sustainability issues are duplicative and unnecessary. Further disclosure is not necessarily beneficial to a company, largely because it would not be able to completely control the process by which its information would be evaluated. Inappropriate comparisons with other companies or across industries could lead to adverse publicity, unwarranted litigation or shareholder divestment. Preparing explanatory data to aid interpretation of the information would be time-consuming. As 313 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholders, it is not prudent to invite such risks by encouraging communication and disclosure beyond that required by law. 314 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- LEGG MASON CAPITAL MANAGEMENT, INC. Proxy Principles and Procedures OVERVIEW Legg Mason Capital Management, Inc. (LMCM) has implemented the following principles and procedures for voting proxies on behalf of advisory clients. These principles and procedures are reasonably designed to ensure LMCM exercises its voting responsibilities to serve the best interests of its clients and in compliance with applicable laws and regulations. LMCM assumes responsibility and authority for voting proxies for all clients, unless such responsibility and authority has been expressly retained by the client or delegated by the client to others. For each proxy vote LMCM takes into consideration its duty to its clients and all other relevant facts available to LMCM at the time of the vote. Therefore, while these guidelines provide a framework for voting, votes are ultimately cast on a case-by-case basis. LMCM employs the same proxy principles and procedures for all funds for which it has voting responsibility. PRINCIPLES Proxy voting is a valuable right of company shareholders. Through the voting mechanism, shareholders are able to protect and promote their interests by communicating views directly to the company's Board of Directors (Board), as well as exercising their right to grant or withhold approval for actions proposed by the Board or company management. LMCM believes the interests of shareholders are best served by the following principles when considering proxy proposals: Preserve and expand the power of shareholders in areas of corporate governance - -- Equity shareholders are owners of the business -- company boards and management teams are ultimately accountable to them. LMCM supports policies, plans and structures that promote accountability of the Board and management to owners, and align the interests of the Board and management with owners. Examples include: annual election of all Board members, cumulative voting, and incentive plans that are contingent on delivering value to shareholders. LMCM opposes proposals that reduce accountability or misalign interests, including but not limited to classified boards, poison pills, and incentives that are not linked to owner returns. Allow responsible management teams to run the business -- LMCM supports policies, plans and structures that give management teams appropriate latitude to run the business in the way that is most likely to maximize value for owners. Conversely, LMCM opposes proposals that limit management's ability to do this. LMCM generally opposes proposals that seek to place restrictions on management in order to promote political, religious or social agendas. Please see LMCM's proxy voting guidelines, which are attached as Schedule A, for more details. PROCEDURES Oversight LMCM's Chief Investment Officer (CIO) has full authority to determine LMCM's proxy voting principles and vote proxies on behalf of LMCM's clients. The Chief Investment Officer has delegated oversight and implementation of the proxy voting process, including the principles and procedures that govern it, to one or more Proxy Officers and Compliance Officers. No less than annually, LMCM will review existing principles and procedures in light of LMCM's duties as well as applicable laws and regulations to determine if any changes are necessary. Limitations LMCM recognizes proxy voting as a valuable right of company shareholders. Generally speaking, LMCM will vote all proxies it receives. However, LMCM may refrain from voting in certain circumstances. For instance, LMCM generally intends to refrain from voting a proxy if the company's shares are no longer held by LMCM's clients at the time of the meeting. Additionally, LMCM may refrain from voting a proxy if LMCM concludes the potential impact on shareholders' interests is insignificant while the cost associated with analyzing and voting the proxy may be significant. Proxy Administration LMCM instructs each client custodian to forward proxy materials to LMCM's Proxy Administrator. New client custodians are notified at account inception of their responsibility to deliver proxy materials to LMCM. LMCM uses Institutional Shareholder Services (ISS) to electronically receive and vote proxies, as well as to maintain proxy voting receipts and records. 315 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Upon receipt of proxy materials: Compliance Review A Compliance Officer reviews the proxy issues and identifies any potential conflicts of interests between LMCM, or its employees, and LMCM's clients. LMCM recognizes that it has a duty to vote proxies in the best interests of its clients, even if such votes may result in a loss of business or economic benefit to LMCM or its affiliates. 1. Identifying Potential Conflicts. In identifying potential conflicts of interest the Compliance Officer will review the following issues: (a) Whether there are any business or personal relationships between LMCM, or an employee of LMCM, and the officers, directors or shareholder proposal proponents of a company whose securities are held in client accounts that may create an incentive for LMCM to vote in a manner that is not consistent with the best interests of its clients; (b) Whether LMCM has any other economic incentive to vote in a manner that is not consistent with the best interests of its clients; and (c) Whether the Proxy Officer voting the shares is aware of any business or personal relationship, or other economic incentive, that has the potential to influence the manner in which the Proxy Officer votes the shares. 2. Assessing Materiality. A potential conflict will be deemed to be material if the Compliance Officer determines in the exercise of reasonable judgment that the conflict is likely to have an impact on the manner in which the subject shares are voted. If the Compliance Officer determines that the potential conflict is not material, the proxy issue will be forwarded to the Proxy Officer for voting. If the Compliance Officer determines that the potential conflict may be material, the following steps will be taken: (a) The Compliance Officer will consult with representatives of LMCM's senior management to make a final determination of materiality. The Compliance Officer will maintain a record of this determination. (b) After the determination is made, the following procedures will apply: (i)If the final determination is that the potential conflict is not material, the proxy issue will be forwarded to the Proxy Officer for voting. (ii) If the final determination is that the potential conflict is material, LMCM will adhere to the following procedures: A. If LMCM's Proxy Voting Guidelines (Guidelines), a copy of which is included as Schedule A, definitively address the issues presented for vote, LMCM will vote according to the Guidelines. B. If the issues presented for vote are not definitively addressed in the Guidelines, LMCM will either (x) follow the vote recommendation of an independent voting delegate, or (y) disclose the conflict to clients and obtain their consent to vote. Proxy Officer Duties The Proxy Officer reviews proxies and evaluates matters for vote in light of LMCM's principles and procedures and the Guidelines. The Proxy Officer may seek additional information from LMCM's investment personnel, company management, independent research services, or other sources to determine the best interests of shareholders. Additionally, the Proxy Officer may consult with LMCM's Chief Investment Officer for guidance on proxy issues. LMCM will maintain all documents that have a material impact on the basis for the vote. The Proxy Officer will return all signed, voted forms to the Proxy Administrator. Proxy Administrator Duties The Proxy Administrator: 1. Provides custodians with instructions to forward proxies to LMCM for all clients for whom LMCM is responsible for voting proxies; 2. Reconciles the number of shares indicated on the proxy ballot with LMCM's internal data on shares held as of the record date and notifies the custodian of any discrepancies or missed proxies; 3. Will use best efforts to obtain missing proxies from custodians; 316 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4. Informs the Compliance Officer and Proxy Officer if the company's shares are no longer held by Firm clients as of the meeting date; 5. Ensures that the Compliance Officer and Proxy Officer are aware of the timeline to vote a proxy and uses best efforts to ensure that votes are cast in a timely manner; 6. Follows instructions from the Proxy Officer or Compliance Officer as to how to vote proxy issues, and casts such votes via ISS software, online or via facsimile; and 7. Obtains evidence of receipt and maintains records of all proxies voted. Record Keeping The following documents are maintained onsite for two years and in an easily accessible place for another three years: 1. A copy of all policies and procedures maintained by LMCM during the applicable period relating to proxy voting; 2. A copy of each proxy statement received regarding client securities (LMCM intends to rely on the availability of such documents through the Securities and Exchange Commission's EDGAR database); 3. A record of each vote cast by LMCM on behalf of a client (LMCM has an agreement with ISS whereby ISS has agreed to maintain these records and make them available to LMCM promptly upon request); 4. A copy of each document created by LMCM that was material to making a decision how to vote proxies or that memorializes the basis for such decision. 5. A copy of each written client request for information on how LMCM voted proxies on behalf of such client, and a copy of any written response provided by LMCM to any (written or oral) request for information on how LMCM voted proxies on behalf of such client. Schedule A Proxy Voting Guidelines LMCM maintains these proxy-voting guidelines, which set forth the manner in which LMCM generally votes on issues that are routinely presented. Please note that for each proxy vote LMCM takes into consideration its duty to its clients, the specific circumstances of the vote and all other relevant facts available at the time of the vote. While these guidelines provide the framework for voting proxies, ultimately proxy votes are cast on a case-by-case basis. Therefore actual votes for any particular proxy issue may differ from the guidelines shown below. Four principal areas of interest to shareholders: 1) Obligations of the Board of Directors 2) Compensation of management and the Board of Directors 3) Take-over protections 4) Shareholders' rights
--------------------------------------------------------------------------------------------------------------- Proxy Issue LMCM Guideline --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- BOARD OF DIRECTORS --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Independence of Boards of Directors: majority of unrelated directors, For independent of management --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Nominating Process: independent nominating committee seeking For qualified candidates, continually assessing directors and proposing new nominees --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Size and Effectiveness of Boards of Directors: Boards must be no For larger than 15 members --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Cumulative Voting for Directors For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Staggered Boards Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Separation of Board and Management Roles (CEO/Chairman) Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Compensation Review Process: compensation committee comprised of For outside, unrelated directors to ensure shareholder value while rewarding good performance --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Director Liability & Indemnification: support limitation of liability For and provide indemnification --------------------------------------------------------------------------------------------------------------- 317 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Audit Process For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Board Committee Structure: audit, compensation, and nominating and/or For governance committee consisting entirely of independent directors --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Monetary Arrangements for Directors: outside of normal board activities amts should be approved by a board of independent directors and reported in proxy For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Fixed Retirement Policy for Directors Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Ownership Requirement: all Directors have direct and material cash For investment in common shares of Company --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Proposals on Board Structure: (lead director, shareholder advisory For committees, requirement that candidates be nominated by shareholders, attendance at meetings) --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Annual Review of Board/CEO by Board For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Periodic Executive Sessions Without Mgmt (including CEO) For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Votes for Specific Directors Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- MANAGEMENT AND DIRECTOR COMPENSATION --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Stock Option and Incentive Compensation Plans: Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Form of Vehicle: grants of stock options, stock appreciation rights, Case-by-Case phantom shares and restricted stock --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Price Against plans whose underlying securities are to be issued at less than 100% of the current market value --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Re-pricing: plans that allow the Board of Directors to lower the Against exercise price of options already granted if the stock price falls or under-performs the market --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Expiry: plan whose options have a life of more than ten years Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Expiry: "evergreen" stock option plans Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Dilution: Case-by-Case - taking into account value creation, commitment to shareholder-friendly policies, etc. --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Vesting: stock option plans that are 100% vested when granted Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Performance Vesting: link granting of options, or vesting of options For previously granted, to specific performance targets --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Concentration: authorization to allocate 20% or more of the available options to any one individual in any one year Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Director Eligibility: stock option plans for directors if terms and conditions are clearly defined and reasonable Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Change in Control: stock option plans with change in control Against provisions that allow option holders to receive more for their options than shareholders would receive for their shares --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Change in Control: change in control arrangements developed during a Against take-over fight specifically to entrench or benefit management --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Change in Control: granting options or bonuses to outside directors Against in event of a change in control --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Board Discretion: plans to give Board broad discretion in setting Against terms and conditions of programs --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Employee Loans: Proposals authorizing loans to employees to pay for Against stock or options --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Director Compensation: % of directors' compensation in form of common For shares --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Golden Parachutes Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Expense Stock Options For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Severance Packages: must receive shareholder approval For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Lack of Disclosure about Provisions of Stock-based Plans Against --------------------------------------------------------------------------------------------------------------- 318 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Reload Options Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Plan Limited to a Small Number of Senior Employees Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Employee Stock Purchase Plans Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- TAKEOVER PROTECTIONS --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Shareholder Rights Plans: plans that go beyond ensuring the equal Against treatment of shareholders in the event of a bid and allowing the corp. enough time to consider alternatives to a bid --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Going Private Transaction, Leveraged Buyouts and Other Purchase Case-by-Case Transactions --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Lock-up Arrangements: "hard" lock-up arrangements that serve to Against prevent competing bids in a takeover situation --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Crown Jewel Defenses Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Payment of Greenmail Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- "Continuing Director" or "Deferred Redemption" Provisions: provisions Against that seek to limit the discretion of a future board to redeem the plan --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Change Corporation's Domicile: if reason for re-incorporation is to Against take advantage of protective statutes (anti-takeover) --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Poison Pills: receive shareholder ratification For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Redemption/Ratification of Poison Pill For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' RIGHTS --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Confidential Voting by Shareholders For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Dual-Class Share Structures Against --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Linked Proposals: with the objective of making one element of a Against proposal more acceptable --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Blank Check Preferred Shares: authorization of, or an increase in, Against blank check preferred shares --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Supermajority Approval of Business Transactions: management seeks to Against increase the number of votes required on an issue above two-thirds of the outstanding shares --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Increase in Authorized Shares: provided the amount requested is For necessary for sound business reasons --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Shareholder Proposals Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Stakeholder Proposals Case-by-Case --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Issuance of Previously Authorized Shares with Voting Rights to be Against Determined by the Board without Prior Specific Shareholder Approval --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- "Fair Price" Provisions: Measures to limit ability to buy back shares For from particular shareholder at higher-than-market prices --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Preemptive Rights For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Actions altering Board/Shareholder Relationship Require Prior For Shareholder Approval (including "anti-takeover" measures) --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Allow Shareholder action by written consent For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Allow Shareholders to call Special Meetings For --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Social and Environmental Issues As recommended by Company Management --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Reimbursing Proxy Solicitation Expenses Case-by-Case ---------------------------------------------------------------------------------------------------------------
319 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NEUBERGER BERMAN MANAGEMENT INC. Summary of Neuberger Berman's Proxy Voting Policy Neuberger Berman has implemented written Proxy Voting Policies and Procedures (Proxy Voting Policy) that are designed to reasonably ensure that Neuberger Berman votes proxies prudently and in the best interest of its advisory clients for whom Neuberger Berman has voting authority. The Proxy Voting Policy also describes how Neuberger Berman addresses any conflicts that may arise between its interests and those of its clients with respect to proxy voting. Neuberger Berman's Proxy Committee is responsible for developing, authorizing, implementing and updating the Proxy Voting Policy, overseeing the proxy voting process, and engaging and overseeing any independent third-party vendors as voting delegate to review, monitor and/or vote proxies. In order to apply the Proxy Voting Policy noted above in a timely and consistent manner, Neuberger Berman utilizes Glass, Lewis & Co. LLC (Glass Lewis) to vote proxies in accordance with Neuberger Berman's voting guidelines. For socially responsive clients, Neuberger Berman has adopted socially responsive voting guidelines. For non-socially responsive clients, Neuberger Berman's guidelines adopt the voting recommendations of Glass Lewis. Neuberger Berman retains final authority and fiduciary responsibility for proxy voting. Neuberger Berman believes that this process is reasonably designed to address material conflicts of interest that may arise between Neuberger Berman and a client as to how proxies are voted. In the event that an investment professional at Neuberger Berman believes that it is in the best interest of a client or clients to vote proxies in a manner inconsistent with Neuberger Berman's proxy voting guidelines or in a manner inconsistent with Glass Lewis recommendations, the Proxy Committee will review information submitted by the investment professional to determine that there is no material conflict of interest between Neuberger Berman and the client with respect to the voting of the proxy in that manner. If the Proxy Committee determines that the voting of a proxy as recommended by the investment professional presents a material conflict of interest between Neuberger Berman and the client or clients with respect to the voting of the proxy, the Proxy Committee shall: (i) take no further action, in which case Glass Lewis shall vote such proxy in accordance with the proxy voting guidelines or as Glass Lewis recommends; (ii) disclose such conflict to the client or clients and obtain written direction from the client as to how to vote the proxy; (iii) suggest that the client or clients engage another party to determine how to vote the proxy; or (iv) engage another independent third party to determine how to vote the proxy. 320 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- PROXY PAPER POLICY GUIDELINES AN OVERVIEW OF THE GLASS LEWIS APPROACH TO PROXY ADVICE 2006 PROXY SEASON For more information about Glass Lewis' policies or our approach to proxy analysis, please visit www.glasslewis.com or contact our Vice President of Proxy Research and Operations, Robert McCormick at (415) 678-4228. 321 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- THE GLASS LEWIS APPROACH Glass Lewis views proxy voting as a mechanism for shareholders to protect and promote shareholder wealth. Our proxy voting advice has a decidedly financial bent. Our recommendations are designed to call institutional investors' attention to the economic consequences of each issue on the ballot and to their potential effect on shareholder value. In the pages that follow, we detail policy guidelines that inform every voting recommendation we make. This document is not, however, a substitute for careful application of these broad principles to the specific situations facing the companies whose proxies we analyze. We do not blindly adhere to any list of governance or other criteria in crafting our advice. We believe that a "one-size-fits-all" approach to governance or proxy voting will not lead to the sort of value creation that institutional investors seek. That is why we use a contextual approach; one that factors in the reality of the company being analyzed. Our team consists of professionals with an array of skills and experience, including accountants, bankers, Wall Street analysts, lawyers, financial and economic experts and policy professionals. 322 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- POLICY OVERVIEW I. A BOARD OF DIRECTORS THAT SERVES THE INTERESTS OF SHAREHOLDERS Election of Directors Glass Lewis looks for talented boards with a proven record of protecting shareholders and delivering value over the medium- and long-term. We believe that boards working to protect and enhance the best interests of shareholders typically possess the following three characteristics: (1) independence; (2) a record of positive performance; and (3) members with a breadth and depth of experience. Independence We look at each individual on the board and examine his or her relationships with the company, the company's executives and with other board members. The purpose of this inquiry is to determine whether pre-existing personal, familial or financial relationships (apart from compensation as a director) are likely to impact the decisions of that board member. We believe the existence of personal, familial or financial relationships makes it difficult for a board member to put the interests of the shareholders whom he/she is elected to serve above his/her own interests or those of the related party. We also believe that a director who owns more than 20% of a company can exert disproportionate influence on the board and, in particular, the audit committee. To that end, we classify directors in three categories based on the type of relationships they have with the company: 1. Independent Director - A director is independent if he/she has no material1 financial, familial2 or other current relationships with the company,3 its executives or other board members except for service on the board and standard fees paid for that service. Relationships that have existed within three to five (3-5) years4 prior to the inquiry are usually considered to be "current" for purposes of this test. - -------------------------------------------------------------------------------- 1 "Material" as used herein means a relationship where the dollar value exceeds: (i) $25,000 (or where no amount is disclosed) for directors who personally receive compensation for a service they have agreed to perform for the company, outside of their service as a director, including professional or other services; (ii) $50,000 (or where no amount is disclosed) for those directors employed by a professional services firm such as a law firm, investment bank or consulting firm where the firm is paid for services but not the individual directly. This dollar limit would also apply to charitable contributions to schools where a board member is a professor; or charities where a board member serves on the board or is an executive; and any aircraft and real estate dealings between the company and the director or the director's firm; (iii) 1% of either company's consolidated gross revenue for other business relationships (e.g., where the director is an executive officer of a company that provides or receives services or products to or from the company). 2 "Familial" as used herein includes a person's spouse, parents, children, siblings, grandparents, uncles, aunts, cousins, nieces and nephews, including in-laws, and anyone (other than domestic employees) who shares such person's home. 3 "Company" includes any parent or subsidiary in a group with the company or any entity that merged with, was acquired by, or acquired the company. 323 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4 We note that NASDAQ originally proposed a five-year look back period but both it and the NYSE ultimately settled on a three-year look back prior to finalizing their rules. A five-year standard is more appropriate, in our view, because we believe that the unwinding of conflicting relationships between former 324 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. Affiliated Director - A director is affiliated if he/she has a material financial, familial5 or other relationship with the company or its executives, but is not an employee of the company.6 This includes directors whose employers have a material financial relationship with the company 7. In addition, we view a director who owns or controls 20% or more of the company's voting stock as an affiliate.8 3. Inside Director - An inside director is one who simultaneously serves as a director and as an employee of the company. This category may include a chairman of the board who acts as an employee of the company or is paid as an employee of the company. In our view a director who derives more than 50% of total compensation from a company as a result of affiliated transactions with his/her employer faces a conflict in making decisions between those that are in the best interests of the company versus those in his/her own best interests. Therefore, we will withhold for such a director. Voting Recommendations on the Basis of Independence: Glass Lewis believes that a board will most effectively perform the oversight necessary to protect the interests of shareholders if it is independent. In general, we feel that at least two-thirds of the members of the board should consist of independent directors. In the event that more than one third of the members are affiliated or inside directors, we typically9 recommend withholding votes from some of the inside and/or affiliated directors in order to satisfy the two-thirds threshold we believe is appropriate. We are firmly committed to the belief that only independent directors should serve on a company's audit, compensation, nominating and governance committees.10 We typically - ------------------------------------------------------------------------------- management and board members is more likely to be complete and final after five years. However, Glass Lewis does not apply the five-year look back period to directors who have previously served as executives of the company on an interim basis for less than one year. We consider a director who is currently serving in an interim management position as an insider, a director who served in such a capacity for less than one year and is no longer serving in that capacity as independent, and a director who served in such a capacity for over one year but is no longer serving in that capacity as an affiliate for the following five years. Glass Lewis applies a three-year look back period to all directors who have an affiliation with the company other than former employment, for which we apply a five-year look back. 5 A director is considered an affiliate if he/she has a family member who is employed by the Company and receives compensation of $100,000 or more per year or the compensation is not disclosed. 6 In every instance in which a company classifies one of its non-employee directors as non-independent, that director will be classified as an affiliate by Glass Lewis. 7 We allow a five-year grace period for former executives of the company or merged companies who have consulting agreements with the surviving company. (We do not automatically withhold from directors in such cases for the first five years). If the consulting agreement persists after this five-year grace period, we apply the materiality thresholds outlined in footnote 1. 8 We view 20% shareholders as affiliates because they typically have access to and involvement with the management of a company that is fundamentally different from that of ordinary shareholders. In addition, and perhaps more importantly, 20% holders may regularly have interests that diverge from those of ordinary holders, for a variety of reasons, including, but not limited to, the liquidity (or lack thereof) of their holdings, personal tax issues, etc. 9 In the case of a staggered board, if the affiliates or insiders that we believe should not be on the board are not standing for election, we will express our concern regarding those directors, but we will not recommend withholding from the affiliates or insiders who are up for election just to achieve two-thirds independence. 10 We will recommend withholding votes from any member of the audit committee who owns 20% or more of the company's stock, and we believe that there should be a maximum of one director (or no directors if 325 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- recommend that shareholders withhold their votes for any affiliated or inside director seeking appointment to an audit, compensation, nominating or governance committee or who has served in that capacity in the past year. In addition, we apply heightened scrutiny to avowedly "independent" chairmen and lead directors. We believe that they should be unquestionably independent or the company should not tout them as such. Performance The purpose of Glass Lewis' proxy research and advice is to facilitate shareholder voting in favor of governance structures that will drive performance and create shareholder value. The most crucial test of a board's commitment to the company and to its shareholders lies in the actions of the board and its members. We look at the performance of these individuals in their capacity as board members and executives of the company and in their roles at other companies where they may have served. Voting Recommendations on the Basis of Performance: We disfavor directors who have a track record of poor performance in fulfilling their responsibilities to shareholders at any company where they have held a board or executive position. We typically recommend withholding votes from: Board Members Generally: 1. A director who fails to attend a minimum of 75% of the board meetings or 75% of the total of applicable committee meetings and board meetings.11 2. A director who belatedly filed a significant form(s) 4 or 5, or has a pattern of late filings if the late filing was the fault of the director. (We look at these forms on a case-by-case basis.) 3. A director who is also the CEO of a company where a serious restatement has occurred after the CEO certified the pre-restatement financial statements. 4. A director who is also the CEO of a company where a serious and material restatement has occurred after the CEO had previously certified the pre-restatement financial statements. 5. A director who has received two withhold recommendations from Glass Lewis for identical reasons within the prior year at other companies (the same situation must also apply at the company being analyzed). 6. All directors who served on the board if, for the last three years, the company's performance has been in the bottom quartile of the sector and the directors have not taken reasonable steps to address the poor performance. 7. An insider director who derives more than 50% of his/her income from affiliated transactions with the company. - -------------------------------------------------------------------------------- the committee is comprised of less than three directors) who owns 20% or more of the company's stock on the compensation, nominating and governance committees. 11 However, where a board member has served for less than one full year, we will not typically withhold for failure to attend 75% of meetings. Rather we will note the failure with a recommendation to track this issue going forward. We will also refrain from recommending to withhold from directors when the proxy discloses that the director missed the meetings due to serious illness or other extenuating circumstances. 326 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Audit committees play an integral role in overseeing the financial reporting process. "Audit Committee Effectiveness - What Works Best" states: "Vibrant and stable capital markets depend on, among other things, reliable, transparent, and objective financial information to support an efficient and effective capital market process. The vital oversight role audit committees play in the process of producing financial information has never been more important."12 When assessing the performance of an audit committee, we are cognizant that an audit committee does not prepare financial statements, is not the party responsible for making the key judgments and assumptions that affect the financial statements, and does not perform an audit of the numbers or disclosures provided to investors. Rather, the role of audit committee member is one of monitoring and overseeing the process and procedures performed by management as well as internal and external auditors. Perhaps the 1999 Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees stated it best: "A proper and well-functioning system exists, therefore, when the three main groups responsible for financial reporting - the full board including the audit committee, financial management including the internal auditors, and the outside auditors - form a `three legged stool' that supports responsible financial disclosure and active participatory oversight. However, in the view of the Committee, the audit commit must be `first among equals' in this process, since the audit committee is an extension of the full board and hence the ultimate monitor of the process." For an audit committee to function effectively on behalf of investors, it must include members with sufficient knowledge to carry out their responsibilities in a diligent fashion. In their recommendations related to Audit and Accounting, members of the Conference Board Commission on Public Trust and Private Enterprise stated: "Members of the audit committee must be independent and have both knowledge and experience in auditing financial matters."13 It is important that an audit committee be assessed against the actual decisions that they have made with respect to their oversight and monitoring role. The quality and integrity of the financial statements and earnings reports, the completeness of disclosures necessary for investors to make informed decisions, the effectiveness of the internal controls should provide reasonable assurance the financial statements are materially free from errors, and the independence of the external auditors and results of their work all provide useful information by which to assess the audit committee. When assessing the decisions and actions of the audit committee, we typically defer to their judgment and would vote in their favor unless audit committee members or the committee:14 - -------------------------------------------------------------------------------- 12 Audit Committee Effectiveness - What Works Best. PricewaterhouseCoopers. The Institute of Internal Auditors Research Foundation. 2005. 13 Commission on Public Trust and Private Enterprise. The Conference Board. 2003. 327 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Audit committee members:15 1. The audit committee chair if the committee does not have a financial expert or has a financial expert who does not have a demonstrable financial background sufficient to understand the financial issues unique to public companies. 2. The audit committee chair if the audit committee did not meet at least 4 times during the year. 3. The audit committee chair if the committee has less than three members. 4. All audit committee members who sit on more than three public company audit committees, unless the audit committee member is a retired CPA, CFO or controller, in which case the limit shall be four committees with availability time and capacity. 5. All members of an audit committee who are up for election and who served on the committee at the time of the audit, if audit and audit-related fees total one-third or less of the total fees billed by the auditor. 6. All members of an audit committee where non-audit fees include fees for tax services for senior executives of the company or involve services related to tax avoidance or tax shelter schemes. 7. All members of an audit committee that reappointed an auditor that we no longer consider to be independent for reasons unrelated to fee proportions. 8. All members of an audit committee when audit fees are excessively low, especially when compared with other companies in the same industry. 9. The audit committee chair16 if the committee failed to put auditor ratification on the ballot for shareholder approval for the upcoming year and fees for the past two years are reasonable (i.e., audit plus audit-related fees are higher than tax fees and higher than all other fees). 10. All members of an audit committee if the committee failed to put auditor ratification on the ballot for shareholder approval and if the non-audit fees or tax fees exceed audit plus audit-related fees in either the current or the prior year. 11. The audit committee chair if the auditor is not up for ratification because the audit committee has not yet selected an auditor for the coming year and (i) the prior auditor was not dismissed, (ii) the prior auditor was dismissed over six months before the annual meeting, or (iii) no compelling explanation is disclosed. 12. All members of an audit committee where the auditor has resigned and reported that a Section 10A Letter17 has been issued. - -------------------------------------------------------------------------------- 14 Where the recommendation is to withhold from the committee chair and the chair is not up for election because the board is staggered, we do not recommend withholding from any members of the committee who are up for election; rather, we will simply express our concern with regards to the committee chair. 15 Where the recommendation is to withhold from the committee chair and the chair is not up for election because the board is staggered, we do not recommend withholding from any members of the committee who are up for election; rather, we will simply express our concern with regards to the committee chair. 16 In all cases, if the chair of the committee is not specified, we recommend withholding from the director who has been on the committee the longest. 17 Auditors are required to report all potential illegal acts to management and the audit committee unless they are clearly inconsequential in nature. If the audit committee / board fail to take appropriate action on an act that has been determined to be a violation of the law, the independent auditor is required to send a letter to the SEC, referred to as a Section 10A letter. Such letters are a very rare occurrence and should be taken very seriously. 328 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 13. All members of an audit committee at a time when material accounting fraud occurred at the company. 14. All members of an audit committee at a time when annual and/or multiple quarterly financial statements had to be restated due to a serious material fraud. 15. All members of an audit committee if the company repeatedly fails to file its financial reports in a timely fashion. 16. All members of an audit committee in a year in which the company and/or its independent auditors report material weaknesses in internal controls and that company's executives had previously certified to investors the controls were effective. 17. When the company has aggressive accounting policies and or poor disclosure or lack of sufficient transparency in its financial statements. 18. The audit committee chair when tax and/or other fees are greater than audit and audit-related fees paid to the auditor for more than one year in a row (i.e., we recommend against ratification of the auditor). 19. All members of the audit committee when the company receives a "material weakness" letter from the auditor in their 10-K. 20. All members of the audit committee when there is a disagreement with the auditor and the auditor resigns or is dismissed. 21. All members of the audit committee when the auditor resigns and a material weakness has been disclosed within the past year. 22. All members of the audit committee if the contract with the auditor specifically limits the auditor's liability to the company. Sometimes a material restatement of financial statements is accompanied by a report of a material weakness in internal controls by management and/or the independent auditors coupled with late filings with the SEC. We consider such situations to negatively impact the integrity of the financial statements and call into question the overall monitoring and oversight by the audit committee. As a result, we will vote against all members of an audit committee when this situation occurs (e.g., in tandem, a restatement, report of a material weakness in internal controls and late filings). Compensation committee members:18 1. All members of the compensation committee who are currently up for election and served at the time of poor pay-for-performance (e.g., a company receives an F grade in our pay-for-performance analysis).19 2. All members of the compensation committee (during the relevant time period) if excessive employment agreements and/or severance agreements were entered into. 3. All members of the compensation committee if performance goals were changed (i.e., lowered) when employees failed or were unlikely to meet original goals, or performance-based compensation was paid despite goals not being attained. - -------------------------------------------------------------------------------- 18 Where the recommendation is to withhold from the committee chair and the chair is not up for election because the board is staggered, we do not recommend withholding from any members of the committee who are up for election, rather, we will simply express our concern with regards to the committee chair. 19 Where there have been two CEOs in one year or a large sign-on bonus for an incoming CEO, we will consider not recommending withholding but will defer judgment until next year or for one full year after arrival. 329 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4. All members of the compensation committee if excessive employee perquisites and benefits were allowed. 5. The compensation committee chair, if the compensation committee did not meet during the year, but should have (e.g., executive compensation was restructured or a new executive was hired). 6. Any member of the compensation committee who has served on the compensation committee of at least two other public companies where compensation is not in line with performance (based on an F grade in our Pay-for-Performance model) and is also suspect at the company in question. 7. All members of the compensation committee when the company has repriced options within the past two years and we would not have supported the repricing (i.e., officers and directors were allowed to participate). 8. All members of the compensation committee when vesting of in the money options is accelerated or when fully vested options are granted. Governance committee members:20 1. All members of the governance committee21 during whose tenure the board failed to implement a shareholder proposal with a direct and substantial impact on shareholders and their rights [i.e., where the proposal received a sufficient number (i.e., at least a majority of shares voting] of shareholder votes to allow the board to implement or take the necessary precursor steps toward implementing that proposal). 2. The governance committee chair22 when the board is less than two-thirds independent, the chairman is not independent and an independent lead or presiding director23 has not been appointed, unless company performance has been in the top quartile of the company's peers. We note that each of the Business Roundtable, The Conference Board and the Council of Institutional Investors advocates that two-thirds of the board be independent. 3. In the absence of a nominating committee, the governance committee chair when there are less than five or more than 20 members on the board. Nominating committee members:24 1. All members of the nominating committee when the committee nominated or renominated an individual who had a significant conflict of interest or whose past - -------------------------------------------------------------------------------- 20 Where the recommendation is to withhold from the committee chair and the chair is not up for election because the board is staggered, we do not recommend withholding from any members of the committee who are up for election; rather, we will simply express our concern with regard to the committee chair. 21 If the board does not have a governance committee (or a committee that serves such a purpose), we recommend withholding from the entire board on this basis. 22 If the chair of the committee is not specified, we recommend withholding from the director who has been on the committee the longest. If the longest-serving committee member cannot be determined, we will recommend withholding from the longest-serving board member serving on the committee. (23) We believe that one specific independent individual should be appointed to serve as the lead or presiding director. When such a position is rotated among certain directors from meeting to meeting, we will recommend withholding votes as if there were no lead or presiding director. 330 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- (24) Where the recommendation is to withhold from the committee chair and the chair is not up for election because the board is staggered, we do not recommend withholding from any members of the committee who are up for election; rather, we will simply express our concern with regards to the committee chair. 331 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- actions demonstrated a lack of integrity or inability to represent shareholder interests. 2. The nominating committee chair, if the nominating committee did not meet during the year, but should have (i.e., new directors were nominated). 3. In the absence of a governance committee, the nominating committee chair25 when the board is less than two-thirds independent, the chairman is not independent and an independent lead or presiding director has not been appointed,26 unless company performance has been in the top 25% of the company's peers. Each of the Business Roundtable, The Conference Board and the Council of Institutional Investors advocates that at least 2/3 of companies' boards be independent. 4. The nominating committee chair when there are less than five or more than 20 members on the board.27 Experience We find that a director's past conduct is often indicative of future conduct and performance. We often find directors -- with a history of overcompensating executives or with a history of serving on boards where significant and avoidable disasters have occurred -- reappearing at companies that follow these same patterns. Glass Lewis has a proprietary database of every officer and every director serving at 8,000 of the most widely held U.S. companies. We use this database to track service and performance of individual board members across companies. Voting Recommendations on the Basis of Experience: We typically recommend that shareholders withhold votes from directors who have served on boards or as executives of companies with track records of poor performance, overcompensation, audit or accounting related issues and/or other indicators of mismanagement or actions against the interests of shareholders.28 Likewise, we look carefully at the backgrounds of those who serve on the key committees of the board to ensure that they have the required skills and diverse backgrounds to make informed and well-reasoned judgments about the subject matter for which the committee is responsible. Other Considerations In addition to the three key characteristics we analyze in evaluating board members, we consider the following issues in making voting recommendations. Voting Recommendations on the Basis of Other Considerations: - -------------------------------------------------------------------------------- 25 If the chair of the committee is not specified, we will recommend withholding from the director who has been on the committee the longest. If the longest-serving committee member cannot be determined, we will recommend withholding from the longest-serving board member serving on the committee. 26 In the absence of both a governance and a nominating committee, we will recommend withholding from the chairman of the board on this basis. 27 In the absence of both a governance and a nominating committee, we will recommend withholding from the chairman of the board on this basis. 28 We typically apply a three-year look back to such issues and also research to see whether the responsible directors have been up for election since the time of the failure, and if so, we take into account the percentage of support they received from shareholders. 332 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Irrespective of the overall presence of independent directors on the board, we believe that a board should be wholly free of people who have an identifiable and substantial conflict of interest. Accordingly, we recommend shareholders withhold votes from the following types of affiliated or inside directors under nearly all circumstances. Conflict of Interest: 1. CFO who presently sits on the board. In our view, the CFO holds a unique position relative to financial reporting and disclosure to shareholders. Because of the critical importance of financial disclosure and reporting, we believe the CFO should report to and not sit on the board. During 2005, Glass Lewis voted to withhold on 204 CFOs who sat on their company's boards. 2. Director who presently sits on an excessive number of boards. A board member who serves as an executive officer of any public company while serving on more than a total of four public company boards and any other director who serves on more than a total of six public company boards typically receives a withhold recommendation from Glass Lewis. The academic literature on this subject suggests that board members spend approximately 200 hours per year per board on which they serve. We believe this limits the number of boards directors can serve on effectively, especially those who are running another company.29 3. Director, or a director who has an immediate family member, who is currently providing consulting or other material professional services to the company. These services may include legal, consulting or financial services to the company. We question the need for the company to engage in consulting relationships with its directors including legal advisors. We view such relationships as creating conflicts for directors, as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions. In addition, a company's decisions regarding where to turn for the best professional services may be compromised when doing business with the professional services firm of one of the company's directors. 4. Director, or a director who has an immediate family member, who engages in airplane, real estate or other similar deals, including perquisite type grants from the company that amount to over $25,000. Directors who receive these sorts of payments from the company will have to make unnecessarily complicated decisions that may pit their interests against those of the shareholders they serve. Given the pool of director talent and the limited number of directors on any board, we think shareholders are best served by finding individuals who are unconflicted to represent their interests on the board. - -------------------------------------------------------------------------------- 29 We note that our guidelines here are well within the standards set forth by the NACD in its Report of the NACD Blue Ribbon Commission on Director Professionalism, 2001 Edition, pp. 14-15 (also cited approvingly by the Conference Board in its Corporate Governance Best Practices: A Blueprint for the Post-Enron Era, 2002, p. 17) which suggested that CEOs should not serve on more than 2 additional boards, persons with full-time work should not serve on more than 4 additional boards and others should not serve on more than six boards. 333 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 5. Current interlocking directorships. CEOs or other top executives who serve on each other's boards create an interlock that poses conflicts that should be avoided to ensure promotion of shareholder interests above all else.30 6. All board members who served at a time when a poison pill was adopted without shareholder approval within the prior twelve months. While we do not believe that there is a universally applicable optimum board size, we do believe that boards should have a minimum of five directors in order to ensure that there is a sufficient diversity of views and breadth of experience in every decision the board makes and to enable the formation of key board committees with independent directors. At the other end of the spectrum, we believe that boards with more than 20 members will typically suffer under the weight of "too many cooks in the kitchen" and have difficulty reaching consensus and making timely decisions. Sometimes the presence of too many voices can make it difficult to draw on the wisdom and experience in the room by virtue of the need to limit the discussion so that each voice may be heard. To that end, we typically recommend withholding for the chairman of the nominating committee at a board with fewer than 5 directors. With boards consisting of more than 20 directors, we typically recommend withholding for all members of the nominating committee (or the governance committee in the absence of a nominating committee).31 Controlled Companies Controlled companies present an exception to our independence recommendations. The function of the board of directors is to protect the interests of shareholders; however, when a single individual or entity owns more than 50% of the voting shares, then the interests of the majority of shareholders are the interests of that entity or individual. Consequently, Glass Lewis does not recommend withholding votes from boards whose composition reflects the makeup of the shareholder population. In other words, affiliates and insiders who are associated with the controlling entity are not subject to the two-thirds independence rule. The independence exceptions that we make for controlled companies are as follows: 1. We do not require that controlled companies have boards that are at least two-thirds independent. So long as the insiders and/or affiliates are connected with the controlling entity, we accept the presence of non-independent board members. 2. The compensation committee and nominating and governance committee(s) do not need to consist of independent directors. a. We believe controlled companies do not need to have standing nominating and corporate governance committees. Although a committee charged with the duties of searching for, selecting and nominating independent directors can be of benefit to all companies, the unique composition of controlled - -------------------------------------------------------------------------------- 30 There is no look-back period for this situation. This only applies to public companies and we only footnote it for the non-insider. (31) The Conference Board, in its report, Corporate Governance Best Practices, Id. at p. 23, quotes one of its roundtable participants as stating, "[w]hen you've got a 20 or 30 person corporate board, it's one way of assuring that nothing is ever going to happen that the CEO doesn't want to happen." 334 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- companies' shareholder base makes such a committee both less powerful and less relevant. b. We do not require compensation committees at controlled companies to be independent. Although we believe the duties of a committee charged with approving and monitoring the compensation awarded to a company's senior executives would best be executed by independent directors, controlled companies serve a unique shareholder population whose voting power ensures the protection of its interests. c. In a similar fashion, controlled companies do not need to have an independent chairman or a lead or presiding director. Although, in our opinion, an independent director in a position of authority on the board - such as the chairman or presiding director - is best able to ensure the proper discharge of the board's duties, controlled companies serve a unique shareholder population whose voting power ensures the protection of its interests. 3. We have no board size requirements for controlled companies. We do not make independence exceptions for controlled companies in the case of audit committee membership. Audit committees need to consist solely of independent directors. Regardless of the company's controlled status, the interests of all shareholders must be protected by ensuring the integrity and accuracy of the company's financial statements. Allowing affiliated directors to discharge the duties of audit oversight could present an insurmountable conflict of interest. In the case where an individual or entity owns more than 50% of the company's voting power but the company is not deemed a "controlled" company, we lower our independence requirement from two-thirds to a majority of the board and keep all other standards in place. Mutual Fund Boards Mutual funds, or investment companies, are structured differently than regular public companies (i.e., operating companies). Members of the fund's adviser are typically on the board and management takes on a different role than that of other public companies. As such, although many of our guidelines remain the same, we focus primarily on a short list of requirements. Similar to other public companies, we apply the following policies at mutual funds we are reviewing: 1. We believe three-fourths of the boards of investment companies should be made up of independent directors. This approach is consistent with the proposed SEC rule that would require that three-fourths of a mutual fund's board be independent. The Investment Company Act currently requires forty percent of the board to be independent but in 2001 the SEC amended the Exemptive Rules to require that a majority of a mutual fund board be independent. We agree that since mutual fund boards play a vital role in overseeing the relationship between the fund and the investment manager hired by the fund, there is need for additional independent oversight than for an operating company board. 2. The board should be made up of between five and twenty directors. 3. The CFO should not serve on the board (this includes the CFO of the fund's adviser). 4. The audit committee should consist solely of independent directors. 335 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 5. At least one member of the audit committee should be designated as the audit committee financial expert. 6. We do not withhold if the auditor is not up for ratification. The following differences from other public companies apply at mutual funds: 1. We do not recommend withholding votes from any director for the lack of an independent lead or presiding director. 2. The SEC has proposed that the chairman of the fund board be an independent director. We agree that the roles of chairman and CEO should be separated for a mutual fund's board. Although we believe this would be best at all companies, we recommend withholding votes from the chairman of the nominating committee at an investment company if the chairman and CEO of a mutual fund are the same person and the fund does not have an independent lead or presiding director. We note that seven former SEC commissioners support the appointment of an independent chairman and we agree with them that "an independent board chairman would be better able to create conditions favoring the long-term interests of fund shareholders than would a chairman who is an executive of the adviser." (See comment letter sent SEC in support of the proposed rule at http://sec.gov/rules/proposed/s70304/s70304-179.pdf) Separation of the Roles of Chairman and CEO Glass Lewis believes that separating the roles of corporate officers and the chairman of the board is typically a better governance structure than a combined executive/chairman position. The role of executives is to manage the business on the basis of the course charted by the board. Executives should be in the position of reporting and answering to the board for their performance in achieving the goals set out by the board. This becomes much more complicated when management actually sits on, or chairs, the board. Presumably the influence of any CEO with his or her board will be supreme. A CEO should be able to set the strategic course for the company, with the blessing of the board, and the board should enable the CEO to carry out his or her vision for accomplishing the board's objectives. Failure to achieve this objective should lead the board to replace that CEO with someone in whom the board has confidence. It can become difficult for the board to fulfill its role of overseer and policy setter when the CEO/Chairman controls the agenda and the discussion in the boardroom. This can afford CEOs with leverage to entrench their position leading to longer-than-optimal terms, fewer checks on management, less scrutiny of the operation of the business and limitations on independent, shareholder-focused goal-setting by the board. We view an independent chairman as better able to oversee the executives of the Company and set a pro-shareholder agenda without the management conflicts that a CEO and other executive insiders often face. This, in turn, leads to a more proactive and effective board of directors that is looking out for the interests of shareholders above all else. We do not recommend shareholders withhold votes from CEOs who serve on or chair the board. However, we do typically encourage our clients to support a separation between the roles of 336 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- chairman of the board and CEO, whenever that question is posed in a proxy (typically in the form of a shareholder proposal), as we believe that in the long-term it is in the best interests of the company and its shareholders. In the case of a less than two-thirds independent board, Glass Lewis strongly supports the existence of a presiding or lead director with authority to set the agenda for the meetings and to lead sessions outside the presence of the insider chairman. Declassified Boards Glass Lewis favors the repeal of staggered boards and the annual election of directors. We believe staggered boards are less accountable to shareholders than boards that are elected annually. Furthermore, we feel the annual election of directors encourages board members to focus on the interests of shareholders. Empirical studies have shown: (i) companies with staggered boards reduce a firm's value; and (ii) in the context of hostile takeovers, staggered boards operate as a takeover defense, which entrenches management, discourages potential acquirers and delivers a lower return to target shareholders. In our view, there is no evidence to demonstrate that in a takeover context staggered boards operate to improve shareholder returns. When a staggered board blocks a transaction, research shows shareholders are worse off. For example, one study performed by a group of Harvard Law professors concluded that companies whose staggered boards prevented a takeover "reduced shareholder returns for targets ... on the order of eight to ten percent in the nine months after a hostile bid was announced."32 When a staggered board negotiates a friendly transaction, no statistically significant difference in premiums occurs.(33) During a March 2004 Glass Lewis Proxy Talk regarding staggered boards, the proponents of staggered boards could not identify research that demonstrated that staggered boards increase shareholder value. On the contrary, the opponents of such a structure marshaled significant support for the proposition that classified boards reduce shareholder value, holding everything else constant. Lucian Bebchuk, a Harvard Law professor who studies corporate governance issues, concluded that charter-based staggered boards "reduce the market value of a firm by 4% to 6% of its market capitalization" and that "staggered boards bring about and not merely reflect this reduction in market value."(34) We also note that shareholders have increasingly come to agree with this view. In fact, 2005 saw the tide turn in corporate America as now more than 50% of US companies do not have a classified board structure, down from approximately 60% of companies in 2004. Clearly, an increasing number of shareholders have supported the repeal of classified boards. Resolutions - -------------------------------------------------------------------------------- 32 Lucian Bebchuk, John Coates, Guhan Subramanian, "The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants," December 2002, page 1. 33 Id. at 2 ("Examining a sample of seventy-three negotiated transactions from 2000 to 2002, we find no systematic benefits in terms of higher premia to boards that have [staggered structures]."). (34) Lucian Bebchuk, Alma Cohen, "The Costs of Entrenched Boards" (2004). 337 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- relating to the repeal of staggered boards garnered on average 61% support among shareholders in 2002, whereas in 1987, only 16.4% of votes cast favored board declassification. Given the empirical evidence suggesting staggered boards reduce a company's value and the increasing shareholder opposition to such a structure, Glass Lewis supports the declassification of boards and the annual election of directors. Mandatory Director Retirement Provisions Director Term Limits Glass Lewis believes that term limits are typically not in the best interests of shareholders. The academic literature available on this subject suggests there is no evidence of a correlation between tenure on the board and a director's performance. Although, on occasion, term limits serve as a crutch for boards that are unwilling to take the steps necessary to police their membership and make the difficult decisions pertaining to when turnover is appropriate. Some shareholders also support term limits as a way to force change where boards lack the fortitude to make changes on their own. In our view, the experience of directors through their service over time can be a valuable asset to shareholders as directors navigate complex and critical issues faced by the board. However, we understand and support the need for periodic director rotation to ensure a fresh perspective in the board room and the generation of new ideas and business strategies. We believe this should be accomplished by the board and not through arbitrary limits. It is our opinion that shareholders can address this issue through the election of directors when necessary. Director Age Limits Glass Lewis believes that age limits are not in the best interests of shareholders. The academic literature available on this subject suggests there is no evidence of a correlation between age and a director's performance. Age limits serve as a crutch for boards that are unwilling to take the steps necessary to police their membership and make the difficult decisions pertaining to when turnover is appropriate. While we understand the support for age limits by some institutions as a way to force change where boards lack the fortitude to make changes on their own, the long-term impact of these limits is to restrict experienced and potentially valuable board members from service at an arbitrary cut-off date. The experience of directors through their service over time can be a valuable asset to shareholders as directors navigate complex and critical issues faced by the board. While we understand and support the need for periodic director rotation to ensure a fresh outlook and perspective in the board room and the generation of new ideas and business strategies, we do not believe age limits are the best mechanism to accomplish this goal. Further, age limits unfairly imply that older directors (or in rare cases, younger) cannot contribute to the oversight of a company. We believe shareholders would be better off focusing their efforts on monitoring the board's approach to corporate governance and their stewardship of the company's performance than imposing "one size fits all" limits that don't necessarily correlate with returns or benefits for shareholders. 338 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Requiring Two or More Nominees per Board Seat Shareholders have attempted to address lack of access to the ballot by proposing that the board give shareholders a choice of directors for every seat in every election. However, we feel that policies that would require the nomination of multiple nominees for each board seat would discourage prospective directors from accepting nominations if they were not confident that they were clearly the board's choice or that they would be elected. Therefore, generally Glass Lewis will vote against such proposals. II. Transparency and Integrity of Financial Reporting Auditor Ratification We believe the role of the auditor as a gatekeeper is crucial in ensuring the integrity and transparency of financial information necessary for protecting shareholder value. Shareholders rely on the auditor to ask tough questions and to do thorough analysis of the company's books to ensure that the information ultimately provided to shareholders is complete, accurate, fair and a reasonable representation of the company's financial position. The only way shareholders can make rational investment decisions is if the market is equipped with accurate information about the fiscal health of the company. In our view, shareholders should demand the services of an objective and well-qualified auditor at every company in which they hold an interest. Like directors, auditors should be free from conflicts of interest and should assiduously avoid situations that require them to make choices between their own interests and the interests of the public they serve. Almost without exception, shareholders should be given the opportunity to review the performance of the auditor annually and ratify the board's selection of an auditor for the coming year. Voting Recommendations on the Ratification of the Auditor: We generally support management's recommendation regarding the selection of an auditor except in cases where we believe the independence of a returning auditor or the integrity of the audit has been compromised. Where the board has not allowed shareholders to exercise their right and responsibility to review and ratify the auditor, we typically recommend withholding votes from the chairman of the audit committee of the board; and, when there have been material restatements of annual financial statements or material weakness in internal controls reported, from the entire audit committee in exceptional situations. Reasons why we may not recommend ratification of the auditor include: o When audit fees added to audit-related fees total less than the tax fees and/or less than other non-audit fees. o If there have been any recent material restatements of annual financial statements, including those resulting in material weaknesses in internal controls being reported or late filings by the company where the auditor bears some 339 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- responsibility for the restatement or late filing (e.g., a restatement due to a reporting error).35 o When the auditor performs prohibited services such as tax shelter work, tax services for the CEO or CFO, or work for a contingent-type fee including a fee based on a percentage of economic benefit to the company. o When audit fees are excessively low, especially when compared with other companies in the same industry. o When the company has aggressive accounting policies. o When the company has poor disclosure or lack of transparency in its financial statements. o Where the auditor had specifically limited its liability through its contract with the company. o We also look for other relationships or issues of concern with the auditor that might suggest a conflict between the interests of the auditor and the interests of shareholders. We typically support audit-related proposals regarding: o Mandatory auditor rotation when the proposal uses a reasonable period of time (usually not less than 5-7 years). Pension Accounting Issues The question often raised in proxy proposals related to pension accounting is what effect, if any, projected returns on employee pension assets should have on the company's net income. This issue often comes up in the context of executive compensation and the extent to which pension accounting should be reflected in the performance of the business for purposes of calculating payments to executives. Glass Lewis believes that pension credits should not be included in measuring income used to award performance-based compensation. Many of the assumptions used in accounting for retirement plans are subject to the discretion of a company, and management would have an obvious conflict of interest if pay were tied to pension income. In our view, projected income from pensions does not truly reflect a company's performance. Reporting Contributions and Political Spending Glass Lewis believes that disclosure regarding how a company uses its funds is an important component of corporate accountability to shareholders. However, the area of campaign contributions is heavily regulated by federal, state and local laws. Most jurisdictions around the country have detailed disclosure laws, and information on contributions is readily available to the public. Other than in exceptional circumstances (e.g., where the company does not adequately disclose information about its contributions to shareholders or where the company has a history of abuse in the donation process) we believe that the mechanism for disclosure and the standards for - -------------------------------------------------------------------------------- 35 An auditor does not perform an audit of interim financial statements and accordingly, in general, we do not believe should be opposed due to a restatement of interim financial statements, unless the nature of the misstatement is clear from a reading of the incorrect financial statements. 340 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- giving are best left to the board. However, Glass Lewis will consider supporting such proposals on a case-by-case basis if the company has substantially and consistently underperformed its peers and has been subject to regulatory action resulting from its political donations. III. THE LINK BETWEEN COMPENSATION AND PERFORMANCE Equity-Based Compensation Plans Glass Lewis evaluates option- and other equity-based compensation plans with a detailed model and analyst review. We believe that equity compensation awards are a useful tool, when not abused, for retaining and incentivizing employees to engage in conduct that will improve the performance of the company. We recognize that equity-based compensation programs have important differences from cash compensation plans and bonus programs. Accordingly, we take factors such as the administration of the plan, the method and terms of exercise, repricing history and express or implied rights to reprice, the presence of evergreen provisions and other factors into account in our model and analysis. Our analysis is decidedly quantitative and focused on the cost of the plan as compared to the operating metrics of the business. We run twenty different analyses, comparing the program with both absolute limits we believe are key to equity value creation and with a carefully chosen peer group. In general, our model seeks to determine whether the proposed plan is either absolutely excessive or is more than one standard deviation away from the average plan for the peer group on a range of criteria, including dilution to shareholders and the projected annual cost relative to the company's financial performance. Each of the twenty analyses (and their constituent parts) is weighted and the plan is scored in accordance with that weight. Importantly, our analysis differs from that of other advisors who have developed models for determining whether an option plan is excessive. The principal differences between our approaches (as we understand the various approaches of others) are: (i) we use a measure of expected annual expense of the program and compare that expense against operating metrics of the business to assist in determining whether the plan is excessive in light of the company's performance; (ii) we compare overall expected annual cost to the enterprise value of the firm, rather than to market capitalization because the employees, managers and directors of the firm are engaged in creating enterprise value, not necessarily market capitalization (the biggest difference can be seen for a company where cash represents the vast majority of market capitalization); and (iii) our approach does not rely exclusively on relative comparisons with averages because we believe that academic literature proves that there are some absolute limits. We evaluate option plans based on ten overarching principles: 1. Companies should seek more shares only when they need them. 2. Plans should be small enough that companies need approval every three to four years (or less) from shareholders. 3. If a plan is relatively expensive, it should not be granting options solely to senior executives and board members. 341 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 4. Annual net share count and voting power dilution should be limited. 5. Annual cost of the plan (especially if not shown on the income statement) should be reasonable as a percentage of financial results and in line with the peer group. 6. The expected annual cost of the plan should be proportional to the value of the business. 7. The intrinsic value received by option grantees in the past should be reasonable compared with the financial results of the business. 8. Plans should deliver value on a per-employee basis when compared with programs at peer companies. 9. Plans should not permit re-pricing of stock options. 10. Plans should not contain excessively liberal administrative or payment terms. Option Exchanges Glass Lewis views option repricing plans and option exchange programs with great skepticism. Shareholders have substantial, real downside risk in owning stock and we believe that the employees, officers and directors that receive stock options should be similarly situated to align interests optimally. We are concerned that option grantees who believe they will be "rescued" from underwater options will be more inclined ab initio to take on unjustifiable risks. Moreover, a predictable pattern of repricing or exchanges substantially alters the value of the stock option in the first instance; options that will practically never expire deeply out of the money are worth far more than options that have such a risk. In short, repricings and option exchange programs change the bargain between shareholders and employees after the bargain has been struck. Re-pricing is tantamount to a re-trade. There is one circumstance in which a repricing or option exchange program is acceptable, namely, if the value of a stock has declined dramatically because of macroeconomic or industry trends (rather than specific company issues) and repricing is necessary to motivate and retain employees. In this circumstance, we think it fair to conclude that option grantees may be suffering from a risk that was not foreseeable when the original equity-based compensation "bargain" was struck. In such a circumstance, we will support a repricing only if the following conditions are true: (i) officers and board members do not participate in the program; (ii) the stock decline mirrors the market or industry price decline in terms of timing and approximates the decline in magnitude; (iii) the exchange is value neutral or value creative to shareholders with very conservative assumptions and a recognition of the adverse selection problems inherent in voluntary programs; and (iv) management and the board make a cogent case for needing to incentivize and retain existing employees, such as being in a competitive employment market. 342 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Performance-Based Options We regularly encounter shareholder requests that the board adopt a policy basing a significant portion of future stock option grants to senior executives on performance. Typically, performance-based options are defined as those whose exercise price is linked to an industry peer group stock performance index. Glass Lewis believes in performance-based equity compensation plans for senior executives. We feel that executives should be compensated with equity when their performance and that of the company warrants such rewards. While we do not believe that equity-based compensation plans for all employees need to be based on overall company performance, we do support such limitations for grants to senior executives (although even some equity-based compensation of senior executives without performance criteria is acceptable, such as in the case of moderate incentive grants made in an initial offer of employment). Boards often argue that such a proposal would hinder them in attracting talent. We believe that boards can develop a consistent, reliable approach, as boards of many companies have, that would still attract executives who believe in their ability to guide the company to achieve its targets. If the board believes in performance-based compensation for executives, then these proposals typically will not hamper the board's ability to create such compensation plans. We generally recommend that shareholders vote in favor of performance-based option requirements. Linking Pay with Performance Glass Lewis strongly believes that executive compensation should be linked directly with the performance of the business the executive is charged with managing. Glass Lewis has a proprietary pay-for-performance model that evaluates compensation of the top five executives at every company in the Russell 3000. Our model benchmarks the compensation of these executives compared with their performance using three peer groups for each company: an industry peer group, a smaller sector peer group and a geographic peer group. Using a forced curve and a school letter-grade system, we rank companies according to their pay-for-performance. We use this analysis to inform our voting decisions on each of the compensation issues that arise on the ballot. Likewise, we use this analysis in our evaluation of the compensation committee's performance. 162(m) Plans Section 162(m) of the Internal Revenue Code allows companies to deduct compensation in excess of $1 million for the CEO and the next four most highly compensated executive officers upon 343 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholder approval of the excess compensation. Glass Lewis recognizes the value of executive incentive programs and the tax benefit of shareholder-approved incentive plans. We also believe that this provision allows shareholders to provide important review and consent of executive compensation, a subject that has raised some troubling concerns at several companies over the past few years. We believe it is best practice for companies to provide reasonable disclosure to shareholders so that they can make sound judgments about the reasonableness of the proposed plan. In order to allow for meaningful shareholder review, we prefer that these proposals generally include: specific performance goals; a maximum award pool; and a maximum award amount per employee. We also believe it is important to analyze the estimated grants to see if they are reasonable and in line with the company's peers. Where a company fails to provide at least a list of performance targets or one of either a total pool or individual maximum, or where the proposed plan is excessive when compared with those of the company's peers and there are other extenuating circumstances, we typically recommend against the plan. The company's track record of aligning pay with performance (as evaluated using our proprietary Pay-for-Performance model) also plays a role in our recommendation on this issue. Where a company has a track record of reasonable pay relative to the performance of the business, we are not typically inclined to recommend against a plan even if the plan caps seem large relative to peers because we recognize the value of having the option of special compensation arrangements for continued exceptional performance. Like all other issues we review, our analysis of these situations attempts to provide consistent but contextual advice given the specifics of the company and ongoing performance. Overall, we recognize that it is generally not in shareholders' best interests to vote against such a plan and forgo the potential tax benefit given the fact that shareholder rejection of such plans will not curtail the awards, it will only prevent the tax deduction associated with them. Director Compensation Plans Glass Lewis believes that non-employee directors should receive compensation for the time and effort they spend serving on the board and its committees. In particular, we support compensation plans that include option grants or other equity-based awards, which help to align the interests of outside directors with those of shareholders. Director fees should be competitive in order to retain and attract qualified individuals. However, excessive fees represent a financial cost to the company and threaten to compromise the objectivity and independence of non-employee directors. Therefore, a balance is required. Glass Lewis uses a proprietary model and analyst review to evaluate the costs of those plans compared to the plans of peer companies with similar market capitalizations. We use the results of this model to assist in making our voting recommendations on director compensation plans. Options Expensing Glass Lewis strongly supports the expensing of stock options. We believe that stock options are an important component of executive compensation and that the expense of that compensation should be reflected in a company's operational earnings. When companies refuse to expense 344 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- options, the effect of options on the company's finances is obscured and accountability for their use as a means of compensation is greatly diminished.36 We will always recommend a vote in favor of a proposal to expense stock options. Limits on Executive Compensation As a general rule, Glass Lewis believes that shareholders should not be involved in setting executive compensation. Such matters should be left to the board's compensation committee. We view the election of directors, and specifically those who sit on the compensation committee, as the appropriate mechanism for shareholders to express their disapproval or support of board policy on this issue. Further, we believe that companies whose pay-for-performance is in line with its peers should be granted the flexibility to compensate their executives in a manner that drives growth and profit. However, Glass Lewis favors performance-based compensation as an effective means of motivating executives to act in the best interests of shareholders. Performance-based compensation may be limited if a CEO's pay is capped at a low level rather than flexibly tied to the performance of the company. Limits on Executive Stock Options Stock options are a common form of compensation for senior executives. Options are a very important component of compensation packages to attract and retain experienced executives and other key employees. Tying a portion of an executive's compensation to the performance of the company also provides an excellent incentive to maximize share values by those in the best position to affect those values. Accordingly, we typically recommend that our clients oppose caps on executive stock options. Linking Pay to Social Criteria Glass Lewis believes that ethical behavior is an important component of executive performance and should be taken into account when evaluating performance and determining compensation. Glass Lewis also believes, however, that the board and specifically its compensation committee are in the best position to set policy on management compensation. Shareholders can hold the board's compensation committee accountable for the compensation awarded through the election of directors. Full Disclosure of Executive Compensation - -------------------------------------------------------------------------------- 36 The Conference Board's Commission on Public Trust, in its report, Corporate Governance Best Practices at p. 28, notes in its "Key Recommendations on Executive Compensation" that "Fixed-price stock options should be expensed on financial statements of public companies. The costs associated with equity-based compensation should be reported on a uniform and consistent basis by all public companies in order to provide clear and understandable comparability." 345 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Glass Lewis believes that disclosure of information regarding compensation is critical to allowing shareholders to evaluate the extent to which a company's pay is keeping pace with its performance. However, we are concerned when a proposal goes too far in the level of detail that it requests for executives other than the most high-ranking leaders of the company. Shareholders are unlikely to need or be able to use information based on the individual level except in the case of senior corporate officers. Moreover, it will rarely be in the interests of shareholders to give away competitive data about salaries at the individual level (which information is not otherwise available). This sort of disclosure requirement could also create internal personnel issues that would be counterproductive for the company and its shareholders. While we are in favor of full disclosure for senior executives and we view information about compensation at the aggregate level (e.g., number of employees being paid over a certain amount or in certain categories) potentially very useful, we do not believe that shareholders need or will benefit from detailed reports about individual management employees other than the most senior executives. IV. GOVERNANCE STRUCTURE AND THE SHAREHOLDER FRANCHISE Anti-Takeover Measures Poison Pills (Shareholder Rights Plans) Glass Lewis believes that poison pill plans generally are not in the best interests of shareholders. Specifically, they can reduce management accountability by substantially limiting opportunities for corporate takeovers. Rights plans can thus prevent shareholders from receiving a buy-out premium for their stock. Typically we recommend that shareholders vote against these plans to protect their financial interests and ensure that they have the opportunity to consider any offer for their shares, especially those at a premium. We believe that boards should be given wide latitude in directing the activities of the company and charting the company's course. However, on an issue such as this, where the link between the financial interests of shareholders and their right to consider and accept buyout offers is so substantial, we believe that shareholders should be allowed to vote on whether or not they support such a plan's implementation. This issue is different from other matters that are typically left to the board's discretion. Its potential impact on and relation to shareholders is direct and substantial. It is also an issue in which the interests of management may be very different from those of shareholders and therefore ensuring shareholders have a voice is the only way to safeguard their interests. In certain limited circumstances, we will support a limited poison pill to accomplish a particular objective, such as the closing of an important merger, or a pill that contains what we believe to be a reasonable `qualifying offer' clause. We will consider supporting a poison pill plan if the provisions of the qualifying offer clause include the following attributes: (i) the form of offer is not required to be an all-cash transaction; (ii) the offer is not required to remain open for more than 90 business days; (iii) the offeror is permitted to make amendments to the offer, to reduce the offer or otherwise change the terms; (iv) there is no fairness opinion requirement; and (v) there is a low to no premium 346 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- requirement. Where these requirements are met, we typically feel comfortable that shareholders will have the opportunity to voice their opinion on any legitimate offer. Right of Shareholders to Call a Special Meeting Glass Lewis strongly supports the right of shareholders to call special meetings. However, in order to prevent abuse and waste of corporate resources by a very small minority of shareholders, we believe that such rights should be limited to a minimum threshold of at least 15% of the shareholders requesting such a meeting. In general, we believe a lower threshold may leave companies subject to meetings whose effect might be the disruption of normal business operations in order to focus on the interests of only a small minority of owners. However, when proposals are presented to allow shareholders the opportunity to call special meetings that do not specify a minimum threshold, we will support them because the possible abuse of the right to call shareholder meetings is outweighed by the benefit to shareholders of having that right. Shareholder Action by Written Consent Glass Lewis strongly supports the right of shareholders to act by written consent. However, in order to prevent abuse and waste of corporate resources by a very small minority of shareholders, we believe that such rights should be limited to a minimum threshold of at least 15% of the shareholders requesting action by written consent. In general, we believe a lower threshold may leave companies subject to meetings whose effect might be the disruption of normal business operations in order to focus on the interests of only a small minority of owners. However, when proposals are presented to allow shareholders the opportunity to act by without specifying a minimum threshold, we will support them based on the belief that shareholders are better off with this right than without it. However, when proposals are presented to allow shareholders the opportunity to act by written consent even without a specified minimum threshold, we will support them because the possible abuse of the right to act by written consent is outweighed by the benefit to shareholders of having that right. Authorized Shares Glass Lewis believes that adequate capital stock is important to the operation of a company. When analyzing a request for additional shares, we typically review four common reasons why a company might need additional capital stock beyond what is currently available: (i) Stock Split - We typically consider three metrics when evaluating whether we think a stock split is likely or necessary. First, we look at the historical stock pre-split price, if any. Second, we consider the current share price relative to the price in the prior 52 weeks to assess the current price relative to the company's most common trading price over that period. Finally, we consider some absolute limits on stock price that in our view either always make a stock split appropriate if desired by management or conversely would almost never be a reasonable price at which to split a stock. (ii) Shareholder Defenses - Additional authorized shares could be used to bolster the efficacy of takeover defenses such as a "poison pill." The fact 347 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- that the additional shares could be used to defend or discourage a hostile takeover is often discussed as a reason for a requested increase in the proxy. Glass Lewis is typically against such defenses and, therefore, will oppose actions intended to increase the efficacy of such defenses. (iii) Financing for Acquisitions - We look to see whether the company has a history of using stock for acquisitions and attempt to determine what levels of stock have typically been required to accomplish such transactions. Likewise, we look to see whether this is discussed as a reason for additional shares in the proxy. (iv) Financing for Operations - We review the company's cash position and its ability to secure financing through borrowing or other means. We look at the company's recent history of capitalization and whether or not the company has had to use stock in the recent past as a means of raising capital. Issuing additional shares can dilute existing holders in limited circumstances. Further, the availability of additional shares, where the board has discretion to implement a poison pill, can often serve as a deterrent to interested suitors. Accordingly, where we find that the company has not detailed a plan for use of the proposed shares, or where the number of shares far exceeds those needed to accomplish a detailed plan, we typically recommend against the authorization of additional shares. While we think that having adequate shares to allow management to make quick decisions and effectively operate the business is critical, we prefer that, for significant transactions, management come to shareholders to justify their use of additional shares rather than providing a blank check in the form of a large pool of unallocated shares available for any purpose. Advance Notice Requirements for Shareholder Ballot Proposals These proposals typically attempt to require a certain amount of notice before shareholders are allowed to place proposals on the ballot. Notice requirements typically range between three to six months prior to the annual meeting. These proposals typically make it impossible for a shareholder who misses the deadline to present a shareholder proposal or a director nominee that might be in the best interests of the company and its shareholders. We believe it is best for shareholders to have the opportunity to review and vote on all proposals and director nominees that arise. Shareholders can always vote against those proposals that appear with little prior notice. However, shareholders, as owners of the business, are capable of identifying those issues where they have sufficient information and ignoring those where they do not. Setting arbitrary notice restrictions simply limits the opportunity for shareholders to raise issues that may come up after the arbitrary window closes until the following year's annual meeting. Accordingly, we typically recommend that shareholders vote against these proposals. Voting Structure Cumulative Voting 348 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Cumulative voting is a voting process that maximizes the ability of minority shareholders to ensure representation of their views on the board. Cumulative voting can play an especially important role where a board is controlled mainly by insiders or affiliates and where the company's ownership structure includes one or more very large shareholders that typically control a majority-voting block of the company's stock. In those situations, shareholders need the protections of cumulative voting to ensure their voices are heard. Glass Lewis believes that cumulative voting generally operates as a safeguard for shareholders by ensuring that those who hold a significant minority of shares are able to elect a candidate of their choosing to the board. This allows the creation of boards that are broadly responsive to the interests of all shareholders rather than simply to a small group of large holders. The recent academic literature on this subject indicates that where a highly independent board is in place and the company has a shareholder-friendly governance structure, shareholders may be better off without cumulative voting. The analysis underlying this literature indicates that shareholder returns at firms with good governance structures are lower and that boards can become factionalized and prone to evaluating the needs of special interests over the general interests of shareholders collectively. Accordingly, we review these proposals on a case-by-case basis factoring in the independence of the board and the status of the company's governance structure. However, we typically find that these proposals are on ballots where independence is lacking and appropriate checks and balances that favor shareholders are not in place. In those instances we typically recommend in favor of cumulative voting. Supermajority Vote Requirements Glass Lewis believes that supermajority vote requirements act as impediments to shareholder action on ballot items that are critical to shareholder interests. One key example is in the takeover context where supermajority vote requirements can strongly limit the voice of shareholders in making decisions on such crucial matters as selling the business. Transaction of Other Business at an Annual or Special Meeting of Shareholders We typically recommend that shareholders not give their proxy to management to vote on any other business items that may properly come before the annual meeting. In our opinion, granting unfettered discretion is unwise. V. SHAREHOLDER INITIATIVES AND MANAGEMENT OF THE FIRM Glass Lewis evaluates shareholder proposals on a case-by-case basis. We generally favor proposals that are likely to increase shareholder value and/or promote and protect shareholder rights. We typically prefer to leave decisions regarding day-to-day management of the business and policy decisions related to political, social or environmental issues to management and the board except when we see a clear and direct link between the proposal and some economic or financial issue for the company. We feel strongly that shareholders should not attempt to micromanage the business or its executives through the initiative process. Rather, shareholders should use their influence to push for governance structures that protect shareholders, including actual director elections and then put in place a board they can trust to make informed and careful decisions that are in the best interests of the business and its owners. We believe that 349 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- shareholders should hold directors accountable for management and policy decisions through the election of directors. Labor Practices Glass Lewis believes that labor policies are typically best left to management and the board, absent a showing of egregious or illegal conduct that might threaten shareholder value. It is our opinion that management is in the best position to determine appropriate practices in the context of its business. Shareholders can hold directors accountable for company decisions related to labor issues through the election of directors. However, in situations where a company's labor practices and its ramifications (through legal or market action) threatens to affect the performance of the company, Glass Lewis will consider supporting proposals regarding labor practices on a case-by-case basis. For example, at Wal-Mart's annual meeting in 2005 we recommend a vote in favor of a shareholder proposal to have the company prepare an equal employment opportunity report. We felt that there was significant potential economic exposure stemming from lawsuits and a federal investigation, both regarding the company's labor practices. In our view, Wal-Mart's shareholders deserved to know if their company had engaged in discriminatory employment practices that made it vulnerable to lawsuits and a variety of potential economic losses stemming from the suits and potential negative market reaction. In addition, we felt the shareholders should be informed about the specific steps that Wal-Mart is taking to address these issues that could have a negative impact on the stock price. Non-Discrimination Policies Glass Lewis believes that human resource policies are best left to management and the board, absent a showing of egregious or illegal conduct that might threaten shareholder value. Management is in the best position to determine which policies will promote the interests of the firm across its various businesses. Board members are accountable to shareholders for the decisions they make about these issues when they face reelection. Reimbursement of Solicitation Expenses Glass Lewis feels that in some circumstances, replacing some or all directors on a company's board is warranted where the incumbent director or directors have failed in their oversight of management in failing to take action to address continuous poor performance. In those cases where a dissident shareholder is seeking reimbursement for their expenses and has received the support of a majority of shareholders, Glass Lewis will generally recommend in favor of reimbursing the dissident for expenses incurred in waging the contest. In those rare cases where a shareholder has put their own time and money into a successful campaign to unseat a poorly performing director, we feel that the dissident should be entitled to reimbursement of their expenses by the company and other shareholders who, by virtue of their majority vote for the dissident, have expressed their concurrence with the dissident and who will share in the improved company performance. However, contests are expensive and distracting to the management and the board. Therefore, to avoid encouraging nuisance or agenda-driven contests, 350 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- we only support the reimbursement of expenses where the dissident has convinced at least a majority of shareholders to support their candidate or candidates. Military and US Government Business Policies Glass Lewis believes that disclosure to shareholders of information on key company endeavors is important. However, Glass Lewis generally does not support resolutions that call for shareholder approval of policy statements for or against government programs that are subject to thorough review by the Federal Government and elected officials at the national level. Foreign Government Business Policies Glass Lewis believes that worldwide business policies are best left to management and the board, absent a showing of egregious or illegal conduct that might threaten shareholder value. We believe that board members can be held accountable for these issues when they face reelection. Environmental Policies Glass Lewis believes that management of the environmental risks associated with business operations are best left to management and the board, absent a showing of egregious or illegal conduct that might threaten shareholder value. We believe that board members can be held accountable on these issues when they face reelection. It is our opinion that management is in the best position to determine what policies are best in the context of its business, particularly given the significant amount of regulation and reporting already required by various government agencies on these topics. However, Glass Lewis would consider supporting such proposals if they address specific issues that pose a substantial long-term risk to the company. Majority Vote for the Election of Directors Repeatedly over the past several decades, shareholders have sought a mechanism by which they might have a genuine voice in the election of directors at companies where they hold an interest. Most of these efforts have centered on regulatory change, the latest iteration of which is the proxy access debate that has taken place at the SEC over the past three years, which appears to have stalled. The proposal here is, in our view, an effort to make the case for shareholder impact on director elections on a company-specific basis. While this proposal would not give shareholders the opportunity to nominate directors or lead to elections in which shareholders have a choice among candidates for the board, if implemented, the proposal would allow shareholders to have a voice in determining whether the nominees proposed by the board should actually serve as the overseer-representatives of shareholders in the boardroom. We believe this would be a very favorable outcome for shareholders. During 2005, Glass Lewis tracked 56 precatory proposals to require a majority vote to elect directors. The average vote in favor was 38% and only 7 proposals received a majority of votes cast. The vote in favor ranged from 68% at Northrop Grumman to 16% at Amazon. The one binding proposal, at Paychex, received only 20% of votes cast in favor, substantially below the average. 351 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Today, most companies elect directors by a plurality vote standard. Under that standard, if one shareholder holding only one share votes in favor of any nominee (including himself, if the director is a shareholder) that nominee "wins" the election and assumes a seat on the board of directors. The common concern among companies with a plurality voting standard was the possibility that one or more directors would not receive a majority of votes, resulting in "failed elections." This was of particular concern during the 1980s, an era of frequent takeovers and contests for control of companies. If a majority vote standard were implemented, a director would have to receive the support of a majority of the shares voted in order to assume the role of a director. Thus, shareholders could collectively vote to reject a director they believe is not or will not pursue their best interests. We think this very minimal amount of protection for shareholders is reasonable and will not upset the corporate structure nor reduce the willingness of qualified shareholder-focused directors to serve in the future. We believe a majority vote standard is overwhelmingly likely to lead to more attentive directors and very occasional use of this power to keep from obtaining a seat on the board a nominee who has a clear track record of ignoring shareholder interests in favor of personal or other interests that conflict with those of investors. There are various initiatives begun to study the issue of majority versus plurality voting. The ABA Committee on Corporate Laws of the Section of Business Law is studying the issue in anticipation of recommending changes to the Model Business Corporation Act (the "Model Act") relating to voting by shareholders for the election of directors. In June it issued for comment a Discussion Paper in which it analyzed the issue in detail and identified certain alternatives to plurality voting. According to the Discussion Paper, plurality was adopted as a standard to address the concern over "failed elections" where a nominee did not receive a majority vote. However, it was not until 1987 that, due to the increasing number of corporate takeovers, Delaware corporate law was changed to make plurality the default standard to address the potential for failed elections resulting from contests. Comments on the Discussion Paper were received from investors, companies and other groups, including the Task Force on Shareholder Proposals of the ABA Committee on Federal Regulation of Securities, which discussed proxy solicitation and disclosure considerations under the federal securities laws that would be implicated by a change from the traditional plurality vote requirement. A committee of the Delaware Bar Association also has undertaken a review of the pertinent provisions of Delaware corporate law. A working group consisting of representatives of various union retirement funds and companies is also studying the issue. While none of the groups have yet made a final determination, the ABA committee published its preliminary report on January 17, 2006 with a recommendation that stops short of changing the near universal plurality standard to a majority standard in the Model Act. However, the committee does recommend allowing shareholders at companies to implement a form of majority voting by amending the company's bylaws. Further, the committee has proposed a statutory method to require resignations of directors who fail to receive a majority vote. In response to the high level of support shareholder votes on majority voting are garnering, many companies have voluntarily taken steps to implement majority voting or modified approaches to majority voting. Theses steps range from requiring directors that receive a majority of withhold votes to submit a letter of resignation (Pfizer) to actually requiring a majority vote of outstanding shares to elect directors (ADP). However, a small number of companies like Lockheed Martin have had a longstanding requirement of a majority of outstanding shares, a higher standard than votes cast, to elect a director. 352 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- However, we feel the Pfizer (or modified) approach does not go far enough because simply requiring a director to submit a resignation would still not require a majority vote to elect a director and would still not allow shareholders' input into the nomination process. Further, under the modified approach the Corporate Governance Committee could reject resignation and, even if it accepts it, the Corporate Governance Committee decides on the director's replacement. Finally, since the modified approach is usually adopted as a policy by the board or a board committee, it could be altered by the same board or committee at any time. Therefore, Glass Lewis will generally support proposals calling for the election of directors by a majority vote unless it would clearly disadvantage the company or put shareholders at risk. 353 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- NICHOLAS-APPLEGATE CAPITAL MANAGEMENT LLC PROXY VOTING SUMMARY HOW NICHOLAS-APPLEGATE VOTES PROXIES The Funds' Investment Adviser votes proxies on behalf of the Funds pursuant to written Proxy Policy Guidelines and Procedures ("Proxy Guidelines") adopted by the Funds. A summary of the Proxy Guidelines is provided below. To obtain information on how your Fund's securities were voted, please contact your account representative at 1-800-551-8043. In addition, the following proxy voting guidelines apply to Nicholas Applegate separately managed accounts, as well as the ADAM Vision accounts. NICHOLAS-APPLEGATE CAPITAL MANAGEMENT PROXY VOTING SUMMARY REVISED 1/3/07 EFFECTIVE 1/31/07 Nicholas-Applegate Capital Management takes seriously the responsibility of voting proxies on behalf of our clients. Our policies and procedures are designed to meet all applicable fiduciary standards and to protect the rights and enhance the economic welfare of those to whom we owe a fiduciary duty. A Proxy Committee, including executive, investment, sales, marketing, compliance and operations personnel, is responsible for establishing our policies and procedures. The Committee reviews these policies and procedures on a regular basis and makes such changes as it believes are necessary. Our guidelines and voting actions are to a large extent aligned with the voting recommendations of Glass Lewis, a third-party proxy voting service to which we subscribe. We vote all proxies received according to our written guidelines, Glass Lewis recommendations and/or investment team input. Our guidelines address such general areas as elections of directors and auditors, corporate defenses, corporate governance, mergers and acquisitions, corporate restructuring, state of incorporation, proxy contest issues, executive compensation, employee considerations and social issue proposals. The guidelines contained herein reflect our normal voting position on certain issues, and may not apply in every situation. The guidelines are intended to generally cover both U.S. and international proxy voting, although due to country differences and requirements, international proxy voting may differ depending on individual facts and circumstances. Even when our guidelines specify how we normally vote on particular issues, we may change the vote if it is reasonably determined to be in our client's best interest. In certain cases, we will vote a specific account outside of our policy upon client request. To ensure that voting responsibilities are met, the Committee has established operational procedures to have client proxies reconciled against client holdings to ensure ballots are received and voted. The procedures are also intended to ensure that proxies are voted consistent with voting guidelines, that the proxy analysis is used for each issue, and all votes are recorded. Any variance from stated policy is carefully noted, including the reason for the variance. In some circumstances NACM is not notified of a ballot to vote, therefore resulting in a non-voted ballot. The proxy voting and record keeping are provided through a third party vendor, Glass Lewis. Prior to October 31, 2006 we were using Institutional Shareholder Services (ISS) for this service. We maintain proxy voting records for all applicable accounts and make these records available to clients at their request. NICHOLAS-APPLEGATE CAPITAL MANAGEMENT Proxy Voting Guidelines Revised 1/3/07 I External Auditor A. Auditors Vote for proposals to ratify auditors, unless there is a reason to believe the auditing firm has a financial interest in or association with the company and is, therefore, not independent; or there is reason to believe the auditor has rendered an 354 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- opinion that is neither accurate nor indicative of the company's financial position. Additionally, we may vote against ratification of auditors: - - When audit fees added to audit-related fees total less than the tax fees and/or less than other non-audit fees. - - If there have been any recent restatements or late filings by the company where the auditor bears some - - responsibility for the restatement or late filing (e.g. a restatement due to a reporting error). - - When the auditor performs tax shelter work or work for a contingent type fee including a fee based on a percentage of economic benefit to the company. - - When audit fees are excessively low, especially when compared with other companies in the same industry. - - When the company has aggressive accounting policies. - - When the Auditor has liability caps. - - When the Auditor performs tax services for the CEO or CFO of the company. II Board of Directors A. Director Nominees Votes on director nominees are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. Evaluations are based on the following criteria (and any others that may be deemed relevant by Glass Lewis or Nicholas-Applegate): - - Long term corporate performance record based on increases in shareholder wealth, earnings, financial strength - - Executive Compensation - - Director Compensation - - Corporate Governance Provisions and Takeover Activity - - Criminal Activity - - Investment in the Company - - Interlocking Directorships - - Inside, Outside, and Independent Directors - - Board Composition - - Number of Other Board Seats - - Any problems or issues that arose on Other Board assignments - - Support of majority-supported shareholder proposals. B. Director Indemnification and Liability Protection 1. Proposals concerning director and officer indemnification and liability protection are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 2. Vote against proposals to limit or eliminate entirely the liability for monetary damages of directors and officers for violating the duty of care. 3. Vote against indemnification proposals that would expand coverage beyond just legal expenses to acts like negligence, that are more serious violations of fiduciary obligation than mere carelessness. 4. Vote for only those proposals providing such expanded coverage on cases when a director's or officer's legal defense was unsuccessful if: (i) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interest of the company, and (ii) if only the director's legal expenses would be covered. C. Director Duties and Stakeholder Laws Vote against management or shareholder proposals to allow the board of directors to consider the interests of "stakeholders" or "non-shareholder constituents," unless these proposals make it clear that these interests are to be considered in the context of the prevailing commitment to shareholders. D. Director Nominations 355 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote in accordance with Glass Lewis shareholder proposals asking that management allow large shareholders equal access to management's proxy to discuss and evaluate management's director nominees, and/or to nominate and discuss shareholder nominees to the board. E. Inside Versus Independent Directors 1. Shareholder proposals asking that boards be comprised of a majority of independent directors are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 2. Vote for shareholder proposals asking that board audit, compensation and/or nominating committees be comprised exclusively of independent directors. F. Stock Ownership Requirements Vote in accordance with Glass Lewis on shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board. G. Term of Office Vote against proposals to limit the tenure of outside directors. III Proxy Contests and Corporate Defenses A. Proxy Contests for Board Seats All votes in a contested election of directors are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. B. Classified Boards 1. Vote against proposals to classify the board. 2. Vote for proposals to repeal a classified board, and to elect all directors annually. C. Cumulative Voting 1. Vote for proposals to permit cumulative voting in the election of directors. 2. Vote against proposals to eliminate cumulative voting in the election of directors. D. Director Nominations Vote against management proposals to limit shareholders' ability to nominate directors. E. Shareholders' Right to Call Special Meetings 1. Vote against management proposals to restrict or prohibit shareholders' ability to call special meetings. 2. Vote for shareholder proposals that remove restrictions on the right of shareholders to act independently of management. F. Shareholder Action by Written Consent 1. Vote against management proposals to restrict or prohibit shareholders' ability to take action by written consent. 2. Vote for shareholder proposals to allow or make easier shareholder action by written consent. G. Size of the Board 1. Vote for proposals that seek to fix the size of the Board. 2. Vote against management proposals that give management the ability to alter the size of the Board without shareholder approval. H. Shareholders' Ability to Remove Directors 1. Vote against proposals that state directors may be removed only for cause. 2. Vote for proposals to restore shareholder ability to remove directors with or without cause. 3. Vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. 4. Vote for proposals that permit shareholders to elect directors to fill board vacancies. 356 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- IV Tender Offers and Corporate Defenses A. Fair Price Provisions 1. Vote in accordance with Glass Lewis analysis and recommendation on management proposals to adopt a fair price provision, as long as the shareholder vote requirement imbedded in the provision is no more than a majority of the disinterested shares. 2. Vote in accordance with Glass Lewis analysis and recommendation on shareholder proposals to lower the shareholder vote requirements imbedded in existing fair price provisions. B. Greenmail 1. Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments. 2. Vote in accordance with Glass Lewis analysis and recommendation on each individual proposal regarding anti-greenmail proposals when they are bundled with other charter or bylaw amendments. 3. Vote on a case-by-case basis regarding restructuring plans that involve the payment of pale greenmail. C. Poison Pills 1. Vote for shareholder proposals asking that a company submit its poison pill for shareholder ratification. 2. Shareholder proposals to redeem a company's poison pill are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 3. Management proposals to ratify a poison pill are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. D. Stakeholder Provisions Vote against management proposals allowing the board to consider stakeholders' (outside constituencies') interests when faced with a tender offer. E. Super-majority Vote Requirement to Approve Mergers 1. Vote for shareholder proposals to lower super-majority vote requirements for mergers and other business combinations. 2. Vote against management proposals to require a super-majority shareholders' vote to approve mergers and other significant business combinations. F. Super-majority Shareholder Vote Requirements to Amend Charter or Bylaws 1. Vote for shareholder proposals to lower super-majority vote requirements to amend any bylaw or charter provision. 2. Vote against management proposals to require a super-majority vote to amend any bylaw or charter provision. G. Unequal Voting Rights Vote in accordance with Glass Lewis analysis and recommendation on proposals for dual class exchange offers and dual class recapitalizations. H. Existing Dual Class Companies 1. Vote in accordance with Glass Lewis analysis and recommendation on shareholder proposals asking that a company report to shareholders on the financial impact of its dual class voting structure. 2. Vote for shareholder proposals asking that a company submit its dual class voting structure for shareholder ratification. I. White Squire Placements Vote for shareholder proposals to require approval of all blank check preferred stock issues. V Miscellaneous Corporate Governance Provisions 357 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- A. Abstention Votes Vote for shareholder proposals recommending that votes to "abstain" not be considered votes "cast" at an annual or special meeting, unless that consideration is required by state law. B. Annual Meetings 1. Vote against management proposals asking for authority to vote at the meeting for "other matters". 2. Vote against shareholder proposals to rotate the time or place of annual meetings. C. Confidential Voting and Independent Tabulation and Inspections Vote for proposals to adopt a policy that comprises both confidential voting and the use of independent vote tabulators of elections. D. Equal Access Vote for shareholder proposals to allow significant company shareholders equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and/or to nominate their own candidates to the board. E. Bundled Proposals Bundled or "conditioned" proxy proposals are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. (e.g., management proposals to provide shareholders a special dividend that are bundled with other charter or bylaw changes). F. Shareholder Advisory Committee 1. Shareholder proposals to establish shareholder advisory committees are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 2. Decisions on whether or not to join a shareholder advisory committee are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. G. Disclosure Proposals Shareholder proposals requesting fuller disclosure of company policies, plans or business practices are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. H. Conflict of Interest When facing conflicts between our interests and the interests of our clients, Nicholas-Applegate will always act in the best interests of its clients. In proxy voting matters, conflicts of interest can arise in many ways. For example, a proxy issue could arise for one of our public clients that we also own in one or more client accounts. Or, a potential client battling a contentious shareholder proposal may ask for our vote in exchange for granting us an investment mandate. In these cases and other potential conflict scenarios, Nicholas-Applegate must exercise caution to ensure our clients' interests are not compromised. We believe a reasonable process to screen for potential conflicts that could influence our proxy voting is as follows: identify any situation where we do not intend to vote in accordance with our normal policy on any issue; determine who is directing (portfolio manager, client, etc) us to vote contrary to our normal policy; review and analyze for potential conflict issues (e.g., may require PM to disclose any relationship with the issuer via a written questionnaire); Proxy Committee to review request to vote contrary to policy, and potential conflict if any, prior to voting, and will make final decision. Pursuant to the request of the Board of Trustees of the Nicholas-Applegate Institutional Funds, NACM will report to the Board any conflict of interest matter and how the Committee resolved it. The Proxy Committee will be responsible for implementing and following the above process, and has the flexibility to use its reasonable judgment in determining which steps are necessary under each set of circumstances. VI Capital Structure A. Common Stock Authorization 358 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1. Proposals to increase the number of shares of common stock the board is authorized to issue are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 2. Proposals to increase the number of shares of common stock authorized for issue are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 3. Vote in accordance with Glass Lewis analysis and recommendation on proposed common share authorizations that increase existing authorization by more than 100 percent unless a clear need for the excess shares is presented by the company. B. Stock Distributions: Splits and Dividends Vote in accordance with Glass Lewis analysis and recommendation on management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares following the split is not greater than 100 percent of existing authorized shares. C. Reverse Stock Splits Vote for management proposals to implement a reverse stock split that also reduces the number of authorized common shares. D. Blank Check Preferred Stock 1. Vote against management proposals authorizing the creation of new classes of preferred stock which have unspecified rights including voting, conversion or dividend distribution rights. 2. Management proposals to increase the number of authorized blank check preferred shares are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. 3. Vote for shareholder proposals asking that any placement of blank check preferred stock be first approved by shareholders, unless the placement is for ordinary business purposes. 4. Vote against proposals that create "blank check" preferred stock. E. Adjustments to Par Value of Common Stock Vote for management proposals to reduce the par value of common stock. F. Preemptive Rights Proposals to provide shareholders with preemptive rights are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. G. Debt Restructuring Proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. H. Share Repurchase Programs Vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. VII Executive Compensation/Employee Consideration A. Incentive Plans All proposals on incentive compensation plans (including option plans) for executives and directors are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. The evaluation is based on the following criteria (and any other that may be deemed relevant by Glass Lewis or Nicholas-Applegate): - - Necessity - - Reasonableness Test - - Participation - - Dilution - - Shares Available 359 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - - Exercise and Payment Terms - - Change-in-Control Provisions - - Types of Awards - - Company specific dilution cap calculated - - Present Value of all incentives, derivative awards, cash/bonus compensation - - Shareholder wealth transfer (dollar amount of shareholders' equity paid it's executives) - - Voting power dilution - Potential percent reduction in relative voting power - - Criteria for awarding grants - - The pace of grants - - The value of grants per employee compared with the company's peers - - Allowance for repricing of options - - Past granting patterns - - Process for determining pay levels B. Shareholder Proposals to Limit Executive and Director Compensation 1. Generally, vote in accordance with Glass Lewis analysis and recommendation on shareholder proposals that seek additional disclosure of executive and director compensation information. 2. All other shareholder proposals that seek to limit executive and director compensation are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. C. Golden Parachutes 1. Vote for shareholder proposals to have golden and tin parachutes submitted for shareholder ratification. 2. Proposals to ratify or cancel golden or tin parachutes are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. D. Employee Stock Ownership Plans (ESOP) 1. Vote in accordance with Glass Lewis analysis and recommendation on proposals requesting shareholder approval to implement Employee Stock Ownership Plans, or increase authorized shares for existing Employee Stock Ownership Plans except when the number of shares allocated to the ESOP is excessive (i.e. greater than 5% of outstanding shares). 2. Votes directly pertaining to the approval of an ESOP or a leveraged ESOP are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. Our evaluation is based on the following criteria (and any other that may be deemed relevant): - Reasonableness Test - Participation - Administration - Shares Available - Exercise and Payment Terms - Change-in-Control Provisions - Types of Awards - Dilution E. 401(k) Employee Benefit Plans Vote in accordance with Glass Lewis analysis and recommendation on proposals to implement a 401(k) savings plan for employees. F. Discounted Options/Restricted Stock 360 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Vote in accordance with Glass Lewis analysis and recommendation on discounted options and restricted stock without performance criteria (except restricted stock in U.S.-style stock option plans, which are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal.) G. Pension Fund Credits Vote for proposals that exclude pension fund credits from earnings when calculating executive compensation. In addition, vote against proposals that include pension fund credits in earnings when calculating executive compensation. VIII State of Incorporation A. Re-Incorporation Proposals Proposals to change a corporation's state of incorporation are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. B. State Takeover Statutes Proposals to opt in or opt out of state takeover statutes are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. C. State Fair Price Provisions Proposals to opt out of S.F.P's are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. D. Stakeholder Laws Vote for proposals to opt out of stakeholder laws (allowing directors to weigh the interest of constituencies other than shareholders in the process of corporate decision making). E. Disgorgement Provisions Proposals to opt out of disgorgement provisions are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. IX Mergers and Corporate Restructurings A. Mergers and Acquisitions Votes on mergers and acquisitions are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. The voting decision depends on a number of factors, including: - - Anticipated financial and operating benefits - - Offer price (cost vs. premium) - - Prospects of the combined companies - - How the deal was negotiated - - Changes in corporate governance and their impact on shareholder rights - - Other pertinent factors discussed below. B. Corporate Restructurings Votes on corporate restructuring proposals, including minority squeezeouts, leveraged buyouts, spin-offs, liquidations and asset sales, are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal. C. Spin-Offs Votes on spin-offs are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal, considering - - The tax and regulatory advantages - - Planned use of the sale proceeds - - Market focus 361 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - - Managerial incentives. D. Asset Sales Votes on asset sales are normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal, considering - - The impact on the balance sheet/working capital - - The value received for the asset - - The potential elimination of diseconomies. E. Liquidations Votes on liquidations normally voted in accordance with Glass Lewis analysis and recommendation on each individual proposal, after reviewing - - Management's efforts to pursue other alternatives - - The appraisal value of the assets - - The compensation plan for executives managing the liquidation. F. Rights of Appraisal Vote for shareholder proposals to provide rights of appraisal to dissenting shareholders. G. Changing Corporate Name Vote for changing the corporate name. X Social Issues Proposals A. Social Issues Proposals Vote in accordance with Glass Lewis analysis and recommendation on each individual proposal, which is based on expected effect on shareholder value, and then voted accordingly. XI Proxies Not Voted A. Shares Out on Loan Proxies are not available to be voted when shares are out on loan through client securities lending programs with their custodians. B. Share-Blocking Proxies are not voted for countries with "share-blocking", generally, voting would restrict ability to sell shares. A list of countries with "share-blocking" is available upon request. C. Other There may be circumstances, such as costs or other factors, where Nicholas-Applegate would in its reasonable discretion refrain from voting proxy shares. 362 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- OPPENHEIMER CAPITAL LLC Proxy Voting Policy and Procedures General Policy Rule 206(4)-6 under the Investment Advisers Act of 1940 requires an investment adviser that exercises voting authority over client proxies to adopt and implement policies and procedures that are reasonably designed to ensure that the investment adviser votes client and fund securities in the best interests of clients and fund investors and addresses how conflicts of interest are handled. Oppenheimer Capital LLC (the "Company") typically votes proxies as part of its discretionary authority to manage accounts, unless the client has explicitly reserved the authority for itself. When voting proxies, the Company's primary objective is to make voting decisions solely in the best economic interests of its clients. The Company will act in a manner which is intended to enhance the economic value of the underlying portfolio securities held in its clients' accounts. This policy sets forth the general standards for proxy voting whereby the Company has authority to vote its clients' proxies with respect to portfolio securities held in the accounts of its clients for whom it provides discretionary investment management services. Under the rule, an investment adviser can have implicit or explicit proxy voting authority, and an adviser must vote proxies even if the advisory contract is silent on this question where its authority is implied by the overall delegation of discretionary authority. In some situations, the client may prefer to retain proxy voting authority or direct proxy voting authority to a third party. The Company is only relieved of the duty to vote proxies in such cases when the client investment advisory agreement or another operative document clearly reserves or assigns proxy voting authority to the client or to a third party. I. Proxy Voting Guidelines A. Proxy Guidelines. The Company has adopted written Proxy Voting Guidelines (the "Proxy Guidelines") that are reasonably designed to ensure that the firm is voting in the best interest of its clients and fund investors (See Appendix No. 1). The Proxy Guidelines reflect the Company's general voting positions on specific corporate governance issues and corporate actions. The Proxy Guidelines address routine as well as significant matters commonly encountered. However, because the Proxy Guidelines cannot anticipate all situations and the surrounding facts of each proxy issue (including, without limitation, foreign laws and practices that may apply to a proxy), some proxy issues may require a case-by-case analysis (whether or not required by the Proxy Guidelines) prior to voting and may result in a vote being cast that will deviate from the Proxy Guidelines. In such cases, the proxy voting procedures established by the Proxy Committee for such situations (and described below) will be followed. B. Client Instructions to Vote in a Particular Manner. Upon receipt of a client's written request, the Company may also vote proxies for that client's account in a particular manner that may differ from the Proxy Guidelines. The Company shall not vote shares held in one client's account in a manner designed to benefit or accommodate any other client. C. Cost-Benefit Analysis Involving Voting Proxies. The Company may review additional criteria associated with voting proxies and evaluate the expected benefit to its clients when making an overall determination on how or whether to vote a proxy. Given the outcome of the cost-benefit analysis, the Company may refrain from voting a proxy on behalf of its clients' accounts. In addition, the Company may refrain from voting a proxy on behalf of its clients' accounts due to de-minimis holdings, immaterial impact on the portfolio, items relating to foreign issues (such as those described below), timing issues related to the opening/closing of accounts and contractual arrangements with clients and/or their authorized delegate. For example, the Company may refrain from voting a proxy of a foreign issue due to logistical considerations that may have a detrimental effect on the Company's ability to vote the proxy. These issues may include, but are not limited to: (i) proxy statements and ballots being written in a foreign language, (ii) untimely notice of a shareholder meeting, (iii) requirements to vote proxies in person, (iv) restrictions on foreigner's ability to exercise votes, (v) restrictions on the sale of securities for a period of time in proximity to the shareholder meeting, or (vi) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis. 363 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- D. Share Blocking and Shares Out on Loan. The Company will generally refrain from voting proxies on foreign securities that are subject to share blocking restrictions. In addition, proxies will typically not be voted when shares are out on loan through client securities lending programs with their custodians. E. Case-by-Case Proxy Determinations. With respect to a proxy ballot that requires a case-by-case voting determination where the Company has not instructed the Proxy Provider (as defined below) how to vote the proxy prior to the proxy voting deadline, the Company has directed the Proxy Provider to vote with management of the issuer. II. Outsourcing the Proxy Voting Process The Company has retained an independent third party service provider (the "Proxy Provider") to assist in the proxy voting process by implementing the votes in accordance with the Proxy Guidelines as well as assisting in the administrative process. The services provided offer a variety of proxy-related services to assist the Company's handling of proxy voting responsibilities. III. Proxy Committee The Company has also established a Proxy Committee that is responsible for overseeing the proxy voting process and ensuring that the voting process is implemented in accordance with these Proxy Voting Policy and Procedures. The Proxy Committee meets at a minimum on a semi-annual basis and when necessary to address potential conflicts of interest. The Company may have conflicts of interest that could potentially affect how it votes its clients' proxies. For example, the Company may manage a pension plan whose management is sponsoring a proxy proposal relating to a security held in another client's account. In order to ensure that all material conflicts of interest are addressed appropriately while carrying out the Company's obligation to vote proxies, the Proxy Committee is responsible for developing a process to identify proxy voting issues that may raise conflicts of interest between the Company and its clients and to resolve such issues. The Proxy Committee will also perform the following duties: 1. Approve and monitor the outsourcing of voting obligations to the Proxy Provider; 2. Develop a process for resolution of voting issues that require a case-by-case analysis (either because the Proxy Guidelines require a case-by-case analysis or the Proxy Guidelines do not specify a vote for a particular proxy issue) or involve a potential conflict of interest (in consultation with the relevant portfolio manager and/or analyst when appropriate), monitor such process and ensure that the resolutions of such issues are properly documented; 3. Monitor proxy voting (or the failure to vote) based on the Company's instructions or recommendations to (i) abstain from a vote, (ii) vote contrary to its Proxy Guidelines or (iii) take voting action based on the Company's interpretation of a Proxy Guideline, and ensure that the reasons for such actions are properly documented; 4. Oversee the maintenance of records regarding proxy voting decisions in accordance with the standards set forth by this policy and applicable law; and 5. Review, at least annually, all applicable processes and procedures, voting practices, the adequacy of records and the use of third party services and update or revise as necessary. IV. Proxy Voting - Conflicts of Interest The Proxy Committee has determined that if a particular proxy vote is specified by the Proxy Guidelines and the Company, in fact, votes in accordance with the Proxy Guidelines, a potential conflict of interest does not arise. In all other cases, proxy proposals will be reviewed for potential conflicts of interest and will be monitored to ensure the sufficiency of documentation supporting the reasons for such proxy vote. If a potential conflict of interest is identified, the Proxy Committee will review the voting decision to ensure that the voting decision has not been affected by the potential conflict. V. Investment Management Personnel Responsibilities The Company has assigned responsibility to its Chief Investment Officers for the review of the Proxy Guidelines on an annual basis to ensure that the guidelines are consistent with the Company's position on various corporate 364 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- governance issues and corporate actions and to make any amendments as necessary. All amendments to the Proxy Guidelines will be communicated promptly to the Proxy Provider by the Company. In addition, the following types of "case-by-case" proxy proposals are required to be reviewed by the appropriate portfolio manager and/or analyst (subject to the conflicts of interests procedures established by the Proxy Committee): 1. Proxy proposals which are specified as case-by-case according to the Proxy Guidelines; 2. Proxy proposals which are not currently covered by the Proxy Guidelines and are referred back to the Company as case-by-case; 3. Bundled proxy proposals which require a single vote and are referred back to the Company as case-by-case; and 4. Proxy proposals where the Proxy Provider does not have sufficient information to evaluate the proposal and are referred back to the Company as case-by-case. VI. Disclosure of Proxy Voting Policies and Procedures The Company shall provide clients with a copy of the Proxy Voting Policy and Procedures upon request. In addition, a summary of this policy is disclosed in Part II of the Company's Form ADV which is provided to clients at or prior to entering into an investment advisory agreement with a client and is also offered to existing clients on an annual basis. VII. Providing Clients Access to Voting Records Generally, clients of the Company have the right, and shall be afforded the opportunity, to have access to records of voting actions taken with respect to securities held in their respective accounts. Proxy voting reports for clients who request such voting records are typically prepared by the Proxy Provider on a quarterly basis and sent to the client by the Company's applicable client service representative. Shareholders and unit-holders of commingled funds managed by the Company shall have access to voting records pursuant to the governing documents of the commingled fund. Proxy voting actions are confidential and may not be disclosed to third parties except as may be required by law, requested by regulators or authorized by the applicable client. VIII. Maintenance of Proxy Voting Records Rule 204-2 under the Investment Advisers Act of 1940 requires investment advisers that vote client proxies to maintain specified records with respect to those clients. The Company must maintain the following records relating to proxy voting: 1. Copies of the Company's Proxy Voting Policies, Procedures and Guidelines; 2. Copies or records of each proxy statement received with respect to clients' securities for whom the Company exercises voting authority; 3. A record of each vote cast on behalf of a client; 4. A copy of any document created by the Company that was material to making a decision how to vote proxies on behalf of a client or that memorializes the basis for that decision; and 5. A copy of each written client request for information on how the Company voted proxies on behalf of the client, and a copy of any written response by the Company to any client request for information (either written or oral) on how the Company voted proxies on behalf of the requesting client. Records are to be kept for a period of at least six years following the date that the vote was cast. The Company may maintain the records electronically. The Company may also satisfy the second and third requirement by relying on the Proxy Provider to maintain the required records on the Company's behalf. As such, the Proxy Provider must provide a copy of the records promptly upon request. 365 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 12-18-06 Appendix No. 1 Oppenheimer Capital LLC Proxy Voting Guidelines Table of Contents Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Operational Items - U.S. Proposals...............................14 101. Adjourn Meeting 102. Approve Technical Amendments 103. Approve Name Change 104. Approve Other Business Operational Items - Non-U.S. Proposals...........................14 101N. Amend Articles-Technical 102N. Amend Articles to Reflect Regulatory Changes 103N. Approve Amendments to Articles of Association 104N. Change Company Name 105N. Amend Meeting Procedures/Change Date 106N. Amend Company Purpose 107N. Change Fiscal Year 108N. Consider Other Business 109N. Receive Statutory Reports 110N. Authorize Legal Formalities 111N. Approve Meeting Formalities 112N. Questions Board of Directors - U.S. Proposals..............................15 201. Elect Directors 366 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 202. Elect Contested Nominee 203. Elect Subsidiary Director(s) 204. Election of Trustee - Fund/Trust/Debtholders 205. Approve Board Size 206. Board Authority to Set Board Size 207. Approve Classified Board 208. Amend Classified Board 209. Repeal Classified Board 210. Adopt Cumulative Voting 211. Eliminate Cumulative Voting 212. Adopt Director Liability Provision 213. Amend Director Liability Provision 214. Adopt Indemnification Provision 215. Amend Indemnification Provision 216. Shareholder Approval to Fill Vacancies 217. Removal of Directors Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Board of Directors - Non-U.S. Proposals...................................17 201N. Election of Directors by Slate 202N. Appoint Board Advisors/Deputy Directors/Alternate Directors 203N. Ratify Executive Board Appointments 204N. Elect Directors-Canada 205N. Elect Directors-UK and Ireland 206N. Elect Directors-Japan 207N. Elect Directors-Other Markets 208N. Election of Trustee - Fund/Trust/Debtholders 209N. Elect Shareholder Representatives 210N. Set Board/Supervisory Board Size Limits 211N. Amend Board/Supervisory Board Size 367 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 212N. Amend Board Structure 213N. Indemnify Directors/Officers 214N. Amend Terms of Indemnification 215N. Elect Board Committee 216N. Amend Board Election Rules 217N. Establish Board Committees 218N. Appoint Board Commission 219N. Appoint Officer(s) from Board 220N. Approve Minimum Stock Ownership by Directors 221N. End Minimum Stock Ownership by Directors 222N. Reduce Board Term to One Year 223N. Preserve/Restore Supermajority to Oust Directors 224N. Amend Board Powers/Procedures/Qualifications 225N. Ratify Board Acts-Symbolic 226N. Ratify Board Acts-Legal Auditor/Financial Statement Related - U.S. Proposals........................20 301. Ratify Selection of Auditors 302. Approve Financial Statements Auditor/Financial Statement Related - Non-U.S. Proposals....................20 301N. Appoint Auditors and Set Their Fees 302N. Set Auditors' Fees 303N. Appoint Outside Auditors 304N. Appoint Secondary Outside Auditor 305N. Appoint Substitute/Back-up Auditor 306N. Elect Supervisory Board/Corporate Assembly 307N. Elect Statutory Auditors 308N. Elect Alternate Statutory Auditors 309N. Appoint Appraiser/Special Auditor/Liquidator 310N. Set Number of Auditors 311N. Set Number of Statutory Auditors 312N. Approve Maximum Statutory Auditors' Fee 313N. Approve Bonuses for Retiring Statutory Auditors Proxy Voting Guidelines - Table of Contents (Continued) 368 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Auditor/Financial Statement Related - Non-U.S. Proposals (Continued)..........21 314N. Ending Statutory Auditor Retirement Bonuses 315N. Amend Statutory Auditor Term 316N. Ratify Acts of Auditors 317N. Ratify Statutory Auditor Acts-Symbolic 318N. Ratify Statutory Auditor Acts-Legal 319N. Approve Financial Statements 320N. Approve Book Entry System 321N. Extend Consolidated Taxation Status 322N. Approve Related Party Transactions Executive and Director Compensation - U.S. Proposals..........................22 401. Adopt Stock Incentive Plan 402. Amend Stock Incentive Plan 403. Add Shares to Stock Incentive Plan 404. Extend Term of Stock Incentive Plan 405. Limit Per-Employee Awards 406. Adopt Director Stock Incentive Plan 407. Amend Director Stock Incentive Plan 408. Add Shares to Director Stock Incentive Plan 409. Adopt Employee Stock Purchase Plan 410. Amend Employee Stock Purchase Plan 411. Add Shares to Employee Stock Purchase Plan 412. Adopt Stock Award Plan 413. Amend Stock Award Plan 414. Add Shares to Stock Award Plan 415. Approve Option/Stock Awards 416. Adopt Director Stock Award Plan 417. Amend Director Stock Award Plan 418. Add Shares to Director Stock Award Plans 369 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 419. Exchange Underwater Options 420. Approve Annual Bonus Plan 421. Amend Annual Bonus Plan 422. Approve Long-Term Bonus Plan 423. Amend Long-Term Bonus Plan 424. Re-approve Option/Bonus Plan for OBRA 425. Approve Savings Plan 426. Adopt Deferred Compensation Plan 427. Amend Deferred Compensation Plan 428. Approve Employment Agreements Executive and Director Compensation - Non-U.S. Proposals......................26 401N. Approve Stock Option Plan 402N. Amend Stock Option Plan 403N. Approve Stock Option Plan for Subsidiary 404N. Approve Director Participation in Stock Plan Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Executive and Director Compensation - Non-U.S. Proposals (Continued)..........27 405N. Approve Outside Directors Stock Option Plan 406N. Amend Outside Directors Stock Option Plan 407N. Approve Stock Purchase Plan/SAYE/AESOP 408N. Amend Stock Purchase Plan/SAYE/AESOP 409N. Approve Option/Purchase Plan-Overseas Employees 410N. Approve Stock Option Grant 411N. Approve Stock Award 412N. Approve Multiple Stock Option Grants 413N. Approve Restricted Stock Grants (Japan Only) 414N. Approve Executive Profit Sharing/Bonus Plan 415N. Amend Executive Profit Sharing/Bonus Plan 370 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 416N. Approve Bonus 417N. Approve Bonuses for Retiring Directors 418N. Ending Director Retirement Bonuses 419N. Eliminate Board Retirement Bonus System 420N. Ratify Director Retirement 421N. Approve Remuneration Policy 422N. Approve Loans to Directors/Employees 423N. Establish Employee Share Trust 424N. Issue Bonds with Warrants to Employees 425N. Issue Warrants in Excess of Individual Limits 426N. Approve Directors' Fees 427N. Approve Supervisory Board/Corporate Assembly Fees 428N. Approve Board Commission Fees 429N. Approve Committee Fees 430N. Approve Committee Budget 431N. Approve Shareholder Representative Fees 432N. Approve Director Contract Capital Structure - U.S. Proposals............................................30 501. Increase Authorized Common Stock 502. Decrease Authorized Common Stock 503. Amend Authorized Common Stock 504. Approve Common Stock Issuance 505. Approve Warrants Exercisable for Common Stock 506. Authorize Dual Class Common Stock 507. Increase Authorized Dual Class Common Stock 508. Eliminate Dual Class Common Stock 509. Amend Dual Class Common Stock 510. Eliminate Preemptive Rights 511. Restore Preemptive Rights 512. Authorize Preferred Stock 513. Increase Authorized Preferred Stock 514. Decrease Authorized Preferred Stock 515. Amend Authorized Preferred Stock Proxy Voting Guidelines - Table of Contents (Continued) 371 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Capital Structure - U.S. Proposals (Continued)................................31 516. Cancel Series of Preferred Stock 517. Approve Issuance/Conversion of Preferred Stock 518. Approve Recapitalization 519. Approve Stock Split 520. Approve Reverse Stock Split 521. Approve Share Repurchase Capital Structure - Non-U.S. Proposals........................................31 501N. Cancel Series of Preferred Stock 502N. Approve Issuance/Conversion of Preferred Stock 503N. Approve Recapitalization 504N. Approve Stock Split 505N. Approve Reverse Stock Split 506N. Approve Share Repurchase 507N. Authorize New Stock Class 508N. Reauthorize Share Issue Limit 509N. Authorize Issuance of Differential Voting Stock 510N. Amend Share Class Rights 511N. Issue Stock with Preemptive Rights 512N. Issue Stock without Preemptive Rights 513N. Issue Stock with Warrants 514N. Issue Bonds with Warrants 515N. Issue Warrants with Preemptive Rights 516N. Issue Warrants without Preemptive Rights 517N. Authorize Creation of Preferred Stock 518N. Approve Issue of Preferred Stock 519N. Increase Authorized Preferred Stock 520N. Amend Authorized Preferred Stock 521N. Issue Debt Instruments 372 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 522N. Issue Convertible Debt Instruments 523N. Amend Terms of Debt Instruments 524N. Approve Borrowing 525N. Approve Borrowing Powers 526N. Convert One Form of Stock to Another 527N. Approve Stock Split 528N. Approve Reverse Stock Split 529N. Reduce Authorized Capital when Shares Repurchased 530N. Authorize Share Repurchase 531N. Waive Approval of Share Repurchase 532N. Re-issuance of Shares/Treasury Stock 533N. Set Price of Reissued Treasury Stock 534N. Amend Articles to Reflect Capital Increase/Decrease 535N. Amend Articles Regarding Issuance of Capital 536N. Amend Articles to Authorize Share Repurchase 537N. Amend Articles Regarding Treasury Shares Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Capital Structure - Non-U.S. Proposals (Continued)............................35 538N. Approve Use/Transfer of Reserves 539N. Transfer Shareholder Equity Funds 540N. Authorize Trade in Company Stock 541N. Amend Tradable Lot Size 542N. Restate/Adjust Capital for Inflation 543N. Amend Reporting Currency 544N. Reduce Share Premium Account 545N. Allow Company to Give Guarantees 546N. Add/Remove Exchange Listing(s) 547N. Appoint Risk-Rating Agency 548N. Authorize Nominal Capital Repayment 373 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 549N. Set Dividend/Allocate Profits 550N. Allocate Dividend 551N. Waive Shareholder Approval for Profit Allocation 552N. Approve Scrip Dividend/Dividend Reinvestment Plan 553N. Approve Special Dividend/Bonus Share Issue 554N. Amend Dividend Distribution Rules 555N. Approve Interim Dividend Mergers and Corporate Restructurings - U.S. Proposals.........................37 601. Approve Merger/Acquisition 602. Approve Restructuring 603. Approve Bankruptcy Restructuring 604. Approve Liquidation 605. Ratify Liquidator's Fees 606. Approve Leveraged Buyout 607. Approve Spin-Off 608. Approve Sale of Assets Mergers and Corporate Restructurings - Non-U.S. Proposals.....................38 601N. Approve Merger/Acquisition 602N. Approve Joint Venture/Strategic Alliance 603N. Approve Restructuring/Recapitalization 604N. Dissolve Company/Approve Liquidation 605N. Approve Divestiture/Spin-Off 606N. Approve Intra-Company Contracts 607N. Extend Investment Trust 608N. Dissolve Investment Trust 609N. Create Parent Holding Company Anti-Takeover Defenses/Voting Related Issues - U.S. Proposals.................38 701. Adopt Advance Notice Requirement 702. Approve Non-Technical Charter Amendments 703. Approve Non-Technical Bylaw Amendments 704. Adopt Poison Pill Proxy Voting Guidelines - Table of Contents (Continued) 374 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- Anti-Takeover Defenses/Voting Related Issues - U.S. Proposals (Continued).....39 705. Redeem Poison Pill 706. Eliminate Written Consent 707. Limit Written Consent 708. Restore Written Consent 709. Eliminate Special Meeting 710. Limit Special Meeting 711. Restore Special Meeting 712. Adopt Supermajority Requirement for Business Transactions 713. Amend Supermajority Requirement for Business Transactions 714. Eliminate Supermajority Requirement for Business Transactions 715. Adopt Supermajority Lock-in 716. Amend Supermajority Lock-in 717. Eliminate Supermajority Lock-in 718. Consider Non-Financial Effects of Merger Anti-Takeover Defenses/Voting Related Issues - Non-U.S. Proposals.............40 701N. Adopt Poison-Pill-Style Defense 702N. Amend Poison-Pill-Style Defense 703N. Limit Voting Rights 704N. Amend Voting Rights Limit 705N. End Voting Rights Limit 706N. Require Voting Supermajority 707N. Amend Supermajority Requirement 708N. End Voting Supermajority 709N. Approve Share Transfer/Registration 710N. End Share Transfer/Registration 711N. Registration of Shares 712N. End Foreign Investor Restrictions 713N. Amend Foreign Investor Restrictions 375 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 714N. Amend Shareholder Disclosure Rules 715N. Waive Mandatory Takeover Requirement 716N. Require Approval for Partial Takeover Bids 717N. Authorize Voting Record Date Changes (Japan Only) State of Incorporation - U.S. Proposals.......................................42 801. Adopt Fair Price Provision 802. Amend Fair Price Provision 803. Repeal Fair Price Provision 804. Adopt Anti-Greenmail Provision 805. Approve Reincorporation 806. Opt Out of State Takeover Law 807. Opt Into State Takeover Law Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Management Proposals - -------------------------------------------------------------------------------- State of Incorporation - Non-U.S. Proposals...................................43 801N. Approve Reincorporation 802N. Relocate Corporate Headquarters Corporate Responsibility - Non-U.S. Proposals.................................43 901N. Authorize Charitable Donations 902N. Approve Political Donation Other - U.S. Proposals........................................................43 1001. Miscellaneous Proposals Other - Non-U.S. Proposals....................................................43 1001N. Approve Electronic Share Trading 376 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1002N. Approve Property Purchase 1003N. Approve Property Sale 1004N. Ratify Management Acts-Symbolic 1005N. Ratify Management Acts-Legal 1006N. Adopt Corporate Governance Standards 1007N. Miscellaneous Proposals Shares Out on Loan - U.S. Proposals...........................................44 1100. Shares Out on Loan Share Blocking and Share Out on Loan - Non-U.S. Proposals.....................44 1100N. Share Blocking and Shares Out on Loan 377 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Shareholder Proposals - -------------------------------------------------------------------------------- Operational Items - U.S. Proposals............................................45 SP-101. Change Annual Meeting Location SP-102. Change Annual Meeting Date SP-103. Improve Meeting Reports Board of Directors - U.S. Proposals...........................................45 SP-201. Majority Vote to Elect Directors SP-202. Director Tenure/Retirement Age SP-203. Repeal Classified Board SP-204. Double Board Nominees SP-205. Adopt Cumulative Voting SP-206. Director Liability SP-207. Independent Board Chairman SP-208. Lead Director SP-209. Allow Union/Employee Representatives on Board SP-210. Increase Board Independence SP-211. Create Nominating Committee SP-212. Increase Nominating Committee Independence SP-213. Create Shareholder Committee SP-214. Create Compensation Committee SP-215. Hire Independent Compensation Consultant SP-216. Increase Compensation Committee Independence SP-217. Increase Key Committee Independence SP-218. Minimum Stock Ownership by Directors SP-219. Directors' Role in Corporate Strategy SP-220. Require Nominee Statement in Proxy Board of Directors - Non-U.S. Proposals.......................................47 378 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-201N. Elect Dissident Directors SP-202N. Elect Dissident Supervisory Board SP-203N. Set Age Limit on Directors SP-204N. Oust Director(s) SP-205N. Establish Key Board Committees SP-206N. Amend Board Procedures SP-207N. Limit Number of Boards Auditor/Financial Statement Related - U.S. Proposals..........................48 SP-301. Shareholder Approval of Auditors SP-302. Limit Non-Audit Fees SP-303. Increase Audit Committee Independence SP-304. Auditor Attendance SP-305. Rotate Auditors Executive and Director Compensation - U.S. Proposals..........................48 SP-401. Restrict/Reform Executive Compensation SP-402. Approve Executive Compensation Proxy Voting Guidelines - Table of Contents (Continued) Proposal - ------------------------------------------------------------------------------ No. Description Page # - ------------------------------------------------------------------------------ Shareholder Proposals - ------------------------------------------------------------------------------ Executive and Director Compensation - U.S. Proposals (Continued)..............48 SP-403. Disclose Executive Compensation SP-404. Cap Executive Pay SP-405. Require Equity Awards to be Held SP-406. Restrict Director Compensation SP-407. Pay Directors in Stock SP-408. Restrict Director Pensions SP-409. No Re-pricing of Underwater Options SP-410. Award Performance-Based Options SP-411. Golden Parachutes 379 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-412. Add Performance Criteria to Equity-Based Awards SP-413. Expense Stock Options SP-414. Pension Fund Surplus SP-415. Approve and/or Disclose SERPs Executive and Director Compensation - Non-U.S. Proposals......................50 SP-401N. Oppose/Change Executive Pay Capital Structure - U.S. Proposals............................................50 SP-501. Restore Preemptive Rights Capital Structure - Non-U.S. Proposals........................................50 SP-501N. Restrict Capital Increases SP-502N. Restore Preemptive Rights SP-503N. Remove Multiple-Voting Rights SP-504N. Increase Dividend SP-505N. Redistribute Profits Mergers and Corporate Restructurings - U.S. Proposals.........................50 SP-601. Study Sale or Spin-Off Mergers and Corporate Restructurings - Non-U.S. Proposals.....................50 SP-601N. Oppose Merger/Acquisition SP-602N. Restructure Investments SP-603N. Liquidate Company Anti-Takeover Defenses/Voting Related Issues - U.S. Proposals.................51 SP-701. Redeem or Vote on Poison Pill SP-702. Right to Act by Written Consent SP-703. Restore Right to Call Special Meeting SP-704. Eliminate Supermajority Provision SP-705. Reduce Supermajority Provision SP-706. Prohibit Targeted Share Placement SP-707. Counting Shareholder Vote Proxy Voting Guidelines - Table of Contents (Continued) 380 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Shareholder Proposals - -------------------------------------------------------------------------------- Anti-Takeover Defenses/Voting Related Issues - U.S. Proposals (Continued).....51 SP-708. No Discretionary Voting SP-709. Adopt Confidential Voting SP-710. Equal Access to the Proxy Anti-Takeover Defenses/Voting Related Issues - Non-U.S. Proposals.............52 SP-701N. End Bars on Foreign Investors SP-702N. End Voting Rights Limitation SP-703N. Facilitate Shareholder Proposals SP-704N. Approve Confidential Voting State of Incorporation - U.S. Proposals.......................................52 SP-801. Repeal Fair Price Provision SP-802. Adopt Anti-Greenmail Provision SP-803. Reincorporation SP-804. Opt Out of State Takeover Statute Corporate Responsibility - U.S. Proposals.....................................53 SP-901. Review or Promote Animal Welfare SP-902. Review Drug Pricing or Distribution SP-903. Review Response to or Impact of Pandemics SP-904. Review Tobacco Marketing SP-905. Sever Links with Tobacco Industry SP-906. Review or Reduce Tobacco Harm to Health SP-907. Review Nuclear Facility/Waste SP-908. Review Energy Efficiency & Renewables SP-909. Endorse Ceres Principles SP-910. Control Generation of Pollutants SP-911. Report on Environmental Impact or Plans SP-912. Review Social Impact of Financial Ventures 381 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-913. Report or Take Action on Climate Change SP-914. Review/Reduce Product Toxicity SP-915. Review/Reduce Toxicity of Product Formulation SP-916. Review or Curb Bioengineering SP-917. Preserve/Report on Natural Habitat SP-918. Report on Sustainability SP-919. Review Charitable Giving Policy SP-920. Limit or End Charitable Giving SP-921. Review Political Spending or Lobbying SP-922. Limit or End Political Spending SP-923. Disclose Prior Government Service SP-924. Affirm Political Nonpartisanship SP-925. Link Executive Pay to Social Criteria SP-926. Develop/Report on Human Rights Policy SP-927. Review/Develop Ethics Policy SP-928. Review Operations' Impact on Local Groups Proxy Voting Guidelines - Table of Contents (Continued) Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Shareholder Proposals - -------------------------------------------------------------------------------- Corporate Responsibility - U.S. Proposals (Continued).........................56 SP-929. Burma-Limit or End Operations SP-930. Burma-Review Operations SP-931. China-No Use of Forced Labor SP-932. China-Adopt Code of Conduct SP-933. Review Mexican Work Force Conditions SP-934. Adopt Standards for Mexican Operation SP-935. Review or Implement MacBride Principles SP-936. Urge MacBride on Contractor/Franchisee SP-937. Review Global Labor Practices SP-938. Review Developing Country Debt SP-939. Review Military Contracting Criteria 382 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-940. Review Economic Conversion SP-941. Review Space Weapons SP-942. Review Foreign Military Sales SP-943. Limit or End Nuclear Weapons Production SP-944. Review Nuclear Weapons Production SP-945. Review Fair Lending Policy SP-946. Review Job Cuts or Relocations SP-947. Report on EEO SP-948. Board Inclusiveness SP-949. Drop Sexual Orientation from EEO Policy SP-950. Adopt Sexual Orientation Anti-Bias Policy SP-951. Monitor/Adopt ILO Provisions SP-952. Miscellaneous Corporate Responsibility Proposals Corporate Responsibility - Non-U.S. Proposals.................................58 SP-901N. Review Nuclear Facility/Waste SP-902N. Review Energy Efficiency & Renewables SP-903N. Control Generation of Pollutants SP-904N. Report on Environmental Impact or Plans SP-905N. Report or Take Action on Climate Change SP-906N. Preserve/Report on Natural Habitat SP-907N. Review Charitable Giving Policy SP-908N. Review Political Spending or Lobbying SP-909N. Limit or End Political Spending SP-910N. Develop/Report on Human Rights Policy SP-911N. Commit to Increase Representation of Women SP-912N. Monitor/Adopt ILO Provisions SP-913N. Miscellaneous Corporate Responsibility Proposals Other - U.S. Proposals........................................................59 SP-1001. Miscellaneous Proposals Proxy Voting Guidelines - Table of Contents (Continued) 383 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proposal - -------------------------------------------------------------------------------- No. Description Page # - -------------------------------------------------------------------------------- Shareholder Proposals - -------------------------------------------------------------------------------- Other - Non-U.S. Proposals....................................................59 SP-1001N. Improve Disclosure SP-1002N. Miscellaneous Proposals Shares Out on Loan - U.S. Proposals...........................................60 SP-1100. Shares Out on Loan Share Blocking and Shares Out on Loan - U.S. Proposals........................60 SP-1100N. Share Blocking and Shares out on Loan 384 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- GUIDELINES FOR VOTING ON MANAGEMENT PROPOSALS The Company will generally vote on management proposals in accordance with the following guidelines, however, because the Proxy Guidelines cannot anticipate all situations and the surrounding facts of each proxy issue (including, without limitation, foreign laws and practices that may apply to a proxy), some proxy issues may require a case-by-case analysis (whether or not required by the Proxy Guidelines) prior to voting and may result in a vote being cast that will deviate from the Proxy Guidelines. In such cases, the proxy voting procedures established by the Proxy Committee for such situations will be followed. OPERATIONAL ITEMS - U.S. PROPOSALS - -------------------------------------------------------------------------------- 101. Adjourn Meeting: The Company will vote for management proposals to adjourn meetings. 102. Approve Technical Amendments: The Company will vote for management proposals to approve technical amendments. For this proposal, amendments may include restatements to omit spelling or grammatical errors, to change the company's business purpose, or other similar technical changes. They do not include amendments that could affect shareholder rights or claims on the company or that could be deemed to be anti-takeover measures. 103. Approve Name Change: The Company will vote for management proposals regarding corporate name changes. 104. Approve Other Business: The Company will vote against management proposals to seek to approve other business. OPERATIONAL ITEMS - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 101N. Amend Articles-Technical: The Company will vote for management proposals to amend technical changes to the company's legal documents. 102N. Amend Articles to Reflect Regulatory Changes: The Company will vote for management proposals to amend its articles to reflect regulatory changes. 103N. Approve Amendments to Articles of Association: The Company will evaluate management proposals to approve amendments to the articles of association on a case-by-case basis. 104N. Change Company Name: The Company will vote for management proposals to change the company's name. OPERATIONAL ITEMS - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 385 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 105N. Amend Meeting Procedures/Change Date: The Company will vote for management proposals to amend meeting procedures or change meeting dates. 106N. Amend Company Purpose: The Company will vote for management proposals to amend the description of what the company does. 107N. Change Fiscal Year: The Company will vote for management proposals to change the company's fiscal year. 108N. Consider Other Business: The Company will vote against management proposals to consider other business. 109N. Receive Statutory Reports: The Company will vote for management proposals to receive statutory reports. 110N. Authorize Legal Formalities: The Company will vote for management proposals to authorize legal formalities to ensure that the meeting is properly summoned, conducted and concluded, and its decisions carried out. 111N. Approve Meeting Formalities: The Company will vote for management proposals to approve meeting formalities. 112N. Questions: The Company will evaluate management proposals that allow for the use of Agenda items (may be labeled voting or nonvoting) indicating questions will be taken from the floor on a case-by-case basis. BOARD OF DIRECTORS - U.S. PROPOSALS - -------------------------------------------------------------------------------- 201. Elect Directors: The Company will vote for management proposals in connection with the routine election of directors unless certain independence issues exist. The Company will withhold votes from a nominee as follows: 1. Withhold votes from any non-independent nominee (excluding the CEO) if employees or affiliated directors comprise more than 50% of the board; 2. Withhold votes from any non-independent nominee on the audit committee if 1% or more of directors serving on that committee are not independent; 3. Withhold votes from any non-independent nominee on the compensation committee if 1% or more of directors serving on that committee are not independent; 4. Withhold votes from any non-independent nominee on the nominating committee if 1% or more of directors serving on that committee are not independent; and BOARD OF DIRECTORS - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 5. Withhold votes from any nominee who attended less than 75% of the board and committee meetings that they were scheduled to attend during the previous fiscal year. 386 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 202. Elect Contested Nominee: The Company will evaluate management proposals to elect contested nominees on a case-by-case basis. 203. Elect Subsidiary Director(s): The Company will vote for management proposals to elect directors to a subsidiary corporation. 204. Election of Trustee - Fund/Trust/Debtholders: The Company will vote for management proposals relating to the election of trustees. 205. Approve Board Size: The Company will vote for management proposals that seek to approve board size unless: 1. The proposed maximum board size is greater than 12 directors; or 2. The board will consist of less than 3 directors. 206. Board Authority to Set Board Size: The Company will vote against management proposals which would give the board authority to set the size of the board without shareholder approval. 207. Approve Classified Board: The Company will vote against management proposals to approve classified boards. Under a classified board structure, directors are divided into separate classes (usually three) with the directors in each class elected to overlapping multiyear terms. 208. Amend Classified Board: The Company will evaluate management proposals to amend classified boards on a case-by-case basis. 209. Repeal Classified Board: The Company will vote for management proposals to repeal classified boards. 210. Adopt Cumulative Voting: The Company will vote against management proposals to adopt cumulative voting. Cumulative voting permits shareholders to apportion the total number of votes they are entitled to cast for one director among the candidates. The total number of votes is equal to the total number of directors to be elected at the meeting multiplied by the number of shares eligible to be voted. 211. Eliminate Cumulative Voting: The Company will vote for management proposals to eliminate cumulative voting. BOARD OF DIRECTORS - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 212. Adopt Director Liability Provision: The Company will vote for management proposals to adopt director liability provisions. 387 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 213. Amend Director Liability Provision: The Company will vote for management proposals to amend director liability provisions. 214. Adopt Indemnification Provision: The Company will vote for management proposals to adopt indemnification provisions. 215. Amend Indemnification Provision: The Company will vote for management proposals to amend indemnification provisions. 216. Shareholder Approval to Fill Vacancies: The Company will vote against management proposals which allow the board to fill vacancies without shareholder approval. 217. Removal of Directors: The Company will evaluate management proposals to remove members from the board on a case-by-case basis. BOARD OF DIRECTORS - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 201N. Election of Directors by Slate: The Company will vote for management proposals to elect directors by slate. 202N. Appoint Board Advisors/Deputy Directors/Alternate Directors: The Company will vote for management proposals to select nominees to serve as advisers, deputy directors or alternate directors to the board. 203N. Ratify Executive Board Appointments: The Company will vote for management proposals to ratify executive board appointments. 204N. Elect Directors-Canada: The Company will vote for management proposals in connection with the routine election of directors unless certain independence issues exist. The Company will withhold votes from a nominee as follows: 1. Withhold votes from all nominees if employees or affiliated directors comprise more than 50% of the board; 2. Withhold votes from any non-independent nominee on the audit committee if 1% or more of directors serving on that committee are not independent; 3. Withhold votes from any non-independent nominee on the compensation committee if 1% or more of directors serving on that committee are not independent; and BOARD OF DIRECTORS - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 4. Withhold votes from any non-independent nominee on the nominating committee if 1% or more of directors serving on that committee are not independent. 388 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 205N. Elect Directors-UK and Ireland: The Company will vote for management proposals in connection with the routine election of directors unless certain independence issues exist. The Company will vote against any non-independent nominee as follows: 1. Vote against all nominees if employees or affiliated directors comprise more than 50% of the board; 2. Vote against any employee nominee who serves on the audit committee; 3. Vote against any employee who serves on the remuneration committee; 4. Vote against any employee who serves on the nominating committee; 5. Vote against any non-independent nominee who serves on the audit committee if 1% or more of the directors serving on the audit committee are not independent; 6. Vote against any non-independent nominee who serves on the remuneration committee if 1% or more of directors serving on the remuneration committee are not independent; or 7. Vote against any non-independent nominee who serves on the nominating committee if 1% or more of directors serving on the nominating committee are not independent. 206N. Elect Directors-Japan: The Company will vote for management proposals to elect directors on Japanese company ballots unless executives comprise more than 50% of the board. 207N. Elect Directors-Other Markets: The Company will vote for management proposals to elect directors in other markets unless certain independence issues exist. The company will vote against any non-independent nominee as follows: 1. Vote against all nominees if employees or affiliated directors comprise more than 50% of the board; 2. Vote against all nominees if executives or affiliated directors comprise more than 50% of the board; 3. Vote against any executive nominee who serves on the audit committee; 4. Vote against any executive nominee who serves on the remuneration committee; 5. Vote against any executive nominee who serves on the nominating committee; 6. Vote against any non-independent nominee on the audit committee if 1% or more of directors serving on that committee are not independent; - -------------------------------------------------------------------------------- BOARD OF DIRECTORS - NON-U.S. PROPOSALS (CONTINUED) 7. Vote against any non-independent nominee on the compensation committee if 1% or more of directors serving on that committee are not independent; and 8. Vote against any non-independent nominee on the nominating committee if 1% or more of directors serving on that committee are not independent. 208N. Election of Trustee - Fund/Trust/Debtholders: The Company will evaluate management proposals relating to the election of trustees on a case-by-case basis. 209N. Elect Shareholder Representatives: The Company will vote for management proposals to elect the nominees who are available and qualified to act as shareholder representatives. 210N. Set Board/Supervisory Board Size Limits: The Company will vote for management proposals to set size limits for the board or supervisory board. 389 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 211N. Amend Board/Supervisory Board Size: The Company will vote for management proposals to amend the size of the board or supervisory board. 212N. Amend Board Structure: The Company will vote for management proposals to amend the structure of the board unless the amendment would institute a two-tier board system. 213N. Indemnify Directors/Officers: The Company will vote for management proposals to indemnify directors and officers. 214N. Amend Terms of Indemnification: The Company will vote for management proposals to amend the terms of indemnification. 215N. Elect Board Committee: The Company will vote for management proposals to elect board committees unless the election is for an audit committee and executives will serve on the committee. 216N. Amend Board Election Rules: The Company will evaluate management proposals to amend board election rules on a case-by-case basis. 217N. Establish Board Committees: The Company will vote for management proposals to establish board committees. 218N. Appoint Board Commission: The Company will vote for management proposals to appoint board commissions. 219N. Appoint Officer(s) from Board: The Company will evaluate management proposals to appoint officer(s) from the board on a case-by-case basis. BOARD OF DIRECTORS - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 220N. Approve Minimum Stock Ownership by Directors: The Company will vote for management proposals to approve a minimum stock ownership requirement for directors. 221N. End Minimum Stock Ownership by Directors: The Company will evaluate management proposals to end minimum stock ownership requirements for directors on a case-by-case basis. 222N. Reduce Board Term to One Year: The Company will vote for management proposals to reduce the board terms to one year. 223N. Preserve/Restore Supermajority to Oust Directors: The Company will vote against management proposals to preserve or restore supermajority rule to oust directors. 390 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 224N. Amend Board Powers/Procedures/Qualifications: The Company will evaluate management proposals to amend board powers, board procedures and board qualifications on a case-by-case basis. 225N. Ratify Board Acts-Symbolic: The Company will vote for management proposals to ratify board acts (symbolic) in the previous year. This traditional housekeeping measure is symbolic in nature and carries no legal or financial consequences. 226N. Ratify Board Acts-Legal: The Company will evaluate management proposals to ratify board acts (legal) in the previous year on a case-by-case basis. AUDITOR/FINANCIAL STATEMENT RELATED - U.S. PROPOSALS - -------------------------------------------------------------------------------- 301. Ratify Selection of Auditors: The Company will vote for management proposals to ratify the selection of auditors unless the fees paid by the company for non-audit services in the prior fiscal year exceed 75% of the aggregate fees paid to the company's outside auditor. 302. Approve Financial Statements: The Company will vote for management proposals to approve the company's financial statements. AUDITOR/FINANCIAL STATEMENT RELATED - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 301N. Appoint Auditors and Set their Fees: The Company will vote for management proposals to select auditors and set their fees. AUDITOR/FINANCIAL STATEMENT RELATED - NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- 302N. Set Auditors' Fees: The Company will vote for management proposals to determine how much the auditors should be paid to perform the annual audit. 303N. Appoint Outside Auditors: The Company will vote for management proposals to appoint outside auditors. 304N. Appoint Secondary Outside Auditor: The Company will vote for management proposals to select secondary outside auditors. 305N. Appoint Substitute/Back-up Auditor: The Company will vote for management proposals to select substitute back-up auditors. 391 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 306N. Elect Supervisory Board/Corporate Assembly: Markets with a two-tier board structure typically have what's called a supervisory board (termed "supervisory auditors" in Japan), comprised of non-executives and a management board comprised of executives. The structure is prevalent in Germany, Holland, other continental European markets, Asian markets including Japan and Indonesia, and elsewhere. The Company will vote for management proposals to elect a supervisory board. 307N. Elect Statutory Auditors: The Company will vote for management proposals to elect statutory auditor board members. 308N. Elect Alternate Statutory Auditor: The Company will vote for management proposals to elect alternate statutory auditors. 309N. Appoint Appraiser/Special Auditor/Liquidator: The Company will vote for management proposals to select an appraiser to estimate the value of a proposed merger or an auditor to conduct a special audit. 310N. Set Number of Auditors: The Company will vote for management proposals that determine the appropriate number of auditors. 311N. Set Number of Statutory Auditors: The Company will vote for management proposals to set the number of statutory auditors. 312N. Approve Maximum Statutory Auditors' Fee: The Company will vote for management proposals to approve the maximum statutory auditors' fee unless the amount to be paid is not disclosed. 313N. Approve Bonuses for Retiring Statutory Auditors: The Company will vote against management proposals to approve bonuses for retiring statutory auditors. AUDITOR/FINANCIAL STATEMENT RELATED - NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- 314N. Ending Statutory Auditor Retirement Bonuses: The Company will evaluate management proposals for ending statutory auditor retirement bonuses on a case-by-case basis. 315N. Amend Statutory Auditor Term: The Company will vote for management proposals to amend the statutory auditors' term. 316N. Ratify Acts of Auditors: The Company will vote for management proposals to ratify the acts of auditors for the previous financial year unless executives sit on the audit committee or the company does not have an audit committee. 392 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 317N. Ratify Statutory Auditor Acts-Symbolic: The Company will vote for management proposals to ratify statutory auditors' acts (symbolic) in the previous year. This traditional housekeeping measure is symbolic in nature and carries no legal or financial consequences. 318N. Ratify Statutory Auditor Acts-Legal: The Company will evaluate management proposals to ratify statutory auditors' acts (legal) in the previous year on a case-by-case basis. 319N. Approve Financial Statements: The Company will vote for management proposals to approve the company's financial statements unless the auditors have qualified their opinion in their evaluation of accounts. 320N. Approve Book Entry System: The Company will vote for management proposals to approve a book entry system to record stock transactions. 321N. Extend Consolidated Taxation Status: The Company will vote for management proposals to extend an authorization that allows companies to pay taxes as a consolidated group and earn a tax break. 322N. Approve Related Party Transactions: The Company will vote for management proposals to approve related-party transactions. EXECUTIVE AND DIRECTOR COMPENSATION - U.S. PROPOSALS - -------------------------------------------------------------------------------- 401. Adopt Stock Incentive Plan: The Company will vote for management proposals to adopt stock incentive plans unless: 1. The dilution represented by the proposed plan is more than 10% of the outstanding common stock; 2. The proposed plan allows the company to re-price or replace underwater options without shareholder approval; EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 3. The proposed plan allows nonqualified options to be priced at less than 100% of the fair market value; 4. The proposed plan has an automatic share replenishment feature (evergreen plan); 5. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 1 year; 6. The plan administrator may provide loans to exercise awards; 7. The plan administrator may accelerate the vesting of outstanding awards; or 8. The plan administrator may grant reload stock options. 402. Amend Stock Incentive Plan: The Company will vote for management proposals to amend stock incentive plans unless: 1. The amendment would allow options to be priced at less than 100% of the fair market value; 393 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. The amendment allows the plan administrator to re-price or replace underwater options; 3. The amendment adds unrestricted stock awards or time-lapsing restricted stock awards that fully vest in less than 3 years; or 4. The amendment extends the post-retirement exercise period of outstanding options. 403. Add Shares to Stock Incentive Plan: The Company will vote for management proposals to add shares to stock incentive plans unless: 1. The dilution represented by the proposal is more than 10% of the outstanding common stock; 2. The plan allows the company to re-price or replace underwater options without shareholder approval; 3. The plan allows nonqualified options to be priced at less than 100% of the fair market value; 4. The plan has an automatic share replenishment feature (evergreen plan); 5. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; 6. The plan administrator may provide loans to exercise awards; 7. The plan administrator may accelerate the vesting of outstanding awards; or 8. The plan administrator may grant reload stock options. 404. Extend Term of Stock Incentive Plan: The Company will vote for management proposals to extend the term of stock incentive plans unless: EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 1. The plan allows the company to re-price or replace underwater options without shareholder approval; 2. The plan allows nonqualified options to be priced at less than 100% of the fair market value; 3. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; 4. The plan administrator may provide loans to exercise awards; 5. The plan administrator may accelerate the vesting of outstanding awards; or 6. The plan administrator may grant reload stock options. 405. Limit Per-Employee Awards: Amendments to the U.S. Tax Code, which were made in 1993, limit the deductibility of compensation paid to each of a company's five highest-paid executives up to $1 million per year. Compensation paid to an executive may be excluded from the $1 million cap if it is paid pursuant to a plan that ties pay to the company's performance. To qualify for the performance-related exemption, stock options and stock appreciation rights (SARS) awards must be priced at no less than fair market value on the grant date and shareholders must approve the maximum potential award that may be granted to each plan participant. The Company will vote for management proposals to limit per-employee awards. 406. Adopt Director Stock Incentive Plan: The Company will vote for management proposals to adopt director stock incentive plans unless: 1. The proposed plan allows nonqualified options to be priced at less than 100% of the fair market value; 2. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; 3. The plan authorizes five or more types of awards; or 4. 394 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The plan allows for non-formula, discretionary awards. 407. Amend Director Stock Incentive Plan: The Company will vote for management proposals to amend director stock incentive plans unless: 1. The amendment would allow options to be priced at less than 100% of the fair market value; 2. The amendment increases the size of the option awards; 3. The amendment adds unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; 4. The amendment would authorize five or more types of awards; or 5. The amendment would permit granting of non-formula, discretionary awards. EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 408. Add Shares to Director Stock Incentive Plan: The Company will vote for management proposals to add shares to director stock incentive plans unless: 1. The plan allows the company to re-price or replace underwater options without shareholder approval; 2. The plan allows nonqualified options to be priced at less than 100% of the fair market value; 3. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; 4. The plan authorizes five or more types of awards; or 5. The plan allows for non-formula, discretionary awards. 409. Adopt Employee Stock Purchase Plan: The Company will vote for management proposals to adopt employee stock purchase plans unless the proposed plan allows employees to purchase stock at less than 85% of the fair market value. 410. Amend Employee Stock Purchase Plan: The Company will vote for management proposals to amend employee stock purchase plans unless the amendment allows employees to purchase stock at less than 85% of the fair market value. 411. Add Shares to Employee Stock Purchase Plan: The Company will vote for management proposals to add shares to employee stock purchase plans unless the plan allows employees to purchase stock at less than 85% of the fair market value. 412. Adopt Stock Award Plan: The Company will vote for management proposals to adopt stock award plans unless the dilution represented by the proposed plan is more than 10% of outstanding common stock or the proposed plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years. 413. Amend Stock Award Plan: The Company will vote for management proposals to amend stock award plans unless the amendment shortens the vesting requirement or lessens performance requirements. 395 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 414. Add Shares to Stock Award Plan: The Company will vote for management proposals to add shares to stock award plans unless the dilution represented by the proposal is more than 10% of outstanding common stock or the plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years. 415. Approve Option/Stock Awards: The Company will vote for management proposals to approve option/stock awards unless: EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 1. The dilution represented by the award is more than 5% of outstanding common stock; 2. The option is priced at less than 85% of the fair market value on the grant date; or 3. The award is time-lapsing restricted stock that fully vests in less than 3 years. 416. Adopt Director Stock Award Plan: The Company will vote for management proposals to adopt director stock award plans unless: 1. The dilution represented by the proposal is more than 5% of outstanding common stock; 2. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; or 3. The plan allows for non-formula, discretionary awards. 417. Amend Director Stock Award Plan: The Company will vote for management proposals to amend director stock award plans unless the amendment adds unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years or the amendment would permit granting of non-formula, discretionary awards. 418. Add Shares to Director Stock Award Plans: The Company will vote for management proposals to add shares to director stock award plans unless: 1. The dilution represented by the proposal is more than 5% of outstanding common stock; 2. The plan permits unrestricted stock or time-lapsing restricted stock awards that fully vest in less than 3 years; or 3. The plan allows for non-formula, discretionary awards. 419. Exchange Underwater Options: Stock options whose exercise price is higher than the current market price of the underlying stock are said to be "underwater." One way to re-price such options is to exchange them for new options with an exercise price set at fair market value on the new grant date. The Company will vote against management proposals to exchange underwater options. 420. Approve Annual Bonus Plan: The Company will vote for management proposals to approve annual bonus plans. 421. Amend Annual Bonus Plan: The Company will vote for management proposals to amend annual bonus plans. EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 396 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 422. Approve Long-Term Bonus Plan: The Company will vote for management proposals to approve long-term bonus plans. 423. Amend Long-Term Bonus Plan: The Company will vote for management proposals to amend long-term bonus plans. 424. Re-approve Option/Bonus Plan for OBRA: The Company will vote for management proposals to re-approve option or bonus plans for OBRA. 425. Approve Savings Plan: The Company will vote for management proposals to approve savings plans. 426. Adopt Deferred Compensation Plan: The Company will vote for management proposals to adopt deferred compensation plans. 427. Amend Deferred Compensation Plan: The Company will vote for management proposals to amend deferred compensation plans. 428. Approve Employment Agreements: The Company will vote for management proposals to approve employment agreements/contracts. EXECUTIVE AND DIRECTOR COMPENSATION - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 401N. Approve Stock Option Plan: The Company will vote for management proposals to approve stock option plans unless the potential dilution from the proposed plan exceeds 5% of the current outstanding ordinary shares or the options may be granted at a discount to the fair market value. 402N. Amend Stock Option Plan: The Company will vote for management proposals to amend stock option plans unless the amendment would add shares to the plan and the potential dilution from the new shares exceeds 5% of the current outstanding ordinary shares or the amendment would allow for the grant of options at a discount to the fair market value. 403N. Approve Stock Option Plan for Subsidiary: The Company will vote for management proposals to approve stock option plans for subsidiaries unless the plan issues stock in the parent company and the potential dilution from the plan exceeds 5% of the current outstanding ordinary shares or the options may be granted at a discount to the fair market value. 404N. Approve Director Participation in Stock Plan: The Company will vote for management proposals to approve director participation in stock plans unless the potential dilution from the proposed awards exceeds 5% of the current 398 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- EXECUTIVE AND DIRECTOR COMPENSATION - NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- outstanding ordinary shares or the proposed awards may be granted at a discount to the fair market value. 405N. Approve Outside Directors Stock Option Plan: The Company will vote for management proposals to approve outside directors stock option plans unless the potential dilution from the plan exceeds 5% of the current outstanding ordinary shares or the options may be granted at a discount to the fair market value. 406N. Amend Outside Directors Stock Option Plan: The Company will vote for management proposals to amend outside director's stock option plans unless the potential dilution from all plans exceeds 5% of the current outstanding ordinary shares (if available) or the amendment will allow for the grant of options at a discount to the fair market value. 407N. Approve Stock Purchase Plan/SAYE/AESOP: The Company will vote for management proposals to approve stock purchase plans/SAYE/AESOP unless the potential dilution from the plan exceeds 10% of the current outstanding ordinary shares or the plan allows for discounts of more than 15% on stock purchases. 408N. Amend Stock Purchase Plan/SAYE/AESOP: The Company will vote for management proposals to amend stock purchase plans/SAYE/AESOP unless the amendment would add shares to the plan and the potential dilution from the new shares exceeds 10% of the current outstanding ordinary shares or the amendment would allow for discounted stock purchases of more than 15%. 409N. Approve Option/Purchase Plan-Overseas Employees: The Company will vote for management proposals to approve stock option or stock purchase plans for overseas employees unless the potential dilution from all plans exceeds 5% of the current outstanding ordinary shares (if available) or the options may be granted at a discount to the fair market value. 410N. Approve Stock Option Grant: The Company will vote for management proposals to approve stock option grants unless the potential dilution from the grant exceeds 5% of the current outstanding ordinary shares or the options may be granted at a discount to the fair market value. 411N. Approve Stock Award: The Company will vote for management proposals to approve stock awards unless the potential dilution from the stock award exceeds 5% of the current outstanding ordinary shares. 412N. Approve Multiple Stock Option Grants: Multiple stock option grants are stock grants proposed for multiple recipients, which may have varied terms that are bundled into a single proposal. The Company will vote for management proposals to approve multiple stock option grants. EXECUTIVE AND DIRECTOR COMPENSATION - NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- 413N. Approve Restricted Stock Grants (Japan Only): The Company will vote for management proposals to approve restricted stock grants on Japanese company ballots. 399 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 414N. Approve Executive Profit Sharing/Bonus Plan: The Company will vote for management proposals to approve executive profit sharing/bonus plans. 415N. Amend Executive Profit Sharing/Bonus Plan: The Company will vote for management proposals to amend executive profit sharing/bonus plans. 416N. Approve Bonus: The Company will vote for management proposals to approve bonuses unless the company does not disclose the recipient(s) and/or the amount of the bonus. 417N. Approve Bonuses for Retiring Directors: The Company will vote for management proposals to approve bonuses for retiring directors unless the bonus amounts are not disclosed or information on insider-outsider status is not provided. 418N. Ending Director Retirement Bonuses: The Company will evaluate management proposals to approve ending director retirement bonuses on a case-by-case basis. 419N. Eliminate Board Retirement Bonus System: The Company will vote for management proposals to eliminate board retirement bonus systems. 420N. Ratify Director Retirement: The Company will vote for management proposals to ratify director retirement. 420N. Approve Remuneration Policy: The Company will vote for management proposals to approve the company's remuneration policy. 422N. Approve Loans to Directors/Employees: The Company will evaluate management proposals to approve loans to board members or employees on a case-by-case basis. 423N. Establish Employee Share Trust: The Company will vote for management proposals to establish share trusts to administer and deliver shares to employees participating in incentive share plans. 424N. Issue Bonds with Warrants to Employees: The Company will evaluate management proposals to issue bonds with warrants over company shares to employees on a case-by-case basis. EXECUTIVE AND DIRECTOR COMPENSATION - NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- 425N. Issue Warrants in Excess of Individual Limits: The Company will evaluate management proposals to issue warrants in excess of individual limits on a case-by-case basis. 400 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 426N. Approve Directors' Fees: The Company will vote for management proposals to approve directors' fees unless the company does not disclose the fees that will be paid to directors. 427N. Approve Supervisory Board/Corporate Assembly Fees: The Company will vote for management proposals to approve fees of the supervisory board of corporate assembly members unless the company does not disclose the amount to be paid. 428N. Approve Board Commission Fees: The Company will vote for management proposals to approve board commission fees. 429N. Approve Committee Fees: The Company will vote for management proposals to approve committee fees unless the fees are not disclosed. 430N. Approve Committee Budget: The Company will vote for management proposals to approve the committee's budget unless the amount is not disclosed. 431N. Approve Shareholder Representative Fees: The Company will vote for management proposals to approve shareholder representative fees unless the company does not disclose the amount to be paid. 432N. Approve Director Contract: The Company will vote for management proposals to approve directors' contracts. CAPITAL STRUCTURE - U.S. PROPOSALS - -------------------------------------------------------------------------------- 501. Increase Authorized Common Stock: The Company will vote for management proposals to increase authorized common stock unless the increase is not intended to effect a merger, stock split, or recapitalization or the dilution represents more than 100% of the currently authorized shares of stock class. 502. Decrease Authorized Common Stock: The Company will vote for management proposals to decrease authorized common stock. 503. Amend Authorized Common Stock: The Company will vote for management proposals to amend authorized common stock. CAPITAL STRUCTURE - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 504. Approve Common Stock Issuance: The Company will evaluate management proposals to issue shares of common stock on a case-by-case basis. 401 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 505. Approve Warrants Exercisable for Common Stock: The Company will evaluate management proposals to approve the issuance of warrants exercisable for common stock on a case-by-case basis. 506. Authorize Dual Class Common Stock: The Company will vote against management proposals to authorize dual class common stock. 507. Increase Authorized Dual Class Common Stock: The Company will vote for management proposals to increase authorized dual class common stock unless dilution is more than 50% of the class of stock or it will allow the company to issue additional shares with superior voting rights. 508. Eliminate Dual Class Common Stock: The Company will vote for management proposals to eliminate dual class common stock. 509. Amend Dual Class Common Stock: The Company will evaluate management proposals to amend dual class common stock on a case-by-case basis. 510. Eliminate Preemptive Rights: The Company will vote for management proposals to eliminate preemptive rights. Preemptive rights give existing shareholders a "right of first refusal" to purchase new issues of shares to maintain their proportional ownership in the company. 511. Restore Preemptive Rights: The Company will vote against management proposals to restore preemptive rights. 512. Authorize Preferred Stock: The Company will vote for management proposals to issue authorized preferred stock unless the board has unlimited rights to set the terms and conditions of the shares (known as "blank check" preferred stock). 513. Increase Authorized Preferred Stock: The Company will vote for management proposals to increase authorized preferred stock unless the proposed increase creates potential dilution of more than 50% or the board has unlimited rights to set the terms and conditions of the shares. 514. Decrease Authorized Preferred Stock: The Company will vote for management proposals to decrease authorized preferred stock. 515. Amend Authorized Preferred Stock: The Company will evaluate management proposals to amend authorized preferred stock on a case-by-case basis. CAPITAL STRUCTURE - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 402 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 516. Cancel Series of Preferred Stock: The Company will vote for management proposals to cancel a series of preferred stock. 517. Approve Issuance/Conversion of Preferred Stock: The Company will vote for management proposals to approve the issuance or conversion of preferred stock unless the dilution represents more than 25% of the total voting power or the shares have voting rights superior to those of other shares. 518. Approve Recapitalization: The Company will evaluate management proposals to approve recapitalizations on a case-by-case basis. 519. Approve Stock Split: The Company will vote for management proposals seeking approval for a stock split. 520. Approve Reverse Stock Split: The Company will vote for management proposals seeking approval for a reverse stock split. 521. Approve Share Repurchase: The Company will vote for management proposals that seek approval for a stock repurchase plan. CAPITAL STRUCTURE - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 501N. Amend/Remove Par Value: The Company will vote for management proposals to amend or remove the stock's par value. 502N. Increase Authorized Capital: The Company will vote for management proposals to increase authorized capital unless: 1. The increase is greater than 50%; 2. The explicit purpose of the increase is to strengthen takeover defenses; or 3. The board can set the rights/terms of the shares at issuance. 503N. Reduce Authorized Capital: The Company will vote for management proposals to reduce authorized capital. 504N. Limit Capital Increase: The Company will vote for management proposals to limit capital increase. 505N. Allow Subsidiaries to Issue Stock: The Company will vote for management proposals to allow subsidiaries to issue stock unless the potential dilution in the parent company would exceed 20% of the current outstanding ordinary shares. 402 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- CAPITAL STRUCTURE - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 506N. Cancel Authorized Stock Class: The Company will vote for management proposals to cancel a particular class of stock. 507N. Authorize New Stock Class: The Company will vote for management proposals to authorize a new stock class unless the new class carries differential (inferior or superior) voting rights. 508N. Reauthorize Share Issue Limit: The Company will vote for management proposals to reauthorize share issue limits. 509N. Authorize Issuance of Differential Voting Stock: The Company will vote against management proposals to authorize the issuance of differential voting stock. 510N. Amend Share Class Rights: The Company will vote for management proposals to amend share class rights unless: 1. The amendment results in a loss of voting rights; 2. The amendment results in a loss of dividend rights; or 3. The amendment results in a dual class share structure with unequal voting rights. 511N. Issue Stock with Preemptive Rights: The Company will vote for management proposals to issue stock with preemptive rights unless: 1. The potential dilution exceeds 100% of the current outstanding ordinary shares; 2. The explicit purpose of the stock issuance is to strengthen takeover defenses; or 3. The maximum number of shares to be issued is not disclosed. 512N. Issue Stock without Preemptive Rights: The Company will vote for management proposals to issue stock without preemptive rights unless: 1. The potential dilution exceeds 50% of the current outstanding ordinary shares; 2. The explicit purpose of the stock issuance is to strengthen takeover defenses; 3. The board can set the rights/terms of the shares at issuance; or 4. The maximum number of shares to be issued is not disclosed. 513N. Issue Stock with Warrants: The Company will vote for management proposals to issue stock with warrants unless: CAPITAL STRUCTURE - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 1. The potential dilution exceeds 50% of the current outstanding ordinary shares; 403 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2. The explicit purpose of the stock issuance is to strengthen takeover defenses; 3. The board can set the rights/terms of the shares at issuance; or 4. The maximum number of shares to be issued is not disclosed. 514N. Issue Bonds with Warrants: The Company will vote for management proposals to issue bonds with warrants unless the potential dilution exceeds 10% of the current outstanding ordinary shares. 515N. Issue Warrants with Preemptive Rights: The Company will vote for management proposals to issue warrants with preemptive rights unless the potential dilution exceeds 100% of the current outstanding ordinary shares or the explicit purpose of the stock issuance is to strengthen takeover defenses. 516N. Issue Warrants without Preemptive Rights: The Company will vote for management proposals to issue warrants without preemptive rights unless: 1. The potential dilution exceeds 50% of the current outstanding ordinary shares; 2. The explicit purpose of the stock issuance is to strengthen takeover defenses; 3. The board can set the rights/terms of the shares at issuance; or 4. The maximum number of shares to be issued is not disclosed. 517N. Authorize Creation of Preferred Stock: If the board has an unlimited right to set the terms for the class and may issue the preferred stock for anti-takeover purposes without shareholder approval, the stock is considered blank check. The Company will vote for management proposals to authorize the creation of preferred stock unless the authorization is for blank check preferred stock. 518N. Approve Issue of Preferred Stock: The Company will vote for management proposals to approve the issuance of preferred stock unless the board can set the rights/terms of the shares at issuance. 519N. Increase Authorized Preferred Stock: The Company will vote for management proposals to increase authorized preferred stock unless the board can set the rights/terms of the additional shares at the time of issuance. 520N. Amend Authorized Preferred Stock: The Company will vote for management proposals to amend authorized preferred stock unless the amendment would result in board authority to issue blank check preferred stock. CAPITAL STRUCTURE - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 521N. Issue Debt Instruments: The Company will vote for management proposals to issue debt instruments. 522N. Issue Convertible Debt Instruments: The Company will vote for management proposals to issue convertible debt instruments unless the potential dilution exceeds 50% of the current outstanding ordinary shares. 523N. Amend Terms of Debt Instruments: The Company will vote for management proposals to amend the terms of issued convertible debt instruments unless the amendment would increase potential dilution by 50%. 404 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 524N. Approve Borrowing: The Company will vote for management proposals to approve borrowing. 525N. Amend Borrowing Powers: The Company will vote for management proposals to amend the company's articles regarding the limit on borrowing powers. 526N. Convert One Form of Stock to Another: The Company will vote for management proposals to convert one form of stock to another unless the amendment results in a loss or reduction of voting rights. 527N. Approve Stock Split: The Company will vote for management proposals to approve stock splits. 528N. Approve Reverse Stock Split: The Company will vote for management proposals to approve reverse stock splits. 529N. Reduce Authorized Capital when Shares Repurchased: The Company will vote for management proposals to reduce its authorized capital when shares are repurchased. 530N. Authorize Share Repurchase: The Company will vote for management proposals to authorize share repurchases. 531N. Waive Approval of Share Repurchase: The Company will vote for management proposals to waive approval for share repurchases. 532N. Re-issuance of Shares/Treasury Stock: The Company will vote for management proposals to sell shares it has previously repurchased and held in reserve as treasury stock. 533N. Set Price of Reissued Treasury Stock: The Company will vote for management proposals to set the price range at which treasury stock can be sold privately or not on stock market. CAPITAL STRUCTURE - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 534N. Amend Articles to Reflect Capital Increase/Decrease: The Company will vote for management proposals to amend its bylaws to reflect increases or decreases in share capital. 535N. Amend Articles Regarding Issuance of Capital: The Company will evaluate management proposals to amend the company's articles regarding issuance of capital on a case-by-case basis. 536N. Amend Articles to Authorize Share Repurchase: The Company will vote for management proposals to amend the company's articles to authorize share repurchases. 537N. Amend Articles Regarding Treasury Shares: The Company will vote for management proposals to amend its articles regarding treasury shares. 405 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 538N. Approve Use/Transfer of Reserves: The Company will vote for management proposals to approve the use or transfer of reserves. 539N. Transfer Shareholder Equity Funds: The Company will vote for management proposals to approve transfers between shareholder equity accounts. 540N. Authorize Trade in Company Stock: The Company will vote for management proposals to authorize the company to trade in its own stock. 541N. Amend Tradable Lot Size: The Company will vote for management proposals to change the size of tradable units. 542N. Restate/Adjust Capital for Inflation: The Company will evaluate management proposals to restate or adjust capital for inflation on a case-by-case basis. 543N. Amend Reporting Currency: The Company will vote for management proposals to amend the company's reporting currency. 544N. Reduce Share Premium Account: The Company will vote for management proposals to reduce the share premium account to clear deficits on profit and loss accounts or to return cash to stakeholders. 545N. Allow Company to Give Guarantees: The Company will vote for management proposals that allow companies to give guarantees. 546N. Add/Remove Exchange Listing(s): The Company will evaluate management proposals to add or remove stock exchange listings on a case-by-case basis. CAPITAL STRUCTURE - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 547N. Appoint Risk-Rating Agency: The Company will vote for management proposals to appoint a risk-rating agency. 548N. Authorize Nominal Capital Repayment: The Company will vote for management proposals to authorize nominal capital repayment. 549N. Set Dividend/Allocate Profits: The Company will vote for management proposals to determine how to apportion the company's profits for the year and set the dividend. 406 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 550N. Allocate Dividend: The Company will vote for management proposals relating to allocation of dividends. 551N. Waive Shareholder Approval for Profit Allocation: The Company will vote for management proposals that waive shareholder approval for profit allocation proposals. 552N. Approve Scrip Dividend/Dividend Reinvestment Plan: Stock dividend programs allow investors to obtain additional shares on attractive terms while enabling the company to conserve cash. The Company will vote for management proposals to approve scrip dividends or dividend reinvestment plans. 553N. Approve Special Dividend/Bonus Share Issue: The Company will vote for management proposals that permit management to determine whether it is in the company's interest to offer shareholders a special bonus dividend. 554N. Amend Dividend Distribution Rules: The Company will vote for management proposals to amend its dividend distribution rules. 555N. Approve Interim Dividend: The Company will vote for management proposals to approve an interim dividend. MERGERS AND CORPORATE RESTRUCTURINGS - U.S. PROPOSALS - -------------------------------------------------------------------------------- 601. Approve Merger/Acquisition: The Company will evaluate merger and acquisition management proposals on a case-by-case basis. The Company will consider the following factors: 1. Anticipated financial and operating benefits; 2. Offer price (cost vs. premium); 3. Prospects of the combined companies; 4. How the deal was negotiated; 5. Changes in corporate governance and their impact on shareholder rights; MERGERS AND CORPORATE RESTRUCTURINGS - U.S. (CONTINUED) - -------------------------------------------------------------------------------- 6. Corporate restructuring; 7. Spin-offs; 8. Asset sales; 9. Liquidations; and 10. Rights of appraisal. 602. Approve Restructuring: The Company will evaluate corporate restructuring management proposals on case-by-case basis. 603. Approve Bankruptcy Restructuring: The Company will evaluate bankruptcy restructuring management proposals on case-by-case basis. 407 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 604. Approve Liquidation: The Company will evaluate liquidation proposals by management on a case-by-case basis and will review management's efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation. 605. Ratify Liquidator's Fees: The Company will evaluate management proposals to ratify liquidator's fees on a case-by-case basis. 605. Approve Leveraged Buyout: The Company will evaluate management proposals to approve a leveraged buyout on a case-by-case basis. 606. Approve Spin-Off: The Company will evaluate spin-off proposals on a case-by-case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus and managerial incentives. 607. Approve Sale of Assets: The Company will evaluate asset sale management proposals on a case-by-case basis by assessing the impact on the balance sheet/working capital and the value received for the asset. MERGERS AND CORPORATE RESTRUCTURINGS - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 601N. Approve Merger/Acquisition: The Company will evaluate management proposals to approve mergers and acquisitions on a case-by-case basis. 602N. Approve Joint Venture/Strategic Alliance: The Company will evaluate management proposals to approve joint ventures or strategic partnerships on a case-by-case basis. 603N. Approve Restructuring/Recapitalization: The Company will evaluate management proposals to approve restructuring or recapitalization of companies on a case-by-case basis. MERGERS AND CORPORATE RESTRUCTURINGS - NON-U.S (CONTINUED) - -------------------------------------------------------------------------------- 604N. Dissolve Company/Approve Liquidation: The Company will evaluate management proposals to dissolve companies or approve liquidations on a case-by-case basis. 605N. Approve Divestiture/Spin-Off: The Company will evaluate management proposals to approve company divestitures or spin-offs on a case-by-case basis. 606N. Approve Intra-Company Contracts: The Company will vote for management proposals to approve intra-company contracts. 408 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 607N. Extend Investment Trust: The Company will vote for management proposals to extend investment trusts. 608N. Dissolve Investment Trust: The Company will evaluate management proposals to dissolve investment trusts on a case-by-case basis. 609N. Create Parent Holding Company: The Company will evaluate management proposals to create a parent holding company on a case-by-case basis. ANTI-TAKEOVER DEFENSES/VOTING RELATED ISSUES - U.S. - -------------------------------------------------------------------------------- 701. Adopt Advance Notice Requirement: The Company will vote for management proposals to adopt advance notice requirements for shareholder proposals. By requiring advance notice, the board can review and consider shareholder presentations for their content and value as a shareholder issue. 702. Approve Non-Technical Charter Amendments: The Company will vote for management proposals to approve non-technical charter amendments unless the amendments reduce shareholders' rights. 703. Approve Non-Technical Bylaw Amendments: The Company will vote for management proposals to approve non-technical bylaw amendments unless the amendments reduce shareholders' rights. 704. Adopt Poison Pill: A poison pill is a strategic move by a takeover-target to make its stock less attractive. A target company with a "pill" (also known as a shareholder rights plan) usually distributes warrants or purchase rights that become exercisable when a triggering event occurs. The Company will vote against management proposals to adopt poison pills. 705. Redeem Poison Pill: The Company will vote for management proposals to redeem poison pills. ANTI-TAKEOVER DEFENSES/VOTING RELATED ISSUES - U.S. (CONT.) - -------------------------------------------------------------------------------- 706. Eliminate Written Consent: The Company will vote against management proposals which eliminate written consent. Written consent allows shareholders to initiate actions without calling a special meeting or waiting until the annual meeting. 707. Limit Written Consent: The Company will vote against management proposals which limit written consent. 708. Restore Written Consent: The Company will vote for management proposals which restore written consent. 409 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 709. Eliminate Special Meeting: The Company will vote against management proposals which eliminate the ability of shareholders to call special meetings. 710. Limit Special Meeting: The Company will vote against management proposals which limit shareholders' ability to call a special meeting. 711. Restore Special Meeting: The Company will vote for management proposals which restore the ability of shareholders to call a special meeting. 712. Adopt Supermajority Requirement for Business Transactions: The Company will vote against management proposals to adopt supermajority vote requirements to approve mergers or other business combinations. 713. Amend Supermajority Requirement for Business Transactions: The Company will vote for management proposals to amend supermajority requirements for business transactions unless the amendment would increase the vote required to approve a business transaction. 714. Eliminate Supermajority Requirement for Business Transactions: The Company will vote for management proposals to eliminate supermajority requirements for business transactions. 715. Adopt Supermajority Lock-in: The Company will vote against management proposals to adopt supermajority lock-in vote requirements. In many cases, supermajority lock-in vote requirements apply to anti-takeover provisions. 716. Amend Supermajority Lock-in: The Company will evaluate management proposals to amend supermajority lock-in vote requirements on a case-by-case basis. 717. Eliminate Supermajority Lock-in: The Company will vote for management proposals to eliminate supermajority lock-in vote requirements. ANTI-TAKEOVER DEFENSES/VOTING RELATED ISSUES - U.S. (CONT.) - -------------------------------------------------------------------------------- 718. Consider Non-Financial Effects of Merger: Also called "directors' duties," these anti-takeover provisions allow directors to consider the non-financial interests of employees, suppliers, customers and the communities in which the company operates, in addition to the financial interests of shareholders, when assessing a merger proposal. The Company will vote against management proposals to consider the non-financial effects of a merger proposal. ANTI-TAKOVER DEFENSES/VOTING RELATED ISSUES - NON-U.S. - -------------------------------------------------------------------------------- 410 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 701N. Adopt Poison-Pill-Style Defense: The Company will evaluate management proposals seeking to adopt poison-pill-style plans (known as shareholder rights plans) on a case-by-case basis. 702N. Amend Poison-Pill-Style Defense: The Company will evaluate management proposals seeking to amend poison-pill-style plans on a case-by-case basis. 703N. Limit Voting Rights: The Company will vote against management proposals that seek to limit voting rights. 704N. Amend Voting Rights Limit: The Company will vote for management proposals to amend voting rights unless the amendment would strengthen the voting rights limit. 705N. End Voting Rights Limit: The Company will vote for management proposals to remove a company's voting rights limitation. 706N. Require Voting Supermajority: The Company will vote against management proposals that require voting supermajority. 707N. Amend Supermajority Requirement: The Company will vote for management proposals to amend supermajority provisions unless the amendment would increase the supermajority vote requirement. 708N. End Voting Supermajority: The Company will vote for management proposals to end voting supermajority. 709N. Approve Share Transfer/Registration: Share transfer/registration is a practice that serves as a defense in takeover attempts and allows management to refuse to register shares acquired by an investor. The shares in question then lose voting rights but retain all other rights. The Company will evaluate management proposals to approve share transfer/registration on a case-by-case basis. ANTI-TAKOVER DEFENSES/VOTING RELATED ISSUES - NON-U.S. (CONT.) - -------------------------------------------------------------------------------- 710N. End Share Transfer/Registration: The Company will evaluate management proposals to end share transfer/registration on case-by-case basis. 711N. Registration of Shares: The Company will evaluate management proposals relating to registration of shares on a case-by-case basis. 712N. End Foreign Investor Restrictions: The Company will vote for management proposals to end foreign investor restrictions pertaining to shareholders' rights to buy, hold, vote, sell and collect dividends on the company's stock. 411 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 713N. Amend Foreign Investor Restrictions: The Company will evaluate management proposals to amend foreign investor restrictions on a case-by-case basis. 714N. Amend Shareholder Disclosure Rules: The Company will vote for management proposals to amend shareholder disclosure rules. 715N. Waive Mandatory Takeover Requirement: The Company will evaluate management proposals that seek to grant a waiver from the statutory mandatory takeover requirement on a case-by-case basis. 716N. Require Approval for Partial Takeover Bids: The Company will evaluate management proposals that require approval for partial takeover bids on a case-by-case basis. 717N. Authorize Voting Record Date Changes (Japan Only): The traditional record date in Japan is the fiscal year closing date, typically about three months prior to the annual shareholder meeting. The Company will vote for management proposals to authorize voting record date changes. STATE OF INCORPORATION - U.S. PROPOSALS - -------------------------------------------------------------------------------- 801. Adopt Fair Price Provision: Fair price provisions require a supermajority vote of the outstanding shares to approve a merger or business combination unless the acquirer meets certain price requirements or the merger is approved by the company's board. The Company will vote for management proposals to adopt fair price provisions. 802. Amend Fair Price Provision: The Company will vote for management proposals to amend fair price provisions. 803. Repeal Fair Price Provision: The Company will evaluate management proposals to repeal fair price provisions on a case-by-case basis. STATE OF INCORPORATION - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 804. Adopt Anti-Greenmail Provision: Greenmail is the name given to certain discriminatory share repurchases. Typically, it refers to payments that a company makes to a raider in exchange for the raider's shares and a guarantee the raider will terminate a takeover bid. This payment is usually a premium above market price, so while greenmail can ensure the continued independence of a company, it discriminates against the other stockholders. The Company will vote for management proposals to adopt anti-greenmail provisions. 805. Approve Reincorporation: The Company will vote for management proposals to change a company's state of incorporation unless the proposal would reduce shareholder rights (if the changes are not subject to a separate shareholder vote). 412 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 806. Opt Out of State Takeover Law: Anti-takeover laws may include: (1) control share acquisition, (2) fair price, (3) business combination (also known as freeze-out or business moratorium), (4) directors' duties, (5) poison pill endorsement and (6) profit recapture. The Company will evaluate whether to opt out of state takeover laws on a case-by-case basis. 807. Opt Into State Takeover Law: The Company will evaluate whether to opt into state takeover laws on a case-by-case basis. STATE OF INCORPORATION - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 801N. Approve Reincorporation: The Company will evaluate management proposals to reincorporate on a case-by-case basis. 802N. Relocate Corporate Headquarters: The Company will vote for management proposals to relocate the company's official headquarters. CORPORATE RESPONSIBILITY - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 901N. Authorize Charitable Donations: The Company will vote for management proposals to authorize charitable donations. 902N. Approve Political Donation: The Company will vote against management proposals to approve political donations. OTHER - U.S. PROPOSALS - -------------------------------------------------------------------------------- 1001. Miscellaneous Proposals: The Company will evaluate all management proposals described as "miscellaneous" on a case-by-case basis. OTHER - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 1001N. Approve Electronic Share Trading: The Company will vote for management proposals to approve electronic share trading systems. 1002N. Approve Property Purchase: The Company will vote for management proposals to approve a property purchase. 413 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 1003N. Approve Property Sale: The Company will vote for management proposals to approve a property sale. 1004N. Ratify Management Acts-Symbolic: The Company will vote for management proposals to ratify management acts (symbolic) in the previous year. This traditional housekeeping measure is symbolic in nature and carries no legal or financial consequences. 1005N. Ratify Management Acts-Legal: The Company will evaluate management proposals to ratify management acts (legal) in the previous year on a case-by-case basis. 1006N. Adopt Corporate Governance Standards: The Company will evaluate management proposals to adopt corporate governance standards on a case-by-case basis. 1007N. Miscellaneous Proposals: The Company will evaluate all management proposals described as "miscellaneous" on a case-by-case basis. SHARES OUT ON LOAN - U.S. PROPOSALS - -------------------------------------------------------------------------------- 1100. Shares Out on Loan: Proxies will typically not be voted when shares are out on loan through client securities lending programs with their custodians. SHARE BLOCKING AND SHARES OUT ON LOAN - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 1100N. Share Blocking and Shares Out on Loan: The Company will generally refrain from voting proxies on foreign securities that are subject to share blocking restrictions. In addition, proxies will typically not be voted when shares are out on loan through client securities lending programs with their custodians. 414 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- GUIDELINES FOR VOTING SHAREHOLDER PROPOSALS The Company will generally vote on shareholder proposals in accordance with the following guidelines, however, because the Proxy Guidelines cannot anticipate all situations and the surrounding facts of each proxy issue (including, without limitation, foreign laws and practices that may apply to a proxy), some proxy issues may require a case-by-case analysis (whether or not required by the Proxy Guidelines) prior to voting and may result in a vote being cast that will deviate from the Proxy Guidelines. In such cases, the proxy voting procedures established by the Proxy Committee for such situations will be followed. OPERATIONAL ITEMS - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-101. Change Annual Meeting Location: The Company will vote against shareholder proposals to change the annual meeting location. SP-102. Change Annual Meeting Date: The Company will vote against shareholder proposals to change the annual meeting date. SP-103. Improve Meeting Reports: The Company will vote against shareholder proposals to improve meeting reports. Pertinent information on what transpired at the meeting is usually available in the quarterly report following the meeting, in letters to shareholders or from the corporate secretary or the company's investor relations department. BOARD OF DIRECTORS - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-201. Majority Vote to Elect Directors: The Company will vote for shareholder proposals which require majority votes in director elections. SP-202. Director Tenure/Retirement Age: The Company will vote against shareholder proposals that seek to limit the period of time a director can serve on the board or mandate a particular retirement age for members of the board. SP-203. Repeal Classified Board: The Company will vote for shareholder proposals to repeal classified boards. Under a classified board structure, directors are divided into separate classes (usually three) with the directors in each class elected to overlapping multiyear terms. SP-204. Double Board Nominees: The Company will vote against double board nominee shareholder proposals. SP-205. Adopt Cumulative Voting: The Company will vote for shareholder proposals to adopt cumulative voting. 415 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- BOARD OF DIRECTORS - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-206. Director Liability: The Company will vote against shareholder proposals aimed at determining the appropriate level of personal liability of board members. SP-207. Independent Board Chairman: The Company will vote against shareholder proposals that require an independent board chairman. SP-208. Lead Director: The Company will vote against shareholder proposals that require a lead director. A lead/presiding director must hold the position for at least one year. SP-209. Allow Union/Employee Representatives on the Board: The Company will vote against shareholder proposals for union/employee representatives to serve on the board. SP-210. Increase Board Independence: The Company will vote for shareholder proposals that seek to increase the independence of the board. SP-211. Create Nominating Committee: The Company will vote against shareholder proposals to create nominating committees. SP-212. Increase Nominating Committee Independence: The Company will vote against shareholder proposals to increase nominating committee independence. SP-213. Create Shareholder Committee: The Company will vote against shareholder proposals to create shareholder committees. SP-214. Create Compensation Committee: The Company will vote against shareholder proposals to create compensation committees. SP-215. Hire Independent Compensation Consultant: The Company will vote against shareholder proposals to hire independent compensation consultants. SP-216. Increase Compensation Committee Independence: The Company will vote against shareholder proposals to increase compensation committee independence. SP-217. Increase Key Committee Independence: The Company will vote against shareholder proposals to limit membership on the board's key committees to directors who have no ties to the company other than those relationships created as a result of their service on the board. 416 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- BOARD OF DIRECTORS - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-218. Minimum Stock Ownership by Directors: The Company will vote against shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. SP-219. Directors' Role in Corporate Strategy: The Company will vote against shareholder proposals relating to disclosure of directors' role in corporate strategy. Strategy planning tasks are within the normal definition of the directors' role and do not need to be specifically disclosed, and/or are adequately defined in most companies' existing documents. Too much disclosure regarding strategy formation could put a company at a competitive disadvantage. SP-220. Require Nominee Statement in Proxy: The Company will vote against shareholder proposals requiring nominee statements in proxies. BOARD OF DIRECTORS - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-201N. Elect Dissident Director(s): The Company will evaluate shareholder proposals to elect dissident directors on a case-by-case basis. SP-202N. Elect Dissident Supervisory Board: The Company will evaluate shareholder proposals to elect dissident supervisory boards on a case-by-case basis. SP-203N. Set Age Limit on Directors: The Company will vote against shareholder proposals that seek to set a retirement age for board members. SP-204N. Oust Director(s): The Company will evaluate shareholder proposals to oust members of the board on a case-by-case basis. SP-205N. Establish Key Board Committees: The Company will evaluate shareholder proposals to establish key board committees on a case-by-case basis. SP-206N. Amend Board Procedures: The Company will evaluate shareholder proposals to amend board procedures on a case-by-case basis. SP-207N. Limit Number of Boards: The Company will vote against shareholder proposals that seek to limit the number of boards on which a director may serve. 417 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- AUDITOR/FINANCIAL STATEMENT RELATED - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-301. Shareholder Approval of Auditors: The Company will vote for shareholder proposals which allow shareholders to ratify the company's independent auditor selection. SP-302. Limit Non-Audit Fees: The Company will vote against shareholder proposals that limit non-audit fees. The Sarbanes-Oxley Act of 2002 ("the Act") contains provisions that establish safeguards that promote auditor independence. Since certain non-audit services are now prohibited, and the Act requires audit committees to pre-approve non-audit services, there is no need to set arbitrary limitations on the provision of these services. SP-303. Increase Audit Committee Independence: The Company will vote for shareholder proposals to increase audit committee independence. SP-304. Auditor Attendance: The Company will vote against shareholder proposals which require attendance by the auditors at the annual meeting. SP-305. Rotate Auditors: The Company will vote against shareholder proposals that require mandatory auditor rotation. EXECUTIVE AND DIRECTOR COMPENSATION - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-401. Restrict/Reform Executive Compensation: The Company will vote against shareholder proposals that restrict or seek to reform executive compensation. SP-402. Approve Executive Compensation: The Company will vote against shareholder proposals that permit shareholders to approve executive pay packages. SP-403. Disclose Executive Compensation: The Company will vote against shareholder proposals that require additional disclosure for executive compensation above and beyond the disclosure required by the Securities and Exchange Commission ("SEC") regulations. SP-404. Cap Executive Pay: The Company will vote against shareholder proposals to cap executive pay. Caps may put a company at a competitive disadvantage by negatively affecting its ability to attract, motivate and retain highly qualified executives. 418 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-405. Require Equity Awards to be Held: The Company will vote against shareholder proposals which require stock holding requirements for executives. EXECUTIVE AND DIRECTOR COMPENSATION - U.S. (CONTINUED) - -------------------------------------------------------------------------------- SP-406. Restrict Director Compensation: The Company will vote against shareholder proposals that seek to restrict director compensation. SP-407. Pay Directors in Stock: The Company will vote against shareholder proposals that require directors to be paid in stock. SP-408. Restrict Director Pensions: The Company will vote against shareholder proposals which restrict director pensions. SP-409. No Re-pricing of Underwater Options: The Company will vote for shareholder proposals requesting companies not re-price underwater options (i.e. turn in options with exercise prices above the current market value of the stock for new options at or below the market value). SP-410. Award Performance-Based Stock Options: The Company will vote against shareholder proposals to award performance-based options. SP-411. Golden Parachutes: The Company will vote for shareholder proposals which require shareholder approval of golden parachutes or shareholder proposals which limit golden parachutes. Golden parachutes are severance packages contingent upon a change in control (i.e. benefits given to top executives in the event that a company is taken over by another firm, resulting in the loss of their job). SP-412. Add Performance Criteria to Equity-Based Awards: The Company will vote against shareholder proposals to add performance criteria to equity-based awards. SP-413. Expense Stock Options: The Company will vote for shareholder proposals requesting that stock options be expensed. SP-414. Pension Fund Surplus: The Company will vote against shareholder proposals which seek to exclude pension fund figures when calculating performance-based compensation payouts or awards. SP-415. Approve and/or Disclose SERPs: A supplemental executive retirement plan, or SERP, is a plan that supplements management's pension plan benefits above the limit established by the Internal Revenue Service. The Company will vote against shareholder approval of benefits under these plans. 419 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- EXECUTIVE AND DIRECTOR COMPENSATION - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-401N. Oppose/Change Executive Pay: The Company will evaluate shareholder proposals which oppose or seek to change executive pay on a case-by-case basis. CAPITAL STRUCTURE - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-501. Restore Preemptive Rights: Preemptive rights give existing shareholders a "right of first refusal" to purchase new issues of shares to maintain their proportional ownership in the company. The Company will vote against shareholder proposals to restore preemptive rights. CAPITAL SRUCTURE - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-501N. Restrict Capital Increases: The Company will evaluate shareholder proposals to restrict capital increases on a case-by-case basis. SP-502N. Restore Preemptive Rights: The Company will evaluate shareholder proposals that seek to restore preemptive rights on a case-by-case basis. SP-503N. Remove Multiple-Voting Rights: The Company will vote for shareholder proposals that would abolish multiple-voting rights. SP-504N. Increase Dividend: The Company will evaluate shareholder proposals to increase the dividend on a case-by-case basis. SP-505N. Redistribute Profits: The Company will evaluate shareholder proposals to redistribute profits on a case-by-case basis. MERGERS AND CORPORATE RESTRUCTURINGS - U.S. PROPOSALS - -------------------------------------------------------------------------------- 420 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-601. Study Sale or Spin-Off: The Company will vote against shareholder proposals that seek to study sales, spin-offs or other strategic alternatives. MERGERS AND CORPORATE RESTRUCTURINGS - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-601N. Oppose Merger/Acquisition: The Company will evaluate shareholder proposals that oppose mergers and acquisitions on a case-by-case basis. SP-602N. Restructure Investments: The Company will vote against shareholder proposals to restructure investments. MERGERS AND CORPORATE RESTRUCTURINGS-NON-U.S. (CONTINUED) - -------------------------------------------------------------------------------- SP-603N. Liquidate Company: The Company will evaluate shareholder proposals to liquidate companies on a case-by-case basis. ANTI-TAKEOVER DEFENSES/VOTING RELATED ISSUES - U.S. - -------------------------------------------------------------------------------- SP-701. Redeem or Vote on Poison Pill: The Company will vote for shareholder proposals that request the board of directors to redeem poison pill provisions or call for poison pills to be put to a vote. SP-702. Right to Act by Written Consent: The Company will vote against shareholder proposals to permit shareholders to take action by written consent. Written consent allows shareholders to initiate actions without calling a special meeting or waiting until the annual meeting. SP-703. Restore Right to Call Special Meeting: The Company will vote against shareholder proposals to grant shareholders the ability to call special meetings. SP-704. Eliminate Supermajority Provision: The Company will vote for shareholder proposals to eliminate existing supermajority vote requirements to amend the charters or bylaws as well as approve mergers, acquisitions and other business combinations. SP-705. Reduce Supermajority Provision: The Company will vote for shareholder proposals to reduce existing supermajority vote provisions. SP-706. Prohibit Targeted Share Placement: The Company will vote for shareholder proposals to prohibit targeted share placement. Targeted share placements are issuances of blocks of company securities, usually preferred stock, to a friendly shareholder. Often such placements are made to defend against takeovers or to obtain favorable financing. 421 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-707. Counting Shareholder Votes: The Company will vote against shareholder proposals pertaining to the methods of counting shareholders' votes. SP-708. No Discretionary Voting: The Company will vote against shareholder proposals relating to discretionary voting. Company proxy cards have historically given shareholders the opportunity to grant a discretionary proxy in matters consistent with federal and state laws. Shareholders should not be required to mark their proxies in order to have their proxies counted in the vote. Proxy cards clearly indicate how unmarked but signed proxies will be voted. ANTI-TAKEOVER DEFENSES/VOTING RELATED ISSUES - U.S. (CONT.) - -------------------------------------------------------------------------------- SP-709. Adopt Confidential Voting: The Company will vote against shareholder proposals requesting that corporations adopt confidential voting. SP-710. Equal Access to the Proxy: The Company will vote for shareholder proposals to allow shareholders equal access to management's proxy material so they can evaluate and propose voting recommendations on proxy proposals and director nominees. ANTI-TAKEOVER DEFENSES AND VOTING RELATED ISSUES - NON-U.S. - -------------------------------------------------------------------------------- SP-701N. End Bars on Foreign Investors: The Company will vote for shareholder proposals to end restrictions on foreign investors. SP-702N. End Voting Rights Limitation: The Company will vote for shareholder proposals to end voting rights limitations. SP-703N. Facilitate Shareholder Proposals: The Company will vote against shareholder proposals relating to the introduction of shareholder proposals. SP-704N. Approve Confidential Voting: The Company will vote for shareholder proposals to approve confidential voting. STATE OF INCORPORATION - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-801. Repeal Fair Price Provision: Fair price provisions require a supermajority vote of the outstanding shares to approve a merger or business combination unless the acquirer meets certain price requirements or the 422 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- merger is approved by the company's board. The Company will vote against shareholder proposals to repeal fair price provisions. SP-802. Adopt Anti-Greenmail Provision: Greenmail is the name given to certain discriminatory share repurchases. Typically, it refers to payments that a company makes to a raider in exchange for the raider's shares and a guarantee the raider will terminate a takeover bid. This payment is usually a premium above market price, so while greenmail can ensure the continued independence of a company, it discriminates against the other stockholders. The Company will vote for shareholder proposals to adopt anti-greenmail provisions. SP-803. Reincorporation: The Company will vote for shareholder proposals requesting the company change its state of incorporation unless the new state has stronger anti-takeover provisions. STATE OF INCORPORATION - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-804. Opt Out of State Takeover Statute: Anti-takeover laws may include: (1) control share acquisition, (2) fair price, (3) business combination (also known as freeze-out or business moratorium), (4) directors' duties, (5) poison pill endorsement and (6) profit recapture. The Company will vote against shareholder proposals to opt out of state/country takeover laws. - -------------------------------------------------------------------------------- CORPORATE RESPONSIBILITY - U.S. PROPOSALS SP-901. Review or Promote Animal Welfare: The Company will vote against shareholder proposals that ask companies to review, report on or improve the welfare of animals in their care, and of animals that provide food for company products. SP-902. Review Drug Pricing or Distribution: The Company will vote against shareholder proposals asking for drug price restraint or disclosure. SP-903. Review Response to or Impact of Pandemics: The Company will vote against shareholder proposals asking companies to review their response to pandemics (i.e. HIV/AIDS, TB, malaria, etc.), or to review the impact of pandemics on their business. SP-903. Oppose Embryo/Fetal Destruction: The Company will vote against shareholder proposals aimed to halt companies' practices of abortion or research or contraceptive methods that cause the destruction of embryos or fetuses. SP-904. Review Tobacco Marketing: The Company will vote against shareholder proposals asking management to report on or change tobacco product marketing practices. SP-905. Sever Links with Tobacco Industry: The Company will vote against shareholder proposals that ask a company to report on or approve the dissolution of links with the tobacco industry. 423 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-906. Review or Reduce Tobacco Harm to Health: The Company will vote against shareholder proposals that ask a company to review or reduce tobacco harm to health. SP-907. Review Nuclear Facility/Waste: The Company will vote against shareholder proposals asking companies that operate nuclear power plants or handle radioactive waste to review the safety and competitiveness of these operations; to revise operating procedures, if necessary, to reduce safety risks; and to report to shareholders on these efforts. CORPORATE RESPONSIBILITY - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-908. Review Energy Efficiency & Renewables: The Company will vote against shareholder proposals that ask companies to reduce their reliance on nuclear and fossil fuels, to develop or use solar and wind power, or to promote energy efficiency. SP-909. Endorse Ceres Principles: The Ceres Principles are a broad statement of environmental policy. The Company will vote against shareholder proposals requesting the company endorse the Ceres Principles. SP-910. Control Generation of Pollutants: The Company will vote against shareholder proposals asking management to control emissions and solid waste generation and consider pollution prevention programs and product recycling initiatives. SP-911. Report on Environmental Impact or Plans: The Company will vote against shareholder requests for additional information on corporate environmental impact or plans. SP-912. Review Social Impact of Financial Ventures: The Company will vote against shareholder proposals that ask companies to conduct reviews of the social and environmental consequences of their lending activities. SP-913. Report or Take Action on Climate Change: The Company will vote against shareholder proposals that ask management to report or take action on climate change. SP-914. Review/Reduce Product Toxicity: The Company will vote against shareholder proposals requesting that companies review and report on the toxicity of its products. SP-915. Review/Reduce Toxicity of Product Formulation: The Company will vote against shareholder proposals requesting that companies reduce the toxicity of their products beyond legal requirements. SP-916. Review or Curb Bioengineering: The Company will vote against shareholder proposals that ask the company to review or curb its bioengineering. 424 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-917. Preserve/Report on Natural Habitat: The Company will vote against shareholder proposals that ask management to take action or institute policy changes concerning the development of wilderness, open areas or cultural sites. CORPORATE RESPONSIBILITY - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-918. Report on Sustainability: The Company will vote against shareholder proposals that ask companies to report on corporate economic, environmental and social performance. SP-919. Review Charitable Giving Policy: The Company will vote against shareholder proposals asking management to review or report on its charitable giving program. SP-920. Limit or End Charitable Giving: The Company will vote against shareholder proposals that ask companies to limit or end their charitable giving. SP-921. Review Political Spending or Lobbying: "Political spending" includes both "political contributions," such as money given to political party committees (including local committees) and spent on political action committees and money spent on lobbying. The Company will vote against shareholder proposals to review corporate political activities. SP-922. Limit or End Political Spending: The Company will vote against shareholder proposals asking the company to end or restrict its political payments. SP-923. Disclose Prior Government Service: The Company will vote against shareholder proposals requesting information on the background of company executives, including prior government service. SP-924. Affirm Political Nonpartisanship: The Company will vote against shareholder proposals asking the company to affirm political nonpartisanship. SP-925. Link Executive Pay to Social Criteria: The Company will vote against shareholder proposals which seek to link executive pay to non-financial/social criteria. SP-926. Develop/Report on Human Rights Policy: The Company will vote against shareholder proposals asking management to develop or report on their human rights policies. SP-927. Review/Develop Ethics Policy: The Company will vote against shareholder proposals asking management to develop an ethics policy and report to shareholders on such policy. 425 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-928. Review Operations' Impact on Local Groups: The Company will vote against shareholder proposals that ask a company to conduct a review of its operations' impact on local communities. CORPORATE RESPONSIBILITY - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-929. Burma-Limit or End Operations: The Company will vote against shareholder proposals to limit or end operations in Burma. SP-930. Burma-Review Operations: The Company will vote against shareholder proposals requesting companies to report on the cost of doing business in Burma, including the risk of consumer boycotts and divestment campaigns. SP-931. China-No Use of Forced Labor: The Company will evaluate shareholder proposals requesting companies to have a certification process to ensure that it does not contract with organizations that use forced labor in China on a case-by-case basis. SP-932. China-Adopt Code of Conduct: The Company will vote against shareholder proposals to require companies to adopt principles aimed at correcting working conditions in China that fall below basic standards of fair and humane treatment. SP-933. Review Mexican Work Force Conditions: The Company will vote against shareholder proposals asking companies to review or report on Mexican operations. SP-934. Adopt Standards for Mexican Operation: The Company will vote against shareholder proposals asking management to adopt standards for Mexican operations. SP-935. Review or Implement MacBride Principles: The Company will vote against shareholder proposals that are aimed at anti-Catholic discrimination within Northern Ireland as outlined in the MacBride Principles. SP-936. Urge MacBride on Contractor/Franchisee: The Company will vote against shareholder proposals that ask companies whose presence in Northern Ireland is through franchises or subcontractors to urge them to implement the MacBride Principles. SP-937. Review Global Labor Practices: The Company will vote against shareholder proposals asking companies to review or report on company and contractor labor practices. SP-938. Review Developing Country Debt: The Company will vote against shareholder proposals which request that management report on its criteria for lending to developing and/or emerging market economies. SP-939. Review Military Contracting Criteria: The Company will oppose shareholder proposals that ask management to explain how it determines CORPORATE RESPONSIBILITY - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 426 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- whether to accept a defense contract, and what consideration, if any, it gives to the social, economic and ethical dimensions therein. SP-940. Review Economic Conversion: The Company will vote against shareholder proposals which ask the management of a company heavily dependent on defense contracting for details on how it plans to provide for the continued economic and financial viability of the company. SP-941. Review Space Weapons: The Company will vote against shareholder proposals requesting management to report on the company's participation in the development of ballistic missile defense technologies and related space systems. SP-942. Review Foreign Military Sales: The Company will vote against shareholder proposals to review the company's foreign military sales. SP-943. Limit or End Nuclear Weapons Productions: The Company will vote against shareholder proposals requesting that the company reduce or end its involvement in nuclear weapons productions. SP-944. Review Nuclear Weapons Production: The Company will vote against shareholder proposals which ask the company to report on various aspects of its nuclear weapons production program. SP-945. Review Fair Lending Policy: The Company will vote against shareholder proposals that ask banks and other financial institutions to conduct reviews and issue reports pertaining to their fair lending policies. SP-946. Review Job Cuts or Relocations: The Company will vote against shareholder proposals that ask a company to report on its rationale for job cuts or relocation and the impact these past or planned actions will have on the company's stakeholders. SP-947. Report on EEO: The Company will vote against shareholder proposals that ask a company to report on its equal employment opportunity (EEO) practices. SP-948: Board Inclusiveness: The Company will vote against shareholder proposals to include more women and members of racial minorities among director candidates. SP-949. Drop Sexual Orientation from EEO Policy: The Company will vote against shareholder proposals that ask management to drop the reference to sexual orientation in corporate-wide non-discrimination policies. CORPORATE RESPONSIBILITY - U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- 427 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-950. Adopt Sexual Orientation Anti-Bias Policy: The Company will vote against shareholder proposals that ask companies to adopt sexual orientation anti-bias policies. SP-951. Monitor/Adopt ILO Provisions: The Company will vote against shareholder proposals asking companies to enforce core International Labor Organization (ILO) conventions. SP-952. Miscellaneous Corporate Responsibility Proposals: The Company will vote against shareholder proposals relating to corporate responsibility issues that are described as "miscellaneous." CORPORATE RESPONSIBILITY - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-901N. Review Nuclear Facility/Waste: The Company will vote against shareholder proposals asking companies that operate nuclear power plants or handle radioactive waste to review the safety and competitiveness of these operations; to revise operating procedures, if necessary, to reduce safety risks; and to report to shareholders on these efforts. SP-902N. Review Energy Efficiency & Renewables: The Company will vote against shareholder proposals that ask companies to reduce their reliance on nuclear and fossil fuels, to develop or use solar and wind power, or to promote energy efficiency. SP-903N. Control Generation of Pollutants: The Company will vote against shareholder proposals asking management to control emissions and solid waste generation and consider pollution prevention programs and product recycling initiatives. SP-904N. Report on Environmental Impact or Plans: The Company will vote against shareholder requests for additional information on corporate environmental impact or plans. SP-905N. Report or Take Action on Climate Change: The Company will vote against shareholder proposals that ask management to report or take action on climate change. SP-906N. Preserve/Report on Natural Habitat: The Company will vote against shareholder proposals that ask management to take action or institute policy changes concerning the development of wilderness, open areas or cultural sites. CORPORATE RESPONSIBILITY - NON-U.S. PROPOSALS (CONTINUED) - -------------------------------------------------------------------------------- SP-907N. Review Charitable Giving Policy: The Company will evaluate shareholder proposals asking management to report to shareholders on the rationales for and recipients of their charitable giving programs on a case-by-case basis. 428 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-908N. Review Political Spending or Lobbying: The Company will evaluate shareholder proposals asking management to report on corporate political activities on a case-by-case basis. SP-909N. Limit or End Political Spending: The Company will vote against shareholder proposals to limit or end political spending. SP-910N. Develop/Report on Human Rights Policy: The Company will evaluate shareholder proposals asking management to develop or report on the company's human rights policy on a case-by-case basis. SP-911N. Commit to Increase Representation of Women: The Company will vote against shareholder proposals that ask companies to increase the representation of women on their boards or in senior managerial or professional professions. SP-912N. Monitor/Adopt ILO Conventions: The Company will vote against shareholder proposals asking companies to enforce core International Labor Organization (ILO) conventions. SP-913N. Miscellaneous Corporate Responsibility Proposals: The Company will vote against shareholder proposals relating to corporate responsibility issues that are described as "miscellaneous." - -------------------------------------------------------------------------------- OTHER - U.S. PROPOSALS SP-1001. Miscellaneous Proposals: The Company will evaluate all shareholder proposals, except those relating to corporate responsibility issues, described as "miscellaneous" on a case-by-case basis. OTHER - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-1001N. Improve Disclosure: The Company will vote against shareholder proposals to improve company disclosure. SP-1002N. Miscellaneous Proposals: The Company will evaluate all shareholder proposals, except those relating to corporate responsibility issues, described as "miscellaneous" on a case-by-case basis. SHARES OUT ON LOAN - U.S. PROPOSALS - -------------------------------------------------------------------------------- SP-1100. Shares Out on Loan: Proxies will typically not be voted when shares are out on loan through client securities lending programs with their custodians. SHARE BLOCKING AND SHARES OUT ON LOAN - NON-U.S. PROPOSALS - -------------------------------------------------------------------------------- 429 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SP-1100N. Share Blocking and Shares Out on Loan: The Company will generally refrain from voting proxies on foreign securities that are subject to share blocking restrictions. In addition, proxies will typically not be voted when shares are out on loan through client securities lending programs with their custodians. 430 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- OPPENHEIMERFUNDS, INC. OPPENHEIMER FUNDS PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES (as of December 5, 2005) and PROXY VOTING GUIDELINES (as of November 29, 2007) These Portfolio Proxy Voting Policies and Procedures, which include the attached "OppenheimerFunds Proxy Voting Guidelines" (the "Guidelines"), set forth the proxy voting policies, procedures and guidelines to be followed by OppenheimerFunds, Inc. ("OFI") in voting portfolio proxies relating to securities held by clients, including registered investment companies advised or sub-advised by OFI ("Fund(s)"). A. Funds for which OFI has Proxy Voting Responsibility OFI Funds. Each Board of Directors/Trustees of the Funds advised by OFI (the "OFI Fund Board(s)") has delegated to OFI the authority to vote portfolio proxies pursuant to these Policies and Procedures and subject to Board supervision. Sub-Advised Funds. OFI also serves as an investment sub-adviser for a number of other non-OFI funds not overseen by the OFI Fund Boards ("Sub-Advised Funds"). Pursuant to contractual arrangements between OFI and many of those Sub-Advised Funds' managers, OFI is responsible for portfolio proxy voting of the portfolio proxies held by those Sub-Advised Funds. Tremont Funds (Funds-of-Hedge Funds) Certain OFI Funds are structured as funds-of-hedge funds (the "Tremont Funds") and invest their assets primarily in underlying private investment partnerships and similar investment vehicles ("portfolio funds"). These Tremont Funds have delegated voting of portfolio proxies (if any) for their portfolio holdings to OFI. OFI, in turn, has delegated the proxy voting responsibility to Tremont Partners, Inc., the investment manager of the Tremont Funds. The underlying portfolio funds, however, typically do not solicit votes from their interest holders (such as the Tremont Funds). Therefore, the Tremont Funds' interests (or shares) in those underlying portfolio funds are not considered to be "voting securities" and generally would not be subject to these Policies and Procedures. However, in the unlikely event that an underlying portfolio fund does solicit the vote or consent of its interest holders, the Tremont Funds and Tremont Partners, Inc. have adopted these Policies and Procedures and will vote in accordance with these Policies and Procedures. B. Proxy Voting Committee OFI's internal proxy voting committee (the "Committee") is responsible for overseeing the proxy voting process and ensuring that OFI and the Funds meet their regulatory and corporate governance obligations for voting of portfolio proxies. The Committee shall adopt a written charter that outlines its responsibilities and any amendments to the charter shall be provided to the Boards at the Boards' next regularly scheduled meetings. The Committee also shall receive and review periodic reports prepared by the proxy voting agent regarding portfolio proxies and related votes cast. The Committee shall oversee the proxy voting agent's compliance with these Policies and Procedures and the Guidelines, including any deviations by the proxy voting agent from the Guidelines. The Committee will meet on a regular basis and may act at the direction of two or more of its voting members provided one of those members is the Legal Department or Compliance Department representative. The Committee will maintain minutes of Committee meetings and provide regular reports to the OFI Fund Boards. C. Administration and Voting of Portfolio Proxies 1. Fiduciary Duty and Objective 431 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- As an investment adviser that has been granted the authority to vote portfolio proxies, OFI owes a fiduciary duty to the Funds to monitor corporate events and to vote portfolio proxies consistent with the best interests of the Funds and their shareholders. In this regard, OFI seeks to ensure that all votes are free from unwarranted and inappropriate influences. Accordingly, OFI generally votes portfolio proxies in a uniform manner for the Funds and in accordance with these Policies and Procedures and the Guidelines. In meeting its fiduciary duty, OFI generally undertakes to vote portfolio proxies with a view to enhancing the value of the company's stock held by the Funds. Similarly, when voting on matters for which the Guidelines dictate a vote be decided on a case-by-case basis, OFI's primary consideration is the economic interests of the Funds and their shareholders. 2. Proxy Voting Agent On behalf of the Funds, OFI retains an independent, third party proxy voting agent to assist OFI in its proxy voting responsibilities in accordance with these Policies and Procedures and, in particular, with the Guidelines. As discussed above, the Committee is responsible for monitoring the proxy voting agent. In general, OFI may consider the proxy voting agent's research and analysis as part of OFI's own review of a proxy proposal in which the Guidelines recommend that the vote be considered on a case-by-case basis. OFI bears ultimate responsibility for how portfolio proxies are voted. Unless instructed otherwise by OFI, the proxy voting agent will vote each portfolio proxy in accordance with the Guidelines. The proxy voting agent also will assist OFI in maintaining records of OFI's and the Funds' portfolio proxy votes, including the appropriate records necessary for the Funds' to meet their regulatory obligations regarding the annual filing of proxy voting records on Form N-PX with the SEC. 3. Material Conflicts of Interest OFI votes portfolio proxies without regard to any other business relationship between OFI (or its affiliates) and the company to which the portfolio proxy relates. To this end, OFI must identify material conflicts of interest that may arise between the interests of a Fund and its shareholders and OFI, its affiliates or their business relationships. A material conflict of interest may arise from a business relationship between a portfolio company or its affiliates (together the "company"), on one hand, and OFI or any of its affiliates (together "OFI"), on the other, including, but not limited to, the following relationships: o OFI provides significant investment advisory or other services to a company whose management is soliciting proxies or OFI is seeking to provide such services; o an officer of OFI serves on the board of a charitable organization that receives charitable contributions from the company and the charitable organization is a client of OFI; o a company that is a significant selling agent of OFI's products and services solicits proxies; o OFI serves as an investment adviser to the pension or other investment account of the portfolio company or OFI is seeking to serve in that capacity; or o OFI and the company have a lending or other financial-related relationship. In each of these situations, voting against company management's recommendation may cause OFI a loss of revenue or other benefit. OFI and its affiliates generally seek to avoid such material conflicts of interest by maintaining separate investment decision making processes to prevent the sharing of business objectives with respect to proposed or actual actions regarding portfolio proxy voting decisions. This arrangement alone, however, is insufficient to assure that material conflicts of interest do not influence OFI's voting of portfolio proxies. To minimize this possibility, OFI and the Committee employ the following procedures: o If the proposal that gives rise to a material conflict is specifically addressed in the Guidelines, OFI will vote the portfolio proxy in accordance with the Guidelines, provided that the Guidelines do not provide discretion to OFI on how to vote on the matter (i.e., case-by-case); 432 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o If the proposal that gives rise to a potential conflict is not specifically addressed in the Guidelines or provides discretion to OFI on how to vote, OFI will vote in accordance with its proxy voting agent's general recommended guidelines on the proposal provided that OFI has reasonably determined there is no conflict of interest on the part of the proxy voting agent; o If neither of the previous two procedures provides an appropriate voting recommendation, OFI may retain an independent fiduciary to advise OFI on how to vote the proposal; or the Committee may determine that voting on the particular proposal is impracticable and/or is outweighed by the cost of voting and direct OFI to abstain from voting. 4. Certain Foreign Securities Portfolio proxies relating to foreign securities held by the Funds are subject to these Policies and Procedures. In certain foreign jurisdictions, however, the voting of portfolio proxies can result in additional restrictions that have an economic impact or cost to the security, such as "share-blocking." Share-blocking would prevent OFI from selling the shares of the foreign security for a period of time if OFI votes the portfolio proxy relating to the foreign security. In determining whether to vote portfolio proxies subject to such restrictions, OFI, in consultation with the Committee, considers whether the vote, either itself or together with the votes of other shareholders, is expected to have an effect on the value of the investment that will outweigh the cost of voting. Accordingly, OFI may determine not to vote such securities. If OFI determines to vote a portfolio proxy and during the "share-blocking period" OFI would like to sell an affected foreign security for one or more Funds, OFI, in consultation with the Committee, will attempt to recall the shares (as allowable within the market time-frame and practices). 5. Securities Lending Programs The Funds may participate in securities lending programs with various counterparties. Under most securities lending arrangements, proxy voting rights during the lending period generally are transferred to the borrower, and thus proxies received in connection with the securities on loan may not be voted by the lender (i.e., the Fund) unless the loan is recalled. Alternatively, some securities lending programs use contractual arrangements among the lender, borrower and counterparty to arrange for the borrower to vote the proxies in accordance with instructions from the lending Fund. If a Fund participates in a securities lending program, OFI will attempt to recall the Funds' portfolio securities on loan and vote proxies relating to such securities if OFI determines that the votes involve matters that would have a material effect on the Fund's investment in such loaned securities. 6. Shares of Registered Investment Companies (Fund of Funds) Certain OFI Funds are structured as funds of funds and invest their assets primarily in other underlying OFI Funds (the "Fund of Funds"). Accordingly, the Fund of Fund is a shareholder in the underlying OFI Funds and may be requested to vote on a matter pertaining to those underlying OFI Funds. With respect to any such matter, the Fund of Funds will vote its shares in the underlying OFI Fund in the same proportion as the vote of all other shareholders in that underlying OFI Fund (sometimes called "mirror" or "echo" voting). D. Fund Board Reports and Recordkeeping OFI will prepare periodic reports for submission to the Board describing: o any issues arising under these Policies and Procedures since the last report to the Board and the resolution of such issues, including but not limited to, information about conflicts of interest not addressed in the Policies and Procedures; and o any proxy votes taken by OFI on behalf of the Funds since the last report to the Board which were deviations from the Policies and Procedures and the reasons for any such deviations. 433 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- In addition, no less frequently than annually, OFI will provide the Boards a written report identifying any recommended changes in existing policies based upon OFI's experience under these Policies and Procedures, evolving industry practices and developments in applicable laws or regulations. OFI will maintain all records required to be maintained under, and in accordance with, the Investment Company Act of 1940 and the Investment Advisers Act of 1940 with respect to OFI's voting of portfolio proxies, including, but not limited to: o these Policies and Procedures, as amended from time to time; o Records of votes cast with respect to portfolio proxies, reflecting the information required to be included in Form N-PX; o Records of written client requests for proxy voting information and any written responses of OFI to such requests; and o Any written materials prepared by OFI that were material to making a decision in how to vote, or that memorialized the basis for the decision. E. Amendments to these Procedures In addition to the Committee's responsibilities as set forth in the Committee's Charter, the Committee shall periodically review and update these Policies and Procedures as necessary. Any amendments to these Procedures and Policies (including the Guidelines) shall be provided to the Boards for review, approval and ratification at the Boards' next regularly scheduled meetings. F. Proxy Voting Guidelines The Guidelines adopted by the Boards of the Funds are attached as Appendix A. The importance of various issues shifts as political, economic and corporate governance issues come to the forefront and then recede. Accordingly, the Guidelines address the issues OFI has most frequently encountered in the past several years. 434 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Appendix A OppenheimerFunds, Inc. and Oppenheimer Funds Portfolio Proxy Voting Guidelines (dated as of November 30, 2007) 1. OPERATIONAL ITEMS Amend Quorum Requirements. o Vote AGAINST proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal. Amend Minor Bylaws. o Vote FOR bylaw or charter changes that are of a housekeeping nature (updates or corrections). Change Company Name. o Vote WITH Management Change Date, Time, or Location of Annual Meeting. o Vote FOR management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable. o Vote AGAINST shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable. Transact Other Business. o Vote AGAINST proposals to approve other business when it appears as voting item. AUDITORS Ratifying Auditors o Vote FOR Proposals to ratify auditors, unless any of the following apply: o An auditor has a financial interest in or association with the company, and is therefore not independent. o Fees for non-audit services are excessive. o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position. o Vote AGAINST shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services. o Vote AGAINST shareholder proposals asking for audit firm rotation. o Vote on a CASE-BY-CASE basis on shareholder proposals asking the company to discharge the auditor(s). o Proposals are adequately covered under applicable provisions of Sarbanes-Oxley Act or NYSE or SEC regulations. 435 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2.0 THE BOARD OF DIRECTORS 2.1 Voting on Director Nominees o Vote on director nominees should be made on a CASE-BY-CASE basis, examining the following factors: o Composition of the board and key board committees o Attendance at board meetings o Corporate governance provisions and takeover activity o Long-term company performance relative to a market index o Directors' investment in the company o Whether the chairman is also serving as CEO o Whether a retired CEO sits on the board o WITHHOLD VOTES: However, there are some actions by directors that should result in votes being WITHHELD. These instances include directors who: o Attend less than 75% of the board and committee meetings without a valid excuse. o Implement or renew a dead-hand or modified dead-hand poison pill o Ignore a shareholder proposal that is approved by a majority of the shares outstanding. o Ignore a shareholder proposal that is approved by a majority of the votes cast for two consecutive years. o Failed to act on takeover offers where the majority of the shareholders tendered their shares. o Are inside directors or affiliated outsiders; and sit on the audit, compensation, or nominating committees or the company does not have one of these committees. o Are audit committee members; and the non-audit fees paid to the auditor are excessive. o Enacted egregious corporate governance policies or failed to replace management as appropriate. o Are inside directors or affiliated outside directors; and the full board is less than majority independent. o Are CEOs of public companies who serve on more than three public company boards, i.e., more than two public company boards other than their own board. (The term "public company" excludes an investment company.) o Serve on more than six public company boards. (The term "public company" excludes an investment company.) o Additionally, the following should result in votes being WITHHELD (except from new nominees): o If the director(s) receive more than 50% withhold votes of votes cast and the issue that was the underlying cause of the high level of withhold votes in the prior election has not been addressed. o If the company has adopted or renewed a poison pill without shareholder approval since the company's last annual meeting, does not put the pill to a vote at the current annual meeting, and there is no requirement to put the pill to shareholder vote within 12 months of its adoption. If a company that triggers this policy commits to putting its pill to a shareholder vote within 12 months of its adoption, OFI will not recommend a WITHHOLD vote. 2.2 Board Size o Vote on a CASE-BY-CASE basis on shareholder proposals to maintain or improve ratio of independent versus non-independent directors. o Vote FOR proposals seeking to fix the board size or designate a range for the board size. o Vote on a CASE-BY-CASE basis on proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval. 2.3 436 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Classification/Declassification of the Board o Vote AGAINST proposals to classify the board. o Vote FOR proposals to repeal classified boards and to elect all directors annually. In addition, if 50% of shareholders request repeal of the classified board and the board remains classified, withhold votes for those directors at the next meeting at which directors are elected. 2.4 Cumulative Voting o Vote FOR proposal to eliminate cumulative voting. 2.5 Require Majority Vote for Approval of Directors o OFI will generally vote FOR precatory and binding resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats. Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director. 2.6 Director and Officer Indemnification and Liability Protection o Proposals on director and officer indemnification and liability protection should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard. o Vote FOR proposals to eliminate entirely directors' and officers' liability for monetary damages for violating the duty of care, provided the liability for gross negligence is not eliminated. o Vote FOR indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness, provided coverage is not provided for gross negligence acts. o Vote FOR only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if both of the following apply: o The director was found to have acted in good faith and in a manner that he reasonable believed was in the best interests of the company, and o Only if the director's legal expenses would be covered. 2.7 Establish/Amend Nominee Qualifications o Vote on a CASE-BY-CASE basis on proposals that establish or amend director qualifications. o Votes should be based on how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board. o Vote AGAINST shareholder proposals requiring two candidates per board seat. 2.8 Filling Vacancies/Removal of Directors. o Vote AGAINST proposals that provide that directors may be removed only for cause. o Vote FOR proposals to restore shareholder ability to remove directors with or without cause. o Vote AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies. o Vote FOR proposals that permit shareholders to elect directors to fill board vacancies. 437 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 2.9 Independent Chairman (Separate Chairman/CEO) o Generally vote FOR shareholder proposals requiring the position of chairman to be filled by an independent director unless there are compelling reasons to recommend against the proposal such as a counterbalancing governance structure. This should include all of the following: o Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties o Two-thirds independent board o All-independent key committees o Established governance guidelines o The company should not have underperformed its peers and index on a one-year and three-year basis, unless there has been a change in the Chairman/CEO position within that time. Performance will be measured according to shareholder returns against index and peers from the performance summary table. 2.10 Majority of Independent Directors/Establishment of Committees o Vote FOR shareholder proposals asking that a majority of directors be independent but vote CASE-BY-CASE on proposals that more than a majority of directors be independent. NYSE and NASDAQ already require that listed companies have a majority of independent directors. o Vote FOR shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard. 2.11 Open Access o Vote CASE-BY-CASE on shareholder proposals asking for open access taking into account the ownership threshold specified in the proposal and the proponent's rationale for targeting the company in terms of board and director conduct. (At the time of these policies, the SEC's proposed rule in 2003 on Security Holder Director Nominations remained outstanding.) 2.12 Stock Ownership Requirements o Vote on a CASE-BY-CASE basis on shareholder proposals that mandate a minimum amount of stock that a director must own in order to qualify as a director or to remain on the board. While stock ownership on the part of directors is favored, the company should determine the appropriate ownership requirement. o Vote on a CASE-BY-CASE basis on shareholder proposals asking companies to adopt holding periods or retention ratios for their executives, taking into account: o Whether the company has any holding period, retention ratio or officer ownership requirements in place. These should consist of: Rigorous stock ownership guidelines or short-term holding period requirement (six months to one year) coupled with a significant long-term ownership requirement or a meaningful retention ratio. o Actual officer stock ownership and the degree to which it meets or exceeds the proponent's suggested holding period/retention ratio or the company's own stock ownership or retention requirements. 2.13 Age or Term Limits o Vote AGAINST shareholder or management proposals to limit the tenure of directors either through term limits or mandatory retirement ages. OFI views as management decision. 438 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 3.0 PROXY CONTESTS 3.1 Voting for Director Nominees in Contested Elections o Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis considering the following factors: o Long-term financial performance of the target company relative to its industry o Management's track record o Background to the proxy contest o Qualifications of director nominees (both slates) o Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met o Stock ownership position 3.2 Reimbursing Proxy Solicitation Expenses o Voting to reimburse proxy solicitation expenses should be analyzed on a CASE-BY-CASE basis. In cases, which OFI recommends in favor of the dissidents, OFI also recommends voting for reimbursing proxy solicitation expenses. 3.3 Confidential Voting o Vote AGAINST shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election. o If a proxy solicitor loses the right to inspect individual proxy cards in advance of a meeting, this could result in many cards being voted improperly (wrong signatures, for example) or not at all, with the result that companies fail to reach a quorum count at their annual meetings, and therefore these companies to incur the expense of second meetings or votes. 4.0 ANTITAKEOVER DEFENSES AND VOTING RELATED ISSUES 4.1 Advance Notice Requirements for Shareholder Proposals/Nominations. o Votes on advance notice proposals are determined on a CASE-BY-CASE basis, generally giving support to those proposals which allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible. 4.2 Amend Bylaws without Shareholder Consent o Vote AGAINST proposals giving the board exclusive authority to amend the bylaws. o Vote FOR proposals giving the board the ability to amend the bylaws in addition to shareholders. 4.3 Poison Pills o Generally vote FOR shareholder proposals requesting to put extraordinary benefits contained in Supplemental Executive Retirement Plan agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans. o Vote AGAINST proposals that increase authorized common stock fro the explicit purpose of implementing a shareholder rights plan (poison pill). 439 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Vote FOR share holder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it. o Vote FOR shareholder proposals asking that any future pill be put to a shareholder vote. 4.4 Shareholder Ability to Act by Written Consent o Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent. o Vote FOR proposals to allow or make easier shareholder action by written consent. 4.5 Shareholder Ability to Call Special Meetings o Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings. o Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management. 4.6 Establish Shareholder Advisory Committee o Vote WITH Management 4.7 Supermajority Vote Requirements o Vote AGAINST proposals to require a supermajority shareholder vote. o Vote FOR proposals to lower supermajority vote requirements. 5.0 MERGERS AND CORPORATE RESTRUCTURINGS 5.1 Appraisal Rights o Vote FOR proposals to restore, or provide shareholders with, rights of appraisal. 5.2 Asset Purchases o Vote CASE-BY-CASE on asset purchase proposals, considering the following factors: o Purchase price o Fairness opinion o Financial and strategic benefits o How the deal was negotiated o Conflicts of interest o Other alternatives for the business o Non-completion risk 5.3 Asset Sales o Vote CASE-BY-CASE on asset sale proposals, considering the following factors: o Impact on the balance sheet/working capital o Potential elimination of diseconomies o Anticipated financial and operating benefits o Anticipated use of funds o Value received for the asset o Fairness opinion 440 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o How the deal was negotiated o Conflicts of interest 5.4 Bundled Proposals o Review on a CASE-BY-CASE basis on bundled or "conditioned" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals. 5.5 Conversion of Securities o Votes on proposals regarding conversion of securities are determined on a CASE-BY-CASE basis. When evaluating these proposals, the investor should review the dilution to existing shareholders, the conversion price relative to the market value, financial issues, control issues, termination penalties, and conflicts of interest. 5.6 Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans o Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a CASE-BY-CASE basis, taking into consideration the following: o Dilution to existing shareholders' position o Terms of the offer o Financial issues o Management's efforts to pursue other alternatives o Control issues o Conflicts of interest o Vote CASE-BY-CASE on the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved. 5.7 Formation of Holding Company o Votes on proposals regarding the formation of a holding company should be determined on a CASE-BY-CASE basis, taking into consideration the following: o The reasons for the change o Any financial or tax benefits o Regulatory benefits o Increases in capital structure o Changes to the articles of incorporation or bylaws of the company. o Absent compelling financial reasons to recommend the transaction, vote AGAINST the formation of a holding company if the transaction would include either of the following: o Increases in common or preferred stock in excess of the allowable maximum as calculated by the ISS Capital Structure Model. o Adverse changes in shareholder rights. 5.8 Going Private Transactions (LBOs and Minority Squeezeouts) o Votes on going private transactiozns on a CASE-BY-CASE basis, taking into account the following: 441 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Offer price/premium o Fairness opinion o How the deal was negotiated o Conflicts of interests o Other alternatives/offers considered o Non-completion risk 5.9 Joint Venture o Votes on a CASE-BY-CASE basis on proposals to form joint ventures, taking into account the following: o Percentage of assets/business contributed o Percentage of ownership o Financial and strategic benefits o Governance structure o Conflicts of interest o Other alternatives o Non-completion risk 5.10 Liquidations o Votes on liquidations should be made on a CASE-BY-CASE basis after reviewing management's efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation. o Vote on a CASE-BY-CASE basis, if the company will file for bankruptcy if the proposal is not approved. 5.11 Mergers and Acquisitions/Issuance of Shares to Facilitate Merger or Acquisition o Votes on mergers and acquisitions should be considered on a CASE-BY-CASE basis, determining whether the transaction enhances shareholder value by giving consideration to the following: o Prospects of the combined company, anticipated financial and operating benefits o Offer price (premium or discount) o Fairness opinion o How the deal was negotiated o Changes in corporate governance o Change in the capital structure o Conflicts of interest 5.12 Private Placements/Warrants/Convertible Debenture o Votes on proposals regarding private placements should be determined on a CASE-BY-CASE basis. When evaluating these proposals the invest should review: o Dilution to existing shareholders' position o Terms of the offer o Financial issues o Management's efforts to pursue other alternatives o Control issues o Conflicts of interest 5.13 Spinoffs o Votes on spinoffs should be considered on a CASE-BY-CASE basis depending on: 442 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Tax and regulatory advantages o Planned use of the sale proceeds o Valuation of spinoff o Fairness opinion o Benefits to the parent company o Conflicts of interest o Managerial incentives o Corporate governance changes o Changes in the capital structure 5.14 Value Maximization Proposals o Votes on a CASE-BY-CASE basis on shareholder proposals seeking to maximize shareholder value by hiring a financial advisor to explore strategic alternatives, selling the company or liquidating the company and distributing the proceeds to shareholders. These proposals should be evaluated based on the following factors: prolonged poor performance with no turnaround in sight, signs of entrenched board and management, strategic plan in place for improving value, likelihood of receiving reasonable value in a sale or dissolution and whether the company is actively exploring its strategic options, including retaining a financial advisor. 5.15 Severance Agreements that are Operative in Event of Change in Control o Review CASE-BY-CASE, with consideration give to ISS "transfer-of-wealth" analysis. (See section 8.2) 6.0 STATE OF INCORPORATION 6.1 Control Share Acquisition Provisions o Vote FOR proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders. o Vote AGAINST proposals to amend the charter to include control share acquisition provisions. o Vote FOR proposals to restore voting rights to the control shares. 6.2 Control Share Cashout Provisions o Vote FOR proposals to opt out of control share cashout statutes. 6.3 Disgorgement Provisions o Vote FOR proposals to opt out of state disgorgement provisions. 6.4 Fair Price Provisions o Vote proposals to adopt fair price provisions on a CASE-BY-CASE basis, evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price. o Generally vote AGAINST fair price provisions with shareholder vote requirements greater than a majority of disinterested shares. 443 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 6.5 Freezeout Provisions o Vote FOR proposals to opt out of state freezeout provisions. 6.6 Greenmail o Vote FOR proposals to adopt anti-greenmail charter of bylaw amendments or otherwise restrict a company's ability to make greenmail payments. o Review on a CASE-BY-CASE basis on anti-greenmail proposals when they are bundled with other charter or bylaw amendments. 6.7 Reincorporation Proposals o Proposals to change a company's state of incorporation should be evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws. o Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes. 6.8 Stakeholder Provisions o Vote AGAINST proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination. 6.9 State Anti-takeover Statutes o Review on a CASE-BY-CASE basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions). 7.0 CAPITAL STRUCTURE 7.1 Adjustments to Par Value of Common Stock o Vote FOR management proposals to reduce the par value of common stock. 7.2 Common Stock Authorization o Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS. o Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights. o Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain. 444 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 7.3 Dual-Class Stock o Vote AGAINST proposals to create a new class of common stock with superior voting rights. o Vote FOR proposals to create a new class of non-voting or sub-voting common stock if: o It is intended for financing purposes with minimal or no dilution to current shareholders o It is not designed to preserve the voting power of an insider or significant shareholder 7.4 Issue Stock for Use with Rights Plan o Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill). 7.5 Preemptive Rights o Review on a CASE-BY-CASE basis on shareholder proposals that seek preemptive rights. In evaluating proposals on preemptive right, consider the size of a company, the characteristics of its shareholder base, and the liquidity of the stock. 7.6 Preferred Stock o Vote FOR shareholder proposals to submit preferred stock issuance to shareholder vote. o Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock). o Vote FOR proposals to create "declawed" blank check preferred stock (stock that cannot be used as a takeover defense) o Vote FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. o Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. o Vote AGAINST proposals to increase the number of blank check preferred shares unless, (i) class of stock has already been approved by shareholders and (ii) the company has a record of issuing preferred stock for legitimate financing purposes. 7.7 Pledge of Assets for Debt (Generally Foreign Issuers) o OFI will consider these proposals on a CASE-BY-CASE basis. Generally, OFI will support increasing the debt-to-equity ratio to 100%. Any increase beyond 100% will require further assessment, with a comparison of the company to its industry peers or country of origin. In certain foreign markets, such as France, Latin America and India, companies often propose to pledge assets for debt, or seek to issue bonds which increase debt-to-equity ratios up to 300%. 7.8 Recapitalization o Votes CASE-BY-CASE on recapitalizations (reclassification of securities), taking into account the following: o More simplified capital structure 445 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Enhanced liquidity o Fairness of conversion terms o Impact on voting power and dividends o Reasons for the reclassification o Conflicts of interest o Other alternatives considered 7.9 Reverse Stock Splits o Vote FOR management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. o Vote FOR management proposals to implement a reverse stock split to avoid delisting. o Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a CASE-BY-CASE basis using a model developed by ISS. 7.10 Share Purchase Programs o Vote FOR management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. 7.11 Stock Distributions: Splits and Dividends o Vote FOR management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance as determined using a model developed by ISS. 7.12 Tracking Stock o Votes on the creation of tracking stock are determined on a CASE-BY-CASE basis, weighing the strategic value of the transaction against such factors as: adverse governance changes, excessive increases in authorized capital stock, unfair method of distribution, diminution of voting rights, adverse conversion features, negative impact on stock option plans, and other alternatives such as spinoff. 8.0 EXECUTIVE AND DIRECTOR COMPENSATION 8.1 Equity-based Compensation Plans o Vote compensation proposals on a CASE-BY-CASE basis. o In general, OFI considers compensation questions such as stock option plans and bonus plans to be ordinary business activity. OFI analyzes stock option plans, paying particular attention to their dilutive effect. While OFI generally supports management proposals, OFI opposes compensation proposals that OFI believes to be excessive, with consideration of factors including the company's industry, market capitalization, revenues and cash flow. o Vote AGAINST plans that expressly permit the repricing of underwater stock options without shareholder approval. Generally vote AGAINST plans in which the CEO participates if there is a disconnect between the CEO's pay and company performance (an increase in pay and a decrease in performance) and the main source of the pay increase (over half) is equity-based. A decrease in performance is based on negative one- and three-year total shareholder returns. An increase in pay is based on the CEO's total direct compensation (salary, cash bonus, present value of stock options, face value of restricted stock, face value of long-term incentive plan payouts, and all other compensation) 446 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- increasing over the previous year. Also WITHHOLD votes from the Compensation Committee members. 8.2 Director Compensation o Examine compensation proposals on a CASE-BY-CASE basis. In general, OFI considers compensation questions such as stock option plans and bonus plans to be ordinary business activity. OFI analyzes stock option plans, paying particular attention to their dilutive effect. While OFI generally supports management proposals, OFI opposes excessive compensation proposals, with consideration of factors including the company's industry, market capitalization, revenues and cash flow. o Vote FOR retirement plans for non-employee directors if the number of shares reserve is less than 3% of outstanding shares and the exercise price is 100% of fair market value. o Vote AGAINST shareholder proposals to eliminate retirement plans for non-employee directors, if the number of shares is less than 3% of outstanding shares and exercise price is 100% of fair market value. 8.3 Bonus for Retiring Director o Examine on a CASE-BY CASE basis. Factors we consider typically include length of service, company's accomplishments during the Director's tenure, and whether we believe the bonus is commensurate with the Director's contribution to the company. 8.4 Cash Bonus Plan o Consider on a CASE-BY-CASE basis. In general, OFI considers compensation questions such as cash bonus plans to be ordinary business activity. While we generally support management proposals, we oppose compensation proposals we believe are excessive. 8.5 Stock Plans in Lieu of Cash o Generally vote FOR management proposals, unless OFI believe the proposal is excessive. In casting its vote, OFI reviews the ISS recommendation per a "transfer of wealth" binomial formula that determines an appropriate cap for the wealth transfer based upon the company's industry peers. o Vote FOR plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock are determined on a CASE-BY-CASE basis. o Vote FOR plans which provide a dollar-for-dollar cash for stock exchange. 8.6 [Reserved] 8.7 Management Proposals Seeking Approval to Reprice Options o Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following: o Historic trading patterns o Rationale for the repricing o Value-for-value exchange o Option vesting 447 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Term of the option o Exercise price o Participation 8.8 Employee Stock Purchase Plans o Votes on employee stock purchase plans should be determined on a CASE-BY-CASE basis. o Votes FOR employee stock purchase plans where all of the following apply: o Purchase price is at least 85% of fair market value o Offering period is 27 months or less o The number of shares allocated to the plan is 10% or less of the outstanding shares o Votes AGAINST employee stock purchase plans where any of the following apply: o Purchase price is at least 85% of fair market value o Offering period is greater than 27 months o The number of shares allocated to the plan is more than 10% of the outstanding shares 8.9 Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related Compensation Proposals) o Vote FOR proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m). o Vote FOR proposals to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) unless they are clearly inappropriate. o Votes to amend existing plans to increase shares reserved and to qualify for favorable tax treatment under the provisions of Section 162(m) should be considered on a CASE-BY-CASE basis using a proprietary, quantitative model developed by ISS. o Generally vote FOR cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes under the provisions of Section 162(m) if no increase in shares is requested. 8.10 Employee Stock Ownership Plans (ESOPs) o Vote FOR proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than 5% of outstanding shares.) 8.11 Shareholder Proposal to Submit Executive Compensation to Shareholder Vote o Vote WITH MANAGEMENT. 8.12 401(k) Employee Benefit Plans o Vote FOR proposals to implement a 401(k) savings plan for employees. 8.13 Shareholder Proposals Regarding Executive and Director Pay o Generally, vote FOR shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company. 448 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Generally vote FOR shareholder proposals seeking disclosure regarding the company's, board's, or committee's use of compensation consultants, such as company name, business relationship(s) and fees paid. o Vote WITH MANAGEMENT on shareholder proposals requiring director fees be paid in stock only. o Vote FOR shareholder proposals to put option repricings to a shareholder vote. o Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. 8.14 Performance-Based Stock Options o Generally vote FOR shareholder proposals advocating the use of performance-based stock options (indexed, premium-priced, and performance-vested options), unless: o The proposal is overly restrictive (e.g., it mandates that awards to all employees must be performance-based or all awards to top executives must be a particular type, such as indexed options), or o The company demonstrates that it is using a substantial portion of performance-based awards for its top executives 8.15 Pay-for-Performance o Generally vote FOR shareholder proposals that align a significant portion of total compensation of senior executives to company performance. In evaluating the proposals, the following factors will be analyzed: o What aspects of the company's short-term and long-term incentive programs are performance driven? o Can shareholders assess the correlation between pay and performance based on the company's disclosure? o What type of industry does the company belong to? o Which stage of the business cycle does the company belong to? 8.16 Golden Parachutes and Executive Severance Agreements o Vote FOR shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. o Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include the following: o The parachute should be less attractive than an ongoing employment opportunity with the firm o The triggering mechanism should be beyond the control management o The amount should not exceed three times base salary plus guaranteed benefits 8.17 Pension Plan Income Accounting o Generally vote FOR shareholder proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation. 8.18 Supplemental Executive Retirement Plans (SERPs) 449 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Generally vote FOR shareholder proposals requesting to put extraordinary benefits contained in SERP agreement to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what it offered under employee-wide plans. o Generally vote FOR shareholder proposals requesting to limit the executive benefits provided under the company's supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive's annual salary and excluding all incentive or bonus pay from the plan's definition of covered compensation used to establish such benefits. 8.19 Claw-back of Payments under Restatements o Vote on a CASE-BY-CASE basis on shareholder proposals requesting clawbacks or recoupment of bonuses or equity, considering factors such as: o The coverage of employees, whether it applies to all employees, senior executives or only employees committing fraud which resulted in the restatement o The nature of the proposal where financial restatement is due to fraud o Whether or not the company has had material financial problems resulting in chronic restatements o The adoption of a robust and formal bonus/equity recoupment policy o If a company's bonus recoupment policy provides overly broad discretion to the board in recovering compensation, generally vote FOR the proposal. o If the proposal seeks bonus recoupment from senior executives or employees committing fraud, generally vote FOR the proposal. 9.0 SOCIAL, POLITICAL AND ENVIRONMENTAL ISSUES In the case of social, political and environmental responsibility issues, OFI believes the issues do not primarily involve financial considerations and OFI ABSTAINS from voting on those issues. 450 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- PIMCO Proxy Voting Policy and Procedures(1) The following are general proxy voting policies and procedures ("Policies and Procedures") adopted by Pacific Investment Management Company LLC ("PIMCO"), an investment adviser registered under the Investment Advisers Act of 1940, as amended ("Advisers Act").(2) PIMCO serves as the investment adviser to a wide range of domestic and international clients, including investment companies registered under the Investment Company Act of 1940, as amended ("1940 Act") and separate investment accounts for other clients.(3) These Policies and Procedures are adopted to ensure compliance with Rule 206(4)-6 under the Advisers Act, other applicable fiduciary obligations of PIMCO and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") and interpretations of its staff. In addition to SEC requirements governing advisers, PIMCO's Policies and Procedures reflect the long-standing fiduciary standards and responsibilities applicable to investment advisers with respect to accounts subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), as set forth in the Department of Labor's rules and regulations.(4) PIMCO will implement these Policies and Procedures for each of its respective clients as required under applicable law, unless expressly directed by a client in writing to refrain from voting that client's proxies. PIMCO's authority to vote proxies on behalf of its clients is established by its advisory contracts, comparable documents or by an overall delegation of discretionary authority over its client's assets. Recognizing that proxy voting is a rare event in the realm of fixed income investing and is typically limited to solicitation of consent to changes in features of debt securities, these Policies and Procedures also apply to any voting rights and/or consent rights of PIMCO, on behalf of its clients, with respect to debt securities, including but not limited to, plans of reorganization, and waivers and consents under applicable indentures.(5) (1) Revised as of May 7, 2007. (2) These Policies and Procedures are adopted by PIMCO pursuant to Rule 206(4)-6 under the Advisers Act, effective August 6, 2003. See Proxy Voting by Investment Advisers, IA Release No. 2106 (January 31, 2003). (3) These Policies and Procedures address proxy voting considerations under U.S. law and regulations and do not address the laws or requirements of other jurisdictions. (4) Department of Labor Bulletin 94-2, 29 C.F.R. 2509.94-2 (July 29, 1994). If a client is subject to ERISA, PIMCO will be responsible for voting proxies with respect to the client's account, unless the client has expressly retained the right and obligation to vote the proxies, and provided prior written notice to PIMCO of this retention. (5) For purposes of these Policies and Procedures, proxy voting includes any voting rights, consent rights or other voting authority of PIMCO on behalf of its clients. For purposes of these Policies and Procedures, voting or consent rights shall not include matters which are primarily investment decisions, including tender offers, exchange offers, conversions, put options, redemptions, and dutch auctions. 451 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Set forth below are PIMCO's Policies and Procedures with respect to any voting or consent rights of advisory clients over which PIMCO has discretionary voting authority. These Policies and Procedures may be revised from time to time. General Statements of Policy These Policies and Procedures are designed and implemented in a manner reasonably expected to ensure that voting and consent rights are exercised in the best interests of PIMCO's clients. Each proxy is voted on a case-by-case basis taking into consideration any relevant contractual obligations as well as other relevant facts and circumstances. PIMCO may abstain from voting a client proxy under the following circumstances: (1) when the economic effect on shareholders' interests or the value of the portfolio holding is indeterminable or insignificant; or (2) when the cost of voting the proxies outweighs the benefits. Conflicts of Interest PIMCO seeks to resolve any material conflicts of interest by voting in good faith in the best interest of its clients. If a material conflict of interest should arise, PIMCO will seek to resolve such conflict in the client's best interest by pursuing any one of the following courses of action: 1. convening an ad-hoc committee to assess and resolve the conflict;(6) 2. voting in accordance with the instructions/consent of a client after providing notice of and disclosing the conflict to that client; 3. voting the proxy in accordance with the recommendation of an independent third-party service provider; 4. suggesting that the client engage another party to determine how the proxies should be voted; 5. delegating the vote to an independent third-party service provider; or 6. voting in accordance with the factors discussed in these Policies and Procedures. PIMCO will document the process of resolving any identified material conflict of interest. 6 Any committee must be comprised of personnel who have no direct interest in the outcome of the potential conflict. 452 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Reporting Requirements and the Availability of Proxy Voting Records Except to the extent required by applicable law or otherwise approved by PIMCO, PIMCO will not disclose to third parties how it voted a proxy on behalf of a client. However, upon request from an appropriately authorized individual, PIMCO will disclose to its clients or the entity delegating the voting authority to PIMCO for such clients (e.g., trustees or consultants retained by the client), how PIMCO voted such client's proxy. In addition, PIMCO provides its clients with a copy of these Policies and Procedures or a concise summary of these Policies and Procedures: (i) in Part II of Form ADV; (ii) together with a periodic account statement in a separate mailing; or (iii) any other means as determined by PIMCO. The summary will state that these Policies and Procedures are available upon request and will inform clients that information about how PIMCO voted that client's proxies is available upon request. PIMCO Record Keeping PIMCO or its agent maintains proxy voting records as required by Rule 204-2(c) of the Advisers Act. These records include: (1) a copy of all proxy voting policies and procedures; (2) proxy statements (or other disclosures accompanying requests for client consent) received regarding client securities (which may be satisfied by relying on obtaining a copy of a proxy statement from the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system or a third party provided that the third party undertakes to provide a copy promptly upon request); (3) a record of each vote cast by PIMCO on behalf of a client; (4) a copy of any document created by PIMCO that was material to making a decision on how to vote proxies on behalf of a client or that memorializes the basis for that decision; and (5) a copy of each written client request for proxy voting records and any written response from PIMCO to any (written or oral) client request for such records. Additionally, PIMCO or its agent maintains any documentation related to an identified material conflict of interest. Proxy voting books and records are maintained by PIMCO or its agent in an easily accessible place for a period of five years from the end of the fiscal year during which the last entry was made on such record, the first two years in the offices of PIMCO or its agent. Review and Oversight PIMCO's proxy voting procedures are described below. PIMCO's Compliance Group will provide for the supervision and periodic review, no less than on an annual basis, of its proxy voting activities and the implementation of these Policies and Procedures. Because PIMCO has contracted with State Street Investment Manager Solutions, LLC ("IMS West") to perform portfolio accounting, securities processing and settlement processing on behalf of PIMCO, certain of the following procedures involve IMS West in administering and implementing the proxy voting process. IMS West will review and monitor the proxy voting process to ensure that proxies are voted on a timely basis. 1. Transmit Proxy to PIMCO. IMS West will forward to PIMCO's Compliance Group each proxy received from registered owners of record (e.g., custodian bank or other third party service providers). 2. Conflicts of Interest. PIMCO's Compliance Group will review each proxy to determine whether there may be a material conflict between PIMCO and its client. As part of this review, the group will determine whether the issuer of the security or proponent of the proposal is a client of PIMCO, or if a client has actively solicited PIMCO to support a particular position. If no conflict exists, this group will forward each proxy to PIMCO's Middle Office Group for consideration by the appropriate portfolio manager(s). However, if a conflict does exist, PIMCO's Compliance Group will seek to resolve any such conflict in accordance with these Policies and Procedures. 3. Vote. The portfolio manager will review the information, will vote the proxy in accordance with these Policies and Procedures and will return the voted proxy to PIMCO's Middle Office Group. 4. Review. PIMCO's Middle Office Group will review each proxy that was submitted to and completed by the appropriate portfolio manager. PIMCO's Middle Office Group will forward the voted proxy back to IMS West with the portfolio manager's decision as to how it should be voted. 5. Transmittal to Third Parties. IMS West will document the portfolio manager's decision for each proxy received from PIMCO's Middle Office Group in a format designated by the custodian bank or other third party service provider. IMS West will maintain a log of all corporate actions, including proxy voting, which indicates, among other 453 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- things, the date the notice was received and verified, PIMCO's response, the date and time the custodian bank or other third party service provider was notified, the expiration date and any action taken. 6. Information Barriers. Certain entities controlling, controlled by, or under common control with PIMCO ("Affiliates") may be engaged in banking, investment advisory, broker-dealer and investment banking activities. PIMCO personnel and PIMCO's agents are prohibited from disclosing information regarding PIMCO's voting intentions to any Affiliate. Any PIMCO personnel involved in the proxy voting process who are contacted by an Affiliate regarding the manner in which PIMCO or its delegate intend to vote on a specific issue must terminate the contact and notify the Compliance Group immediately. Categories of Proxy Voting Issues In general, PIMCO reviews and considers corporate governance issues related to proxy matters and generally supports proposals that foster good corporate governance practices. PIMCO considers each proposal on a case-by-case basis, taking into consideration various factors and all relevant facts and circumstances at the time of the vote. PIMCO may vote proxies as recommended by management on routine matters related to the operation of the issuer and on matters not expected to have a significant economic impact on the issuer and/or shareholders, because PIMCO believes the recommendations by the issuer generally are in shareholders' best interests, and therefore in the best economic interest of PIMCO's clients. The following is a non-exhaustive list of issues that may be included in proxy materials submitted to clients of PIMCO, and a non-exhaustive list of factors that PIMCO may consider in determining how to vote the client's proxies. Board of Directors 1. Independence. PIMCO may consider the following factors when voting on director independence issues: (i) majority requirements for the board and the audit, nominating, compensation and/or other board committees; and (ii) whether the issuer adheres to and/or is subject to legal and regulatory requirements. 2. Director Tenure and Retirement. PIMCO may consider the following factors when voting on limiting the term of outside directors: (i) the introduction of new viewpoints on the board; (ii) a reasonable retirement age for the outside directors; and (iii) the impact on the board's stability and continuity. 3. Nominations in Elections. PIMCO may consider the following factors when voting on uncontested elections: (i) composition of the board; (ii) nominee availability and attendance at meetings; (iii) any investment made by the nominee in the issuer; and (iv) long-term corporate performance and the price of the issuer's securities. 4. Separation of Chairman and CEO Positions. PIMCO may consider the following factors when voting on proposals requiring that the positions of chairman of the board and the chief executive officer not be filled by the same person: (i) any potential conflict of interest with respect to the board's ability to review and oversee management's actions; and (ii) any potential effect on the issuer's productivity and efficiency. 5. D&O Indemnification and Liability Protection. PIMCO may consider the following factors when voting on proposals that include director and officer indemnification and liability protection: (i) indemnifying directors for conduct in the normal course of business; (ii) limiting liability for monetary damages for violating the duty of care; (iii) expanding coverage beyond legal expenses to acts that represent more serious violations of fiduciary obligation than carelessness (e.g. negligence); and (iv) providing expanded coverage in cases where a director's legal defense was unsuccessful if the director was found to have acted in good faith and in a manner that he or she reasonably believed was in the best interests of the company. 6. Stock Ownership. PIMCO may consider the following factors when voting on proposals on mandatory share ownership requirements for directors: (i) the benefits of additional vested interest in the issuer's stock; (ii) the ability of a director to fulfill his duties to the issuer regardless of the extent of his stock ownership; and (iii) the impact of limiting the number of persons qualified to be directors. 454 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Proxy Contests and Proxy Contest Defenses 1. Contested Director Nominations. PIMCO may consider the following factors when voting on proposals for director nominees in a contested election: (i) background and reason for the proxy contest; (ii) qualifications of the director nominees; (iii) management's track record; (iv) the issuer's long-term financial performance within its industry; (v) assessment of what each side is offering shareholders; (vi) the likelihood that the proposed objectives and goals can be met; and (vii) stock ownership positions of the director nominees. 2. Reimbursement for Proxy Solicitation Expenses. PIMCO may consider the following factors when voting on reimbursement for proxy solicitation expenses: (i) identity of the persons who will pay the expenses; (ii) estimated total cost of solicitation; (iii) total expenditures to date; (iv) fees to be paid to proxy solicitation firms; and (v) when applicable, terms of a proxy contest settlement. 3. Ability to Alter the Size of the Board by Shareholders. PIMCO may consider whether the proposal seeks to fix the size of the board and/or require shareholder approval to alter the size of the board. 4. Ability to Remove Directors by Shareholders. PIMCO may consider whether the proposal allows shareholders to remove directors with or without cause and/or allow shareholders to elect directors and fill board vacancies. 5. Cumulative Voting. PIMCO may consider the following factors when voting on cumulative voting proposals: (i) the ability of significant stockholders to elect a director of their choosing; (ii) the ability of minority shareholders to concentrate their support in favor of a director(s) of their choosing; and (iii) any potential limitation placed on the director's ability to work for all shareholders. 6. Supermajority Shareholder Requirements. PIMCO may consider all relevant factors, including but not limited to limiting the ability of shareholders to effect change when voting on supermajority requirements to approve an issuer's charter or bylaws, or to approve a merger or other significant business combination that would require a level of voting approval in excess of a simple majority. Tender Offer Defenses 1. Classified Boards. PIMCO may consider the following factors when voting on classified boards: (i) providing continuity to the issuer; (ii) promoting long-term planning for the issuer; and (iii) guarding against unsolicited takeovers. 2. Poison Pills. PIMCO may consider the following factors when voting on poison pills: (i) supporting proposals to require a shareholder vote on other shareholder rights plans; (ii) ratifying or redeeming a poison pill in the interest of protecting the value of the issuer; and (iii) other alternatives to prevent a takeover at a price clearly below the true value of the issuer. 3. Fair Price Provisions. PIMCO may consider the following factors when voting on proposals with respect to fair price provisions: (i) the vote required to approve the proposed acquisition; (ii) the vote required to repeal the fair price provision; (iii) the mechanism for determining fair price; and (iv) whether these provisions are bundled with other anti-takeover measures (e.g., supermajority voting requirements) that may entrench management and discourage attractive tender offers. Capital Structure 1. Stock Authorizations. PIMCO may consider the following factors to help distinguish between legitimate proposals to authorize increases in common stock for expansion and other corporate purchases and those proposals designed primarily as an anti-takeover device: (i) the purpose and need for the stock increase; (ii) the percentage increase with respect to the authorization currently in place; (iii) voting rights of the stock; and (iv) overall capitalization structure of the issuer. 2. Issuance of Preferred Stock. PIMCO may consider the following factors when voting on the issuance of preferred stock: (i) whether the new class of preferred stock has unspecified voting, conversion, dividend distribution, and other rights; (ii) whether the issuer expressly states that the stock will not be used as a takeover defense or carry superior voting rights; (iii) whether the issuer specifies the voting, dividend, conversion, and other rights of such stock 455 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- and the terms of the preferred stock appear reasonable; and (iv) whether the stated purpose is to raise capital or make acquisitions in the normal course of business. 3. Stock Splits. PIMCO may consider the following factors when voting on stock splits: (i) the percentage increase in the number of shares with respect to the issuer's existing authorized shares; and (ii) the industry that the issuer is in and the issuer's performance in that industry. 4. Reversed Stock Splits. PIMCO may consider the following factors when voting on reverse stock splits: (i) the percentage increase in the shares with respect to the issuer's existing authorized stock; and (ii) issues related to delisting the issuer's stock. Executive and Director Compensation 1. Stock Option Plans. PIMCO may consider the following factors when voting on stock option plans: (i) whether the stock option plan expressly permits the repricing of options; (ii) whether the plan could result in earnings dilution of greater than a specified percentage of shares outstanding; (iii) whether the plan has an option exercise price below the market price on the day of the grant; (iv) whether the proposal relates to an amendment to extend the term of options for persons leaving the firm voluntarily or for cause; and (v) whether the stock option plan has certain other embedded features. 2. Director Compensation. PIMCO may consider the following factors when voting on director compensation: (i) whether director shares are at the same market risk as those of the issuer's shareholders; and (ii) how stock option programs for outside directors compare with the standards of internal stock option programs. 3. Golden and Tin Parachutes. PIMCO may consider the following factors when voting on golden and/or tin parachutes: (i) whether they will be submitted for shareholder approval; and (ii) the employees covered by the plan and the quality of management. State of Incorporation State Takeover Statutes. PIMCO may consider the following factors when voting on proposals to opt out of a state takeover statute: (i) the power the statute vests with the issuer's board; (ii) the potential of the statute to stifle bids; and (iii) the potential for the statute to empower the board to negotiate a better deal for shareholders. Mergers and Restructurings 1. Mergers and Acquisitions. PIMCO may consider the following factors when voting on a merger and/or acquisition: (i) anticipated financial and operating benefits as a result of the merger or acquisition; (ii) offer price; (iii) prospects of the combined companies; (iv) how the deal was negotiated; and (v) changes in corporate governance and the potential impact on shareholder rights. PIMCO may also consider what impact the merger or acquisition may have on groups/organizations other than the issuer's shareholders. 2. Corporate Restructurings. With respect to a proxy proposal that includes a spin-off, PIMCO may consider the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives. With respect to a proxy proposal that includes an asset sale, PIMCO may consider the impact on the balance sheet or working capital and the value received for the asset. With respect to a proxy proposal that includes a liquidation, PIMCO may consider management's efforts to pursue alternatives, the appraisal value of assets, and the compensation plan for executives managing the liquidation. Investment Company Proxies For a client that is invested in an investment company, PIMCO votes each proxy of the investment company on a case-by-case basis and takes all reasonable steps to ensure that proxies are voted consistent with all applicable investment policies of the client and in accordance with any resolutions or other instructions approved by authorized persons of the client. 456 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- For a client that is invested in an investment company that is advised by PIMCO or its affiliates, if there is a conflict of interest which may be presented when voting for the client (e.g., a proposal to approve a contract between PIMCO and the investment company), PIMCO will resolve the conflict by doing any one of the following: (i) voting in accordance with the instructions/consent of the client after providing notice of and disclosing the conflict to that client; (ii) voting the proxy in accordance with the recommendation of an independent third-party service provider; or (iii) delegating the vote to an independent third-party service provider. 1. Election of Directors or Trustees. PIMCO may consider the following factors when voting on the director or trustee nominees of a mutual fund: (i) board structure, director independence and qualifications, and compensation paid by the fund and the family of funds; (ii) availability and attendance at board and committee meetings; (iii) investments made by the nominees in the fund; and (iv) the fund's performance. 2. Converting Closed-end Fund to Open-end Fund. PIMCO may consider the following factors when voting on converting a closed-end fund to an open-end fund: (i) past performance as a closed-end fund; (ii) the market in which the fund invests; (iii) measures taken by the board to address any discount of the fund's shares; (iv) past shareholder activism; (v) board activity; and (vi) votes on related proposals. 3. Proxy Contests. PIMCO may consider the following factors related to a proxy contest: (i) past performance of the fund; (ii) the market in which the fund invests; (iii) measures taken by the board to address past shareholder activism; (iv) board activity; and (v) votes on related proposals. 4. Investment Advisory Agreements. PIMCO may consider the following factors related to approval of an investment advisory agreement: (i) proposed and current fee arrangements/schedules; (ii) fund category/investment objective; (iii) performance benchmarks; (iv) share price performance as compared with peers; and (v) the magnitude of any fee increase and the reasons for such fee increase. 5. Policies Established in Accordance with the 1940 Act. PIMCO may consider the following factors: (i) the extent to which the proposed changes fundamentally alter the investment focus of the fund and comply with SEC interpretation; (ii) potential competitiveness; (iii) regulatory developments; and (iv) current and potential returns and risks. 6. Changing a Fundamental Restriction to a Non-fundamental Restriction. PIMCO may consider the following when voting on a proposal to change a fundamental restriction to a non-fundamental restriction: (i) reasons given by the board and management for the change; and (ii) the projected impact of the change on the fund's portfolio. 7. Distribution Agreements. PIMCO may consider the following when voting on a proposal to approve a distribution agreement: (i) fees charged to comparably sized funds with similar investment objectives; (ii) the distributor's reputation and past performance; and (iii) competitiveness of the fund among other similar funds in the industry. 8. Names Rule Proposals. PIMCO may consider the following factors when voting on a proposal to change a fund name, consistent with Rule 35d-1 of the 1940 Act: (i) whether the fund invests a minimum of 80% of its assets in the type of investments suggested by the proposed name; (ii) the political and economic changes in the target market; and (iii) current asset composition. 9. Disposition of Assets/Termination/Liquidation. PIMCO may consider the following when voting on a proposal to dispose of fund assets, terminate, or liquidate the fund: (i) strategies employed to salvage the fund; (ii) the fund's past performance; and (iii) the terms of the liquidation. 10. Changes to Charter Documents. PIMCO may consider the following when voting on a proposal to change a fund's charter documents: (i) degree of change implied by the proposal; (ii) efficiencies that could result; (iii) state of incorporation; and (iv) regulatory standards and implications. 11. Changing the Domicile of a Fund. PIMCO may consider the following when voting on a proposal to change the domicile of a fund: (i) regulations of both states; (ii) required fundamental policies of both states; and (iii) the increased flexibility available. 457 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 12. Change in Fund's Subclassification. PIMCO may consider the following when voting on a change in a fund's subclassification from diversified to non-diversified or to permit concentration in an industry: (i) potential competitiveness; (ii) current and potential returns; (iii) risk of concentration; and (iv) consolidation in the target industry. Distressed and Defaulted Securities 1. Waivers and Consents. PIMCO may consider the following when determining whether to support a waiver or consent to changes in provisions of indentures governing debt securities which are held on behalf of clients: (i) likelihood that the granting of such waiver or consent will potentially increase recovery to clients; (ii) potential for avoiding cross-defaults under other agreements; and (iii) likelihood that deferral of default will give the obligor an opportunity to improve its business operations. 2. Voting on Chapter 11 Plans of Liquidation or Reorganization. PIMCO may consider the following when determining whether to vote for or against a Chapter 11 plan in a case pending with respect to an obligor under debt securities which are held on behalf of clients: (i) other alternatives to the proposed plan; (ii) whether clients are treated appropriately and in accordance with applicable law with respect to their distributions; (iii) whether the vote is likely to increase or decrease recoveries to clients. Miscellaneous Provisions 1. Such Other Business. Proxy ballots sometimes contain a proposal granting the board authority to "transact such other business as may properly come before the meeting." PIMCO may consider the following factors when developing a position on proxy ballots that contain a proposal granting the board authority to "transact such other business as may properly come before the meeting": (i) whether the board is limited in what actions it may legally take within such authority; and (ii) PIMCO's responsibility to consider actions before supporting them. 2. Equal Access. PIMCO may consider the following factors when voting on equal access: (i) the opportunity for significant company shareholders to evaluate and propose voting recommendations on proxy proposals and director nominees, and to nominate candidates to the board; and (ii) the added complexity and burden of providing shareholders with access to proxy materials. 3. Charitable Contributions. PIMCO may consider the following factors when voting on charitable contributions: (i) the potential benefits to shareholders; and (ii) the potential impact on the issuer's resources that could have been used to increase shareholder value. 4. Special Interest Issues. PIMCO may consider the following factors when voting on special interest issues: (i) the long-term benefit to shareholders of promoting corporate accountability and responsibility on social issues; (ii) management's responsibility with respect to special interest issues; (iii) any economic costs and restrictions on management; (iv) a client's instruction to vote proxies in a specific manner and/or in a manner different from these Policies and Procedures; and (v) the responsibility to vote proxies for the greatest long-term shareholder value. * * * * * 458 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. Policy Relating To Identifying And Acting Upon Conflicts Of Interest In Connection With Its Proxy Voting Obligations This document sets forth Schroder Investment Management North America Inc.'s ("Schroders") policy with respect to proxy voting and its procedures to comply with Rule 206(4)-6 under the Investment Advisers Act of 1940 and Rule 30b1-4 under the Investment Company Act of 1940. Specifically, Rule 206(4)-6 requires that Schroders: o Adopt and implement written policies and procedures reasonably designed to ensure that proxies are voted in the best interest of clients and o Disclose its proxy voting policies and procedures to clients and inform them how they may obtain information about how Schroders voted proxies. Rule 30b1-4 requires that the Schroders US Mutual Funds (the "Funds"): o Disclose their proxy voting policies and procedures in their registration statements and o Annually, file with the SEC and make available to shareholders their actual proxy voting. (A) PROXY VOTING GENERAL PRINCIPLES Schroders will evaluate and usually vote for or against all proxy requests relating to securities held in any account managed by Schroders (unless this responsibility has been retained by the client). Proxies will be treated and evaluated with the same attention and investment skill as the trading of securities in the accounts. Proxies will be voted in a manner which is deemed most likely to protect and enhance the longer term value of the security as an asset to the account. PROXY COMMITTEE The Proxy Committee consists of investment professionals and other officers and is responsible for ensuring compliance with this proxy voting policy. The Committee meets quarterly to review proxies voted, policy guidelines and to examine any issues raised, including a review of any votes cast in connection with controversial issues. The procedure for evaluating proxy requests is as follows: Schroders' Global Corporate Governance Team (the "Team") is responsible for the initial evaluation of the proxy request, for seeking advice where necessary, especially from the US small cap and mid cap product heads, and for consulting with portfolio managers who have invested in the company should a controversial issue arise. When making proxy-voting decisions, Schroders generally adheres to the Global Corporate Governance Policy (the "Policy"), as revised from time to time. The Policy, which has been developed by Schroders' Global Corporate Governance Team and approved by the Schroders Proxy Committee, sets forth Schroders's positions on recurring issues and criteria for addressing non-recurring issues. The Policy is a part of these procedures and is incorporated herein by reference. The Proxy Committee exercises oversight to assure that proxies are voted in accordance with the Policy and that any votes inconsistent with the Policy or against management are appropriately documented. Schroders uses Institutional Shareholder Services, Inc. ("ISS") to assist in voting proxies. ISS provides proxy research, voting and vote-reporting services. ISS's primary function with respect to Schroders is to apprise the Group of shareholder meeting dates of all securities holdings, translate proxy materials received from companies, provide associated research and provide considerations and recommendations for voting on particular proxy proposals. Although Schroders may consider ISS's and others' recommendations on proxy issues, Schroders bears ultimate responsibility for proxy voting decisions. Schroders may also consider the recommendations and research of other providers, including the National Association of Pension Funds' Voting Issues Service. CONFLICTS 459 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- From time to time, proxy voting proposals may raise conflicts between the interests of Schroders's clients and the interests of Schroders and/or its employees. Schroders is adopting this policy and procedures to ensure that decisions to vote the proxies are based on the clients' best interests. For example, conflicts of interest may arise when: o Proxy votes regarding non-routine matters are solicited by an issuer that, directly or indirectly, has a client relationship with Schroders; o A proponent of a proxy proposal has a client relationship with Schroders; o A proponent of a proxy proposal has a business relationship with Schroders; o Schroders has business relationships with participants in proxy contests, corporate directors or director candidates; The Team is responsible for identifying proxy voting proposals that may present a material conflict of interest. If Schroders receives a proxy relating to an issuer that raises a conflict of interest, the Team shall determine whether the conflict is "material" to any specific proposal included within the proxy. The Team will determine whether a proposal is material as follows: o Routine Proxy Proposals: Proxy proposals that are "routine" shall be presumed not to involve a material conflict of interest unless the Team has actual knowledge that a routine proposal should be treated as material. For this purpose, "routine" proposals would typically include matters such as uncontested election of directors, meeting formalities, and approval of an annual report/financial statements. o Non-Routine Proxy Proposals: Proxy proposals that are "non-routine" will be presumed to involve a material conflict of interest, unless the Team determines that neither Schroders nor its personnel have a conflict of interest or the conflict is unrelated to the proposal in question. For this purpose, "non-routine" proposals would typically include any contested matter, including a contested election of directors, a merger or sale of substantial assets, a change in the articles of incorporation that materially affects the rights of shareholders, and compensation matters for management (e.g., stock, option plans, retirement plans, profit-sharing or other special remuneration plans). If the Team determines that there is, or may be perceived to be, a conflict of interest when voting a proxy, Schroders will address matters involving such conflicts of interest as follows: A. If a proposal is addressed by the Policy, Schroders will vote in accordance with such Policy; B. If Schroders believes it is in the best interests of clients to depart from the Policy, Schroders will be subject to the requirements of C or D below, as applicable; C. If the proxy proposal is (1) not addressed by the Policy or (2) requires a case-by-case determination, Schroders may vote such proxy as it determines to be in the best interest of clients, without taking any action described in D below, provided that such vote would be against Schroders's own interest in the matter (i.e., against the perceived or actual conflict). The rationale of such vote will be memorialized in writing; and D. If the proxy proposal is (1) not addressed by the Policy or (2) requires a case-by-case determination, and Schroders believes it should vote in a way that may also benefit, or be perceived to benefit, its own interest, then Schroders must take one of the following actions in voting such proxy: (a) vote in accordance with ISS' recommendation; (b) inform the client(s) of the conflict of interest and obtain consent to vote the proxy as recommended by Schroders; or (c) obtain approval of the decision from the Chief Compliance Officer and the Chief Investment Officer. The rationale of such vote will be memorialized in writing. RECORD OF PROXY VOTING The Team will maintain, or have available, written or electronic copies of each proxy statement received and of each executed proxy. The Team will also maintain records relating to each proxy, including (i) the voting decision with regard to each proxy; and (ii) any documents created by the Team and/or the Proxy Committee, or others, that were material to making the voting decision; (iii) any decisions of the Chief Compliance Officer and the Chief Investment Officer. Schroders will maintain a record of each written request from a client for proxy voting information and its written response to any request (oral or written) from any client for proxy voting information. Such records will be maintained for six years and may be retained electronically. Additional Reports and Disclosures for the Schroder Funds The Funds must disclose their policies and procedures for voting proxies in their Statement of Additional Information. In addition to the records required to be maintained by Schroders, the following information will be made available to the 460 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Funds or their agent to enable the Funds to file Form N-PX under Rule 30b1-4: For each matter on which a fund is entitled to vote: o Name of the issuer of the security; o Exchange ticker symbol; o CUSIP number, if available; o Shareholder meeting date; o Brief summary of the matter voted upon; o Source of the proposal, i.e., issuer or shareholder; o Whether the fund voted on the matter; o How the fund voted; and o Whether the fund voted with or against management. Further, the Funds are required to make available to shareholders the Funds' actual proxy voting record. If requested, the most recently filed Form N-PX must be sent within three (3) days of receipt of the request. July 30, 2003 461 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Schroder Investment Management Global Corporate Governance Policy Synopsis We believe that companies, which are well governed and operate in a responsible and sustainable way, should have the culture and transparent mechanisms in place to support their long-term health and shareholder value. Good corporate governance establishes a framework that facilitates both this and the agency relationship that exists between shareholders and a company's management. Schroders' approach As an active manager, we adopt an integrated approach to investment, which combines the skills of fund managers, analysts and dedicated corporate governance specialists in a focussed, individual approach to companies. Decisions to invest in or sell a share are made on the basis of shareholder value and risk and, in making such decisions, corporate governance is one of the range of issues that is taken into account. Our assessment of the companies in which we invest is based on a reasoned and pragmatic approach. This recognises that companies, whether in different markets or in terms of size or industry, do not all conform to a single structure and, as a result, their approach to issues and the proposals or resolutions that they bring forward, may not always be `standard'. While it is not our role or intention to get involved in the micro-management of companies, it is our role to monitor the stewardship of the underlying assets and operations that make up our investments. A considered policy on corporate governance and proxy voting is, therefore, an integral part of our approach to protecting our clients' long-term interests and the value of the investments made on their behalf. Proxy Voting Voting rights represent one of the most tangible forms of engagement with companies. At their most significant, these can affect the structure, development and future of a company. More commonly, they highlight perceived issues and shareholder concerns to management. In addition, they also routinely provide shareholder endorsement for management. We recognize our responsibility to make considered use of voting rights that are an integral part of the assets that we manage. We therefore evaluate voting issues on investments and, where we have the authority to do so, vote on them in line with our fiduciary responsibilities, in what we deem to be the long-term financial interests of our clients. We normally support the management of companies in which we invest in routine, non-controversial matters e.g. the election of directors or the approval of distributions and dividends. We will, however, withhold support or oppose management if we believe that it is in the best long-term interests of our clients to do so. Where we believe that significant issues exist or issues remain unresolved after discussions with management we may also, if appropriate, take action in addition to voting; for example, through attendance and participation at shareholder meetings. 462 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Operational arrangements At an operational level corporate governance and proxy voting is overseen by a Committee of fund managers working with corporate governance specialists, investment analysts, and others. Their role is threefold (i) to monitor and advise on specific corporate governance issues (ii) to ensure compliance with our corporate governance and proxy voting policies and (iii) to review those policies. The Corporate Governance Team report to the Committee, and have responsibility for assessing Annual and Extraordinary General Meeting resolutions of the companies in which we invest. Other relevant members of our research and fund management teams are engaged in the process when addressing controversial issues or issues which could potentially damage shareholder value. With corporate governance integrated into the overall investment process, rather than being dealt with as a separate function, the focus is on ensuring that voting rights are used to enhance and protect the long-term interests and value of our investments. By way of example, in assessing voting issues the following are indicative of the types of proposal that would give rise to concern and, consequently, would generally be opposed: o Any proposal materially reducing shareholders' rights or damaging to shareholders' interests. o Proposals to allow unlimited capital authorizations or blank cheque preferred stock. o The disapplication of pre-emption rights in breach of recognized market guidelines or, in any case, an overall limit of 10%. o Non-preemptive issues at a discount of more than 5% to the prevailing market price. o Proposals to raise capital from the public markets using different classes of share that, in particular, do not feature one vote for each share. o The creation or continuation of poison pill arrangements, take-over defences or other equivalent arrangements. o The discharge or indemnification of the Board or Management where we are aware of outstanding issues. o The introduction of classified or staggered boards or any other move away from annual re-election of directors. o The appointment or re-appointment of any director where that individual's appointment would lead to an unacceptable proportion of non-independent directors on the Board or on a board sub-committee. o Proposals on elements of directors' remuneration that are excessive relative to comparable companies in the industry. 463 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Incentive plan proposals that are not structured in line with market best practice in relation to performance linkage, pricing or dilution. o The appointment or re-appointment of auditors where there are significant concerns about their suitability. o Any proposals to include auditors in directors and officers liability insurance or otherwise indemnify them. SIMIL will evaluate and vote for or against any proxy requests relating to the following securities: o Largest 500 International holdings by value. o Largest 250 UK holdings by value. o Japanese holdings where SIM hold above 5% of market capital. o European Small Cap holdings where SIM own above 2% of market capital. SIMIL will normally vote all proxies unless there is insufficient information with which to make a decision or where market conventions make it onerous or expensive to vote compared with the benefits of doing so. Regular reports are made available to clients on the use made of voting rights. The following is a supplemental note- outlining Global Corporate Governance Principles: GLOBAL CORPORATE GOVERNANCE PRINCIPLES Levels of regulation, disclosure and accountability can vary considerable between markets and, from a practical perspective, it is necessary to assess companies in context against prevailing best practice, having regard to prevailing market practice, in particular, local regulatory and legal standards and frameworks. By way of example for two leading financial markets these include: (i) UK - Financial Services Authority (FSA) Listing Rules, The Combined Code(5) and the Pre-emption Group Guidelines(6). (ii) US - Securities and Exchange Commission (SEC) Regulations(7), the Investment Company Institute(8) and the Council of Institutional Investors(9) guidelines on governance. While recognizing such variations, it is nevertheless appropriate to articulate the core principles of good practice that all companies accessing the global capital markets should, as a minimum, aspire to and which underpin our views on a global approach to corporate governance. These are set out below and draw on the principles established by the Organization for Economic Co-operation and Development ("OECD")(10), and the International Corporate Governance Network ("ICGN")(11). 464 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Taking a long-term view, the development, enhancement, promotion and understanding of appropriate standards and industry best practice, both across sectors and across markets, is important. Reflecting this we participate in and/or support a range of initiatives and organizations, both at a national level and internationally(12). 1. CORPORATE OBJECTIVE The overriding objective of a company should be to optimise over time the returns to its shareholders. Corporate governance practices should focus board attention on this. Where other considerations might significantly or materially affect this objective, such as issues of corporate social responsibility or legislative and regulatory requirements, they should be clearly identified and disclosed, along with appropriate details of the company's policy and approach to them. In seeking to achieve this objective, the company should focus on excelling in specific sector peer group comparisons and on the long-term viability of its business and manage its relationships with stakeholders effectively and sensitively. i.e. those with a legitimate interest in the operation of the business, such as employees, customers, suppliers, creditors and the communities in which the company operates. 2. COMMUNICATIONS, TRANSPARENCY AND REPORTING Companies should disclose accurate, adequate, clear and timely information, in particular meeting market guidelines where they exist, so as to allow investors to make informed decisions about the acquisition, ownership, obligations and rights, and sale of shares. Clarity and transparency over the company's governance arrangements is a key element of this. 3. STRATEGIC FOCUS Where management propose significant changes to the business or significant transactions shareholders should be given the right to approve the proposals. o Major strategic modifications to the core business(es) of a company should not be made without prior shareholder approval of the proposed modification. o Major corporate changes that in substance or effect materially dilute the equity or erode the economic interests or share ownership rights of existing shareholders(13) should not be made without prior shareholder approval of the proposed change. o In addition, with the exception of those that could reasonably be deemed insignificant, any transactions with related parties(14) should not be made without prior shareholder approval. o Shareholders should be given sufficient information about any such proposal(15), sufficiently early, to allow them to make an informed judgement and exercise their voting rights. 4. BOARD OF DIRECTORS 465 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The board of directors, or supervisory board, (as an entity and each of its members as individuals) is a fiduciary for all shareholders, and should be accountable to the shareholder body as a whole. o Boards should adopt effective corporate governance policies, structures and practices that should protect and enhance accountability to and equal treatment of shareholders. o Boards should neither be too small to maintain the needed expertise and independence, nor too large to be efficiently functional. Independent(16) non-executives should ideally comprise a substantial majority of the board though we recognise that board structures in some markets may not enable this. Every individual member of the board should stand for re-election annually (or no less than every three years where annual re-election is not the norm or best practice). o Audit and remuneration sub-committees should be established and composed wholly of independent non-executives. A nomination sub-committee should be established and should ideally be composed wholly of non-executives, at least two thirds of whom should be independent. o Companies should disclose - at the time of the appointment to the board and thereafter in each annual report or proxy statement - sufficient biographical information(17) to enable investors to make a reasonable assessment of the value they add to the company and their independence. Information on the appointment procedure should also be disclosed annually. o Boards should ensure that non-executive members have appropriate competencies and their responsibilities should include monitoring and contributing effectively to the strategy and performance of management, staffing key committees of the board, and influencing the conduct of the board as a whole. 5. INTERNAL CONTROLS AND AUDIT Directors must ensure they maintain a sound system of internal control and review its effectiveness regularly, seeking to embrace best practice(18) in this area. Investor perceptions of a company are influenced by the level of risk that it faces and by the way it manages those risks. o The role of the Audit Committee is key both to ensuring that a sound system of internal control is maintained in a company, including ensuring that the company presents a balanced, clear and understandable assessment of its position and prospects, as well as the accounting policies and practices it adopts. (General adherence to minimum standards will rarely be sufficient). o The chairmen and members of board audit, remuneration and nomination committees should be appointed by the board as a whole, pursuant to a transparent procedure. Committees should select all advisers or service providers. o Auditor independence is an important element of a balanced corporate governance regime. Where that independence is compromised or could be perceived as being compromised due to a conflict of interest, a firm's independence as auditor may be called into question. Audit Committees should monitor and review both the arrangements for the day-to-day operation of the audit relationship and any issues that might, or might be perceived as, compromising auditor independence. 6. VOTING RIGHTS Companies should ensure that shareholders are properly enabled to exercise their voting rights: o Shareholder approval should be required for any proposal that might significantly affect shareholder rights, interests or value(19). 466 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Voting rights should be exercisable on each separate issues individually, hence bundled resolution are not appropriate. o In raising capital from the public markets, companies should avoid creating different classes of share and their ordinary shares should feature one vote for each share(20). Companies should act to ensure the owners' rights to vote and investors have a responsibility to vote. In addition it is important that legislators and regulators should facilitate voting rights and timely disclosure of voting levels. Additional guidance on this issue is available from the International Corporate Governance Network.(21) 7. CORPORATE REMUNERATION POLICIES Remuneration of supervisory board members, company directors and key executives should be aligned with the interests of shareholders. o Executive share schemes, incentive plans and shareholding requirements are now common mechanisms in many markets that, where properly structured, help align participants' interests with those of shareholders and incentivise them, as well as facilitating the recruitment and retention of key executives. o Broad-based employee share ownership plans or other profit-sharing schemes are effective market mechanisms that promote employee participation. However, such schemes should not be introduced without prior shareholder approval. o Companies should disclose in each annual report or proxy statement the board's policies on remuneration, along with a break down of individual board members' remuneration (and ideally that of top executives) so that investors can judge whether corporate pay policies and practices are aligned with shareholder interests. o Sufficient disclosure should also be made in each annual report or proxy statement to enable shareholders to assess their link and contribution to performance. 8. CORPORATE SOCIAL RESPONSIBILITY Companies should adhere to all applicable laws and regulations of the jurisdictions in which they operate. Boards that are sensitive to and strive for active co-operation with stakeholders will be most likely to create wealth, employment and sustainable economies. Increasingly shareholders and special interest groups are lobbying companies on issues of corporate social responsibility (social, ethical and environmental issues). Given the range of standards and guidelines currently in circulation and, given the extent of overlap that exists, we do not believe it is appropriate for us to select one standard in preference to another. Rather, it is for each company to ensure that they adopt appropriate, transparent policies on CSR issues and make suitable disclosures publicly available. In considering appropriate standards, companies should ensure that the policies and standards they adopt are at least fully compliant with local laws and standards, as well as compatible and comparable to appropriate 467 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- international standards, for example OECD Guidelines(22) or International Labour Organisation (ILO) Conventions(23) and other relevant industry standards. In doing so companies should disclose their policies on issues involving stakeholders, including employment, the workplace and environmental matters. 9. SMALLER COMPANIES Markets and economies need small and growth companies with drive and imagination and such companies need access to affordable finance and capital. Inevitably there will be such companies whose particular circumstances mean that full compliance with best practice is at best difficult or, in some cases, inappropriate (As an institutional investor with a substantial commitment to smaller companies, we are aware of the particular issues and dynamics that can exist for such companies). o In considering small company practice we will adopt a pragmatic and flexible approach where that is appropriate. o In return small companies should adopt a transparent and reasoned approach to derogations from best practice that are required. 10. INVESTMENT COMPANY GOVERNANCE A separate briefing note on Investment Company Governance is available on request. 11. CORPORATE GOVERNANCE IMPLEMENTATION Where codes of best corporate governance practice exist, they should be applied openly and pragmatically. Where they do not yet exist, investors and others should endeavour to assist in their development. o Corporate governance issues between shareholders, the board and management should be pursued by dialogue. o This should be done with a view to resolving disputes, if possible, through negotiation, mediation or arbitration. o Where those means fail, more forceful remedies should be available and feasible. For instance, investors should have the right to sponsor resolutions or convene extraordinary meetings. o Where necessary government, regulatory authorities and other concerned bodies should be involved in seeking solutions to corporate governance issues. 468 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- TURNER INVESTMENT PARTNERS, INC. TURNER INVESTMENT MANAGEMENT LLC Proxy Voting Policy and Procedures Turner Investment Partners, Inc., as well as its investment advisory affiliate, Turner Investment Management LLC (collectively, Turner), act as fiduciaries in relation to their clients and the assets entrusted by them to their management. Where the assets placed in Turner's care include shares of corporate stock, and except where the client has expressly reserved to itself or another party the duty to vote proxies, it is Turner's duty as a fiduciary to vote all proxies relating to such shares. Duties with Respect to Proxies: Turner has an obligation to vote all proxies appurtenant to shares of corporate stock owned by its client accounts in the best interests of those clients. In voting these proxies, Turner may not be motivated by, or subordinate the client's interests to, its own objectives or those of persons or parties unrelated to the client. Turner will exercise all appropriate and lawful care, skill, prudence and diligence in voting proxies, and shall vote all proxies relating to shares owned by its client accounts and received by Turner. Turner shall not be responsible, however, for voting proxies that it does not receive in sufficient time to respond. Delegation: In order to carry out its responsibilities in regard to voting proxies, Turner must track all shareholder meetings convened by companies whose shares are held in Turner client accounts, identify all issues presented to shareholders at such meetings, formulate a principled position on each such issue and ensure that proxies pertaining to all shares owned in client accounts are voted in accordance with such determinations. Consistent with these duties, Turner has delegated certain aspects of the proxy voting process to Institutional Shareholder Services, and its Proxy Voter Services (PVS) subsidiary. PVS is a separate investment adviser registered under the Investment Advisers Act of 1940, as amended. Under an agreement entered into with Turner, PVS has agreed to vote proxies in accordance with recommendations developed by PVS and overseen by Turner, except in those instances where Turner has provided it with different direction. Review and Oversight: Turner has reviewed the methods used by PVS to identify and track shareholder meetings called by publicly traded issuers throughout the United States and around the globe. Turner has satisfied itself that PVS operates a system reasonably designed to identify all such meetings and to provide Turner with timely notice of the date, time and place of such meetings. Turner has further reviewed the principles and procedures employed by PVS in making recommendations on voting proxies on each issue presented, and has satisfied itself that PVS's recommendations are: (i) based upon an appropriate level of diligence and 469 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- research, and (ii) designed to further the interests of shareholders and not serve other unrelated or improper interests. Turner, either directly or through its duly-constituted Proxy Committee, shall review its determinations as to PVS at least annually. Notwithstanding its belief that PVS's recommendations are consistent with the best interests of shareholders and appropriate to be implemented for Turner's client accounts, Turner has the right and the ability to depart from a recommendation made by PVS as to a particular vote, slate of candidates or otherwise, and can direct PVS to vote all or a portion of the shares owned for client accounts in accordance with Turner's preferences. PVS is bound to vote any such shares subject to that direction in strict accordance with all such instructions. Turner, through its Proxy Committee, reviews on a regular basis the overall shareholder meeting agenda, and seeks to identify shareholder votes that warrant further review based upon either (i) the total number of shares of a particular company stock that Turner holds for its clients accounts, or (ii) the particular subject matter of a shareholder vote, such as board independence or shareholders' rights issues. In determining whether to depart from a PVS recommendation, the Turner Proxy Committee looks to its view of the best interests of shareholders, and provides direction to PVS only where in Turner's view departing from the PVS recommendation appears to be in the best interests of Turner's clients as shareholders. The Proxy Committee keeps minutes of its determinations in this regard. Conflicts of Interest: Turner stock is not publicly traded, and Turner is not otherwise affiliated with any issuer whose shares are available for purchase by client accounts. Further, no Turner affiliate currently provides brokerage, underwriting, insurance, banking or other financial services to issuers whose shares are available for purchase by client accounts. Where a client of Turner is a publicly traded company in its own right, Turner may be restricted from acquiring that company's securities for the client's benefit. Further, while Turner believes that any particular proxy issues involving companies that engage Turner, either directly or through their pension committee or otherwise, to manage assets on their behalf, generally will not present conflict of interest dangers for the firm or its clients, in order to avoid even the appearance of a conflict of interest, the Proxy Committee will determine, by surveying the Firm's employees or otherwise, whether Turner, an affiliate or any of their officers has a business, familial or personal relationship with a participant in a proxy contest, the issuer itself or the issuer's pension plan, corporate directors or candidates for directorships. In the event that any such relationship is found to exist, the Proxy Committee will take appropriate steps to ensure that any such relationship (or other potential conflict of interest), does not influence Turner's or the Committee's decision to provide direction to PVS on a given vote or issue. Further to that end, Turner will adhere to all recommendations made by PVS in connection with all shares issued by such companies and held in Turner client accounts, and, absent extraordinary circumstances that will be documented in writing, will not subject any such proxy to special review by the Proxy Committee. Turner will seek to resolve any conflicts of interests that may arise prior to voting proxies in a manner that reflects the best interests of its clients. Securities Lending: Turner will generally not vote nor seek to recall in order to vote shares on loan in connection with client administered securities lending programs, unless it determines that a vote is particularly significant. Seeking to recall securities in order to vote them even in these limited circumstances may nevertheless not result in Turner voting the shares because the securities are unable to be recalled in time from the party with custody of the securities, or for other reasons beyond Turner's control. 470 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Obtaining Proxy Voting Information: To obtain information on how Turner voted proxies, please contact: Andrew Mark, Director of Operations and Technology Administration c/o Turner Investment Partners, Inc. 1205 Westlakes Drive, Suite 100 Berwyn, PA 19312 Recordkeeping: Turner shall retain its (i) proxy voting policies and procedures; (ii) proxy statements received regarding client statements; (iii) records or votes it casts on behalf of clients; (iv) records of client requests for proxy voting information, and (v) any documents prepared by Turner that are material in making a proxy voting decision. Such records may be maintained with a third party, such as PVS, that will provide a copy of the documents promptly upon request. Adopted: July 1, 2003 Last revised: April 1, 2007 471 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- MORGAN STANLEY INVESTMENT MANAGEMENT (FOR FUNDS SUBADVISED BY VAN KAMPEN ASSET MANAGEMENT) PROXY VOTING POLICY AND PROCEDURES FEBRUARY 28, 2008 MORGAN STANLEY INVESTMENT MANAGEMENT PROXY VOTING POLICY AND PROCEDURES I. POLICY STATEMENT Introduction - Morgan Stanley Investment Management's ("MSIM") policy and procedures for voting proxies ("Policy") with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary investment management services and for which an MSIM entity has authority to vote proxies. This Policy is reviewed and updated as necessary to address new and evolving proxy voting issues and standards. The MSIM entities covered by this Policy currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Van Kampen Asset Management, and Van Kampen Advisors Inc. (each an "MSIM Affiliate" and collectively referred to as the "MSIM Affiliates" or as "we" below). Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds--collectively referred to herein as the "MSIM Funds"), each MSIM Affiliate will vote proxies under this Policy pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors/Trustees of the MSIM Funds. An MSIM Affiliate will not vote proxies if the "named fiduciary" for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the investment management or investment advisory agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will vote proxies in a prudent and diligent manner and in the best interests of clients, including beneficiaries of and participants in a client's benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns ("Client Proxy Standard"). In certain situations, a client or its fiduciary may provide an MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the client's policy. Proxy Research Services - RiskMetrics Group ISS Governance Services ("ISS") and Glass Lewis (together with other proxy research providers as we may retain from time to time, the "Research Providers") are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided include in-depth research, global issuer analysis, and voting recommendations. While we may review and utilize the recommendations of the Research Providers in making proxy voting decisions, we are in no way obligated to follow such recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping. Voting Proxies for Certain Non-U.S. Companies - Voting proxies of companies located in some jurisdictions, particularly emerging markets, may involve several problems that can restrict or prevent the ability to vote such proxies or entail significant costs. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person; (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate our voting instructions. As a result, we vote clients' non-U.S. proxies on a best efforts basis only, after weighing the costs and benefits of voting such proxies, 472 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- consistent with the Client Proxy Standard. ISS has been retained to provide assistance in connection with voting non-U.S. proxies. II. GENERAL PROXY VOTING GUIDELINES To promote consistency in voting proxies on behalf of its clients, we follow this Policy (subject to any exception set forth herein), including the guidelines set forth below. These guidelines address a broad range of issues, and provide general voting parameters on proposals that arise most frequently. However, details of specific proposals vary, and those details affect particular voting decisions, as do factors specific to a given company. Pursuant to the procedures set forth herein, we may vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee (see Section III for description) and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the procedures as described in Appendix A. We endeavor to integrate governance and proxy voting policy with investment goals and to follow the Client Proxy Standard for each client. At times, this may result in split votes, for example when different clients have varying economic interests in the outcome of a particular voting matter (such as a case in which varied ownership interests in two companies involved in a merger result in different stakes in the outcome). We also may split votes at times based on differing views of portfolio managers, but such a split vote must be approved by the Proxy Review Committee. We may abstain on matters for which disclosure is inadequate. A. Routine Matters. We generally support routine management proposals. The following are examples of routine management proposals: o Approval of financial statements and auditor reports. o General updating/corrective amendments to the charter, articles of association or bylaws. o Most proposals related to the conduct of the annual meeting, with the following exceptions. We generally oppose proposals that relate to "the transaction of such other business which may come before the meeting," and open-ended requests for adjournment. However, where management specifically states the reason for requesting an adjournment and the requested adjournment would facilitate passage of a proposal that would otherwise be supported under this Policy (i.e. an uncontested corporate transaction), the adjournment request will be supported. We generally support shareholder proposals advocating confidential voting procedures and independent tabulation of voting results. B. Board of Directors 1. Election of directors: In the absence of a proxy contest, we generally support the board's nominees for director except as follows: a. We consider withholding support from or voting against interested directors if the company's board does not meet market standards for director independence, or if otherwise we believe board independence is insufficient. We refer to prevalent market standards as promulgated by a stock exchange or other authority within a given market (e.g., New York Stock Exchange or Nasdaq rules for most U.S. companies, and The Combined Code on Corporate Governance in the United Kingdom). Thus, for an NYSE company with no controlling shareholder, we would expect that at a minimum a majority of directors should be independent as defined by NYSE. Where we view market standards as inadequate, we may withhold votes based on stronger independence standards. Market standards notwithstanding, we generally do not view long board tenure alone as a basis to classify a director as 473 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- non-independent, although lack of board turnover and fresh perspective can be a negative factor in voting on directors. i. At a company with a shareholder or group that controls the company by virtue of a majority economic interest in the company, we have a reduced expectation for board independence, although we believe the presence of independent directors can be helpful, particularly in staffing the audit committee, and at times we may withhold support from or vote against a nominee on the view the board or its committees are not sufficiently independent. ii. We consider withholding support from or voting against a nominee if he or she is affiliated with a major shareholder that has representation on a board disproportionate to its economic interest. b. Depending on market standards, we consider withholding support from or voting against a nominee who is interested and who is standing for election as a member of the company's compensation, nominating or audit committee. c. We consider withholding support from or voting against a nominee if we believe a direct conflict exists between the interests of the nominee and the public shareholders, including failure to meet fiduciary standards of care and/or loyalty. We may oppose directors where we conclude that actions of directors are unlawful, unethical or negligent. We consider opposing individual board members or an entire slate if we believe the board is entrenched and/or dealing inadequately with performance problems, and/or acting with insufficient independence between the board and management. d. We consider withholding support from or voting against a nominee standing for election if the board has not taken action to implement generally accepted governance practices for which there is a "bright line" test. For example, in the context of the U.S. market, failure to eliminate a dead hand or slow hand poison pills would be seen as a basis for opposing one or more incumbent nominees. e. In markets that encourage designated audit committee financial experts, we consider voting against members of an audit committee if no members are designated as such. f. We consider withholding support from or voting against a nominee who has failed to attend at least 75% of board meetings within a given year without a reasonable excuse. g. We consider withholding support from or voting against a nominee who serves on the board of directors of more than six companies (excluding investment companies). We also consider voting against a director who otherwise appears to have too many commitments to serve adequately on the board of the company. 2. Board independence: We generally support U.S. shareholder proposals requiring that a certain percentage (up to 66?%) of the company's board members be independent directors, and promoting all-independent audit, compensation and nominating/governance committees. 3. Board diversity: We consider on a case-by-case basis shareholder proposals urging diversity of board membership with respect to social, religious or ethnic group. 4. Majority voting: We generally support proposals requesting or requiring majority voting policies in election of directors, so long as there is a carve-out for plurality voting in the case of contested elections. 474 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 5. Proxy access: We consider on a case-by-case basis shareholder proposals to provide procedures for inclusion of shareholder nominees in company proxy statements. 6. Proposals to elect all directors annually: We generally support proposals to elect all directors annually at public companies (to "declassify" the Board of Directors) where such action is supported by the board, and otherwise consider the issue on a case-by-case basis based in part on overall takeover defenses at a company. 7. Cumulative voting: We generally support proposals to eliminate cumulative voting in the U.S. market context. (Cumulative voting provides that shareholders may concentrate their votes for one or a handful of candidates, a system that can enable a minority bloc to place representation on a board). U.S. proposals to establish cumulative voting in the election of directors generally will not be supported. 8. Separation of Chairman and CEO positions: We vote on shareholder proposals to separate the Chairman and CEO positions and/or to appoint a non-executive Chairman based in part on prevailing practice in particular markets, since the context for such a practice varies. In many non-U.S. markets, we view separation of the roles as a market standard practice, and support division of the roles in that context. 9. Director retirement age and term limits: Proposals recommending set director retirement ages or director term limits are voted on a case-by-case basis. 10. Proposals to limit directors' liability and/or broaden indemnification of directors. Generally, we will support such proposals provided that the officers and directors are eligible for indemnification and liability protection if they have acted in good faith on company business and were found innocent of any civil or criminal charges for duties performed on behalf of the company. C. Corporate transactions and proxy fights. We examine proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) on a case-by-case basis. However, proposals for mergers or other significant transactions that are friendly and approved by the Research Providers generally will be supported and in those instances will not need to be reviewed by the Proxy Review Committee, where there is no portfolio manager objection and where there is no material conflict of interest. We also analyze proxy contests on a case-by-case basis. D. Changes in capital structure. 1. We generally support the following: o Management and shareholder proposals aimed at eliminating unequal voting rights, assuming fair economic treatment of classes of shares we hold. o Management proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear business purpose is stated that we can support and the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and/or (ii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the total new authorization will be outstanding. o Management proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital, unless we have concerns about use of the authority for anti-takeover purposes. 475 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- o Management proposals to authorize share repurchase plans, except in some cases in which we believe there are insufficient protections against use of an authorization for anti-takeover purposes. o Management proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock. o Management proposals to effect stock splits. o Management proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases. o Management proposals for higher dividend payouts. 2. We generally oppose the following (notwithstanding management support): o Proposals to add classes of stock that would substantially dilute the voting interests of existing shareholders. o Proposals to increase the authorized or issued number of shares of existing classes of stock that are unreasonably dilutive, particularly if there are no preemptive rights for existing shareholders. o Proposals that authorize share issuance at a discount to market rates, except where authority for such issuance is de minimis, or if there is a special situation that we believe justifies such authorization (as may be the case, for example, at a company under severe stress and risk of bankruptcy). o Proposals relating to changes in capitalization by 100% or more. We consider on a case-by-case basis shareholder proposals to increase dividend payout ratios, in light of market practice and perceived market weaknesses, as well as individual company payout history and current circumstances. For example, currently we perceive low payouts to shareholders as a concern at some Japanese companies, but may deem a low payout ratio as appropriate for a growth company making good use of its cash, notwithstanding the broader market concern. E. Takeover Defenses and Shareholder Rights 1. Shareholder rights plans: We generally support proposals to require shareholder approval or ratification of shareholder rights plans (poison pills). In voting on rights plans or similar takeover defenses, we consider on a case-by-case basis whether the company has demonstrated a need for the defense in the context of promoting long-term share value; whether provisions of the defense are in line with generally accepted governance principles; and the specific context if the proposal is made in the midst of a takeover bid or contest for control. 2. Supermajority voting requirements: We generally oppose requirements for supermajority votes to amend the charter or bylaws, unless the provisions protect minority shareholders where there is a large shareholder. In line with this view, in the absence of a large shareholder we support reasonable shareholder proposals to limit such supermajority voting requirements. 476 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 3. Shareholder rights to call meetings: We consider proposals to enhance shareholder rights to call meetings on a case-by-case basis. 4. Reincorporation: We consider management and shareholder proposals to reincorporate to a different jurisdiction on a case-by-case basis. We oppose such proposals if we believe the main purpose is to take advantage of laws or judicial precedents that reduce shareholder rights. 5. Anti-greenmail provisions: Proposals relating to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount, as determined by the Proxy Review Committee) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders. 6. Bundled proposals: We may consider opposing or abstaining on proposals if disparate issues are "bundled" and presented for a single vote. F. Auditors. We generally support management proposals for selection or ratification of independent auditors. However, we may consider opposing such proposals with reference to incumbent audit firms if the company has suffered from serious accounting irregularities and we believe rotation of the audit firm is appropriate, or if fees paid to the auditor for non-audit-related services are excessive. Generally, to determine if non-audit fees are excessive, a 50% test will be applied (i.e., non-audit-related fees should be less than 50% of the total fees paid to the auditor). We generally vote against proposals to indemnify auditors. G. Executive and Director Remuneration. 1. We generally support the following proposals: o Proposals for employee equity compensation plans and other employee ownership plans, provided that our research does not indicate that approval of the plan would be against shareholder interest. Such approval may be against shareholder interest if it authorizes excessive dilution and shareholder cost, particularly in the context of high usage ("run rate") of equity compensation in the recent past; or if there are objectionable plan design and provisions. o Proposals relating to fees to outside directors, provided the amounts are not excessive relative to other companies in the country or industry, and provided that the structure is appropriate within the market context. While stock-based compensation to outside directors is positive if moderate and appropriately structured, we are wary of significant stock option awards or other performance-based awards for outside directors, as well as provisions that could result in significant forfeiture of value on a director's decision to resign from a board (such forfeiture can undercut director independence). o Proposals for employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad-based employee plan, including all non-executive employees. o Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that approval of the plan would be against shareholder interest. 2. Shareholder proposals requiring shareholder approval of all severance agreements will not be supported, but proposals that require shareholder approval for agreements in excess of three times the annual compensation (salary and bonus) generally will be supported. We generally oppose shareholder proposals that would establish arbitrary caps on pay. We consider on a case-by-case basis shareholder proposals that seek to limit Supplemental Executive Retirement Plans (SERPs), but support such proposals where we consider SERPs to be excessive. 477 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- 3. Shareholder proposals advocating stronger and/or particular pay-for-performance models will be evaluated on a case-by-case basis, with consideration of the merits of the individual proposal within the context of the particular company and its labor markets, and the company's current and past practices. While we generally support emphasis on long-term components of senior executive pay and strong linkage of pay to performance, we consider whether a proposal may be overly prescriptive, and the impact of the proposal, if implemented as written, on recruitment and retention. 4. We consider shareholder proposals for U.K.-style advisory votes on pay on a case-by-case basis. 5. We generally support proposals advocating reasonable senior executive and director stock ownership guidelines and holding requirements for shares gained in option exercises. 6. Management proposals effectively to re-price stock options are considered on a case-by-case basis. Considerations include the company's reasons and justifications for a re-pricing, the company's competitive position, whether senior executives and outside directors are excluded, potential cost to shareholders, whether the re-pricing or share exchange is on a value-for-value basis, and whether vesting requirements are extended. H. Social, Political and Environmental Issues. We consider proposals relating to social, political and environmental issues on a case-by-case basis to determine whether they will have a financial impact on shareholder value. However, we generally vote against proposals requesting reports that are duplicative, related to matters not material to the business, or that would impose unnecessary or excessive costs. We may abstain from voting on proposals that do not have a readily determinable financial impact on shareholder value. We generally oppose proposals requiring adherence to workplace standards that are not required or customary in market(s) to which the proposals relate. I. Fund of Funds. Certain Funds advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying fund has a shareholder meeting, in order to avoid any potential conflict of interest, such proposals will be voted in the same proportion as the votes of the other shareholders of the underlying fund, unless otherwise determined by the Proxy Review Committee. III. ADMINISTRATION OF POLICY The MSIM Proxy Review Committee (the "Committee") has overall responsibility for creating and implementing the Policy, working with an MSIM staff group (the "Corporate Governance Team"). The Committee, which is appointed by MSIM's Chief Investment Officer of Global Equities ("CIO"), consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm. Because proxy voting is an investment responsibility and impacts shareholder value, and because of their knowledge of companies and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has final authority over proxy votes. The Committee Chairperson is the head of the Corporate Governance Team, and is responsible for identifying issues that require Committee deliberation or ratification. The Corporate Governance Team, working with advice of investment teams and the Committee, is responsible for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The Corporate Governance Team has responsibility for voting case-by-case where guidelines and precedent provide adequate guidance, and to refer other case-by-case decisions to the Proxy Review Committee. The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard. A. Committee Procedures The Committee will meet at least monthly to (among other matters) address any outstanding issues relating to the Policy or its implementation. The Corporate Governance Team will timely communicate to ISS MSIM's Policy (and any amendments and/or any additional guidelines or procedures the Committee may adopt). The Committee will meet on an ad hoc basis to (among other matters): (1) authorize "split voting" (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to 478 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- be voted differently than other shares) and/or "override voting" (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in this Policy; and (3) determine how to vote matters for which specific direction has not been provided in this Policy. Members of the Committee may take into account Research Providers' recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies ("Index Strategies") will be voted in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the Committee will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts. B. Material Conflicts of Interest In addition to the procedures discussed above, if the Committee determines that an issue raises a material conflict of interest, the Committee will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question ("Special Committee"). The Special Committee shall be comprised of the Chairperson of the Proxy Review Committee, the Chief Compliance Officer or his/her designee, a senior portfolio manager (if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee, and MSIM's relevant Chief Investment Officer or his/her designee, and any other persons deemed necessary by the Chairperson. The Special Committee may request the assistance of MSIM's General Counsel or his/her designee who will have sole discretion to cast a vote. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate. C. Identification of Material Conflicts of Interest A potential material conflict of interest could exist in the following situations, among others: 1. The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a material matter affecting the issuer. 2. The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if echo voting is used, as with MSIM Funds, as described herein. 3. Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed). If the Chairperson of the Committee determines that an issue raises a potential material conflict of interest, depending on the facts and circumstances, the Chairperson will address the issue as follows: 1. If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy. 2. If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal will be voted in a manner consistent with the Research Providers, provided that all the Research Providers have the same recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM's Client Proxy Standard. 3. If the Research Providers' recommendations differ, the Chairperson will refer the matter to the Committee to vote on the proposal. If the Committee determines that an issue raises a material conflict of interest, the 479 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- Committee will request a Special Committee to review and recommend a course of action, as described above. Notwithstanding the above, the Chairperson of the Committee may request a Special Committee to review a matter at any time as he/she deems necessary to resolve a conflict. D. Proxy Voting Reporting The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s), for a period of at least 6 years. To the extent these decisions relate to a security held by an MSIM Fund, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those Funds at each Board's next regularly scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting. The Corporate Governance Team will timely communicate to applicable portfolio managers and to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions. MSIM will promptly provide a copy of this Policy to any client requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that client's account. MSIM's Legal Department is responsible for filing an annual Form N-PX on behalf of each MSIM Fund for which such filing is required, indicating how all proxies were voted with respect to such Fund's holdings. APPENDIX A The following procedures apply to accounts managed by Morgan Stanley AIP GP LP ("AIP"). Generally, AIP will follow the guidelines set forth in Section II of MSIM's Proxy Voting Policy and Procedures. To the extent that such guidelines do not provide specific direction, or AIP determines that consistent with the Client Proxy Standard, the guidelines should not be followed, the Proxy Review Committee has delegated the voting authority to vote securities held by accounts managed by AIP to the Liquid Markets investment team and the Private Markets investment team of AIP. A summary of decisions made by the investment teams will be made available to the Proxy Review Committee for its information at the next scheduled meeting of the Proxy Review Committee. In certain cases, AIP may determine to abstain from determining (or recommending) how a proxy should be voted (and therefore abstain from voting such proxy or recommending how such proxy should be voted), such as where the expected cost of giving due consideration to the proxy does not justify the potential benefits to the affected account(s) that might result from adopting or rejecting (as the case may be) the measure in question. Waiver of Voting Rights For regulatory reasons, AIP may either 1) invest in a class of securities of an underlying fund (the "Fund") that does not provide for voting rights; or 2) waive 100% of its voting rights with respect to the following: 1. Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting in a similar capacity for or on behalf of the Fund (each individually a "Designated Person," and collectively, the "Designated Persons"), which may include, but are not limited to, voting on the election or removal of a Designated Person in the event of such Designated Person's death, disability, insolvency, bankruptcy, incapacity, or other event requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and 2. Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon the occurrence of an event described in the Fund's organizational documents; provided, however, that, if the Fund's organizational documents require the consent of the Fund's general partner or manager, as the case may be, for any such termination or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter. APPENDIX B 480 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- The following procedures apply to the portion of the Van Kampen Dynamic Credit Opportunities Fund ("VK Fund") sub advised by Avenue Europe International Management, L.P. ("Avenue"). (The portion of the VK Fund managed solely by Van Kampen Asset Management will continue to be subject to MSIM's Policy.) 1. Generally: With respect to Avenue's portion of the VK Fund, the Board of Trustees of the VK Fund will retain sole authority and responsibility for proxy voting. The Adviser's involvement in the voting process of Avenue's portion of the VK Fund is a purely administrative function, and serves to execute and deliver the proxy voting decisions made by the VK Fund Board in connection with the Avenue portion of the VK Fund, which may, from time to time, include related administrative tasks such as receiving proxies, following up on missing proxies, and collecting data related to proxies. As such, the Adviser shall not be deemed to have voting power or shared voting power with Avenue with respect to Avenue's portion of the Fund. 2. Voting Guidelines: All proxies, with respect to Avenue's portion of the VK Fund, will be considered by the VK Fund Board or such subcommittee as the VK Fund Board may designate from time to time for determination and voting approval. The VK Board or its subcommittee will timely communicate to MSIM's Corporate Governance Group its proxy voting decisions, so that among other things the votes will be effected consistent with the VK Board's authority. 3. Administration: The VK Board or its subcommittee will meet on an adhoc basis as may be required from time to time to review proxies that require its review and determination. The VK Board or its subcommittee will document in writing all of its decisions and actions which will be maintained by the VK Fund, or its designee(s), for a period of at least 6 years. If a subcommittee is designated, a summary of decisions made by such subcommittee will be made available to the full VK Board for its information at its next scheduled respective meetings. - -------------------------------------------------------------------------------- (1) For purposes of this section, a "client" does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a "client." (2) The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest. (3) "Access Person" shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc. (4) The term "immediate family member" means a person's spouse; child residing in the person's household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152). (5) : http://www.fsa.gov.uk/ukla (6) : http://www.ivis.computasoft.com (7) : http://www.sec.gov/ (8) : http://www.ici.org/newsroom/industry_issues_governance.html (see also Appendix B) (9) : http://www.cii.org/policy.htm (10) : www.oecd.org - see section headed `governance': http://www.oecd.org/daf/corporate-affairs/governance/ (11) : www.icgn.org (12) : For example, the Institute of International Finance's Equity Advisory Group on international investment in the emerging markets and corporate governance (www.iif.com) (13) : for example a sale or transfer of 10% or more of the company or group (on a consolidated basis), measured by gross assets, net profits before tax, turnover or gross capital. (14) : for example, transactions with (i) members of the board or senior executives, their families, associates or businesses in which they have an ownership stake or (ii) major shareholders and their affiliates. (15) : this might include, for example, advice form the independent directors that a proposal or transactions was in the best interests of shareholders as a whole. (16) : An outline of factors we consider may affect independence is available on request. (17) : Including: their identities, age, core competencies, professional or other backgrounds, other current and former position held, factors affecting independence, overall qualifications of board members and nominees and, for existing board members, their attendance at board meetings over both the period and preceding one. (18) : for example, the UK's Turnbull Guidance - `Internal; Control - Guidance for Directors on the Combined Code' (1999) - focuses on the adoption of a risk-based approach to establishing proper internal controls, reviewing its effectiveness and the minimum level of disclosure appropriate - www.icaew.co.uk/internalcontrol (19) : For example, share buy-backs (other than by tender offer) at a premium to the prevailing market price or excessive proposals or authorities to issue shares on a non-preemptive basis. (20) : This would not be taken to cover preference shares (preferred stock) that are a recognised market security, which provide for a specific dividend that is paid before any dividends are paid to holders of ordinary shares (common stock). These take precedence over ordinary shares in the event of a liquidation and, other than in exceptional circumstances, they do not usually carry voting rights. (21) : `Statement on Global Implementation of ICGN Share Voting Principles' (July 2000) (www.icgn.org) (22) : e.g. The OECD Guidelines for Multinational Enterprises (Revision 2000), (23) : The United Nations' social and labour standards agency - http://www.ilo.org 481 - -------------------------------------------------------------------------------- The Allianz Variable Insurance Products Trust SAI May 1, 2008 - -------------------------------------------------------------------------------- PART C OTHER INFORMATION _____________________ ITEM 23. EXHIBITS Exhibit Number Description of Exhibit - ---------------------------- (a) Agreement and Declaration of Trust, dated July 13, 1999, filed on July 21, 1999 as Exhibit (a) to Registration Statement No. 333-83423, is incorporated by reference. (b) By-laws, dated July 13, 1999, filed on July 21, 1999 as Exhibit (b) to Registration Statement No. 333-83423, is incorporated by reference. (c) Not Applicable (d)(1) Investment Management Agreement, dated April 27, 2001, between USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust, filed on October 24, 2001 as Exhibit (d)(2)(i) to Registrant's Post-Effective Amendment No. 7, is incorporated by reference. (d)(1)(i) Amended Schedule A, dated May 1, 2007, to Investment Management Agreement between USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust, dated April 27, 2001, filed on April 27, 2007 as Exhibit (d)(1)(i) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(1)(ii) Attachment 1 dated May 1, 2007 to Schedule A, dated May 1, 2007, to the Investment Management Agreement dated April 27, 2001, filed on April 27, 2007 as Exhibit (d)(1)(ii) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(2) Portfolio Management Agreement, dated May 1, 2002, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and A I M Capital Management, Inc., filed on December 27, 2006 as Exhibit (d)(2) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(2)(i) Amendment, dated September 8, 2003, to the Portfolio Management Agreement dated May 1, 2002, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and A I M Capital Management, Inc., filed on December 27, 2006 as Exhibit (d)(2)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(2)(ii) Amended Schedule A, dated March 28, 2005, to the Portfolio Management Agreement dated May 1, 2002, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and A I M Capital Management, Inc., filed on December 27, 2006 as Exhibit (d)(2)(ii) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(3) Subadvisory Agreement, dated November 28, 2007, between Allianz Life Advisers, LLC, and BlackRock Institutional Management Corporation, filed herewith. (d)(4) Subadvisory Agreement, dated July 6, 2006, between Allianz Life Advisers, LLC and Columbia Management Advisers, LLC, filed on December 27, 2006 as Exhibit (d)(3) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(5) Portfolio Management Agreement, dated March 8, 2004, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Davis Selected Advisers, L.P., filed on December 27, 2006 as Exhibit (d)(4) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(5)(i) Amendment, dated March 8, 2004, to the Portfolio Management Agreement dated March 8, 2004, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Davis Selected Advisers, L.P., filed on December 27, 2006 as Exhibit (d)(4)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(6) Subadvisory Agreement dated May 1, 2007 between Allianz Life Advisers, LLC, and The Dreyfus Corporation, filed on April 27, 2007 as Exhibit (d)(5) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(7) Amended and Restated Subadvisory Agreement, dated May 1, 2007, between Allianz Investment Management LLC and First Trust Advisors L.P., filed on April 27, 2007 as Exhibit (d)(6) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(8) Portfolio Management Agreement, dated March 8, 2004, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Founders Asset Management LLC, filed on December 27, 2006 as Exhibit (d)(7) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(9) Portfolio Management Agreement, dated April 12, 2005, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Franklin Advisory Services, LLC, filed on December 27, 2006 as Exhibit (d)(8) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(10) Portfolio Management Agreement, dated April 29, 2005, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Jennison Associates LLC, filed on December 27, 2006 as Exhibit (d)(9) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(11) Portfolio Management Agreement, dated July 27, 2004 between USAllianz Advisers LLC, USAllianz Variable Insurance Products Trust, and Legg Mason Funds Management, Inc., filed on February 2, 2005 as Exhibit (d)(15) to Registrant's Post-Effective Amendment No. 14, is incorporated by reference. (d)(11)(i) First Amendment to Portfolio Management Agrement and Amended Schedule A, dated April 4, 2005, to Portfolio Management Agreement dated July 27, 2004, between USAllianz Advisers LLC, USAllianz Variable Insurance Products Trust, and Legg Mason Funds Management, Inc., filed on December 27, 2006 as Exhibit (d)(10)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(12) Subadvisory Agreement, dated May 1, 2006, between Allianz Life Advisers, LLC and Neuberger Berman Management Inc., filed on April 27, 2006 as Exhibit (d)(17) to Registrant's Post-Effective Amendment No. 17, is incorporated by reference. (d)(13) Subadvisory Agreement, dated May 1, 2007, between Allianz Life Advisers, LLC and Nicholas-Applegate Capital Management LLC, filed on April 27, 2007 as Exhibit (d)(12) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(14) Subadvisory Agreement, dated August 24, 2006, between Allianz Life Advisers, LLC, and Oppenheimer Capital, LLC, filed on December 27, 2006 as Exhibit (d)(12) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(15) Subadvisory Agreement, dated May 1, 2006, between Allianz Life Advisers, LLC and OppenheimerFunds, Inc., filed on April 27, 2006 as Exhibit (d)(20) to Registrant's Post-Effective Amendment No. 17, is incorporated by reference. (d)(15)(i) Amended Schedule A, dated August 28, 2006, to the Subadvisory Agreement dated May 1, 2006, between Allianz Life Advisers, LLC and OppenheimerFunds, Inc., filed on December 27, 2006 as Exhibit (d)(13)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(16) Amended and Restated Subadvisory Agreement, dated May 1, 2007, between Allianz Life Advisers, LLC and Pacific Investment Management Company LLC, filed on April 27, 2007 as Exhibit (d)(15) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(17) Sub-Subadvisory Agreement dated April 30, 2007, between Allianz Life Advisers, LLC, Pacific Investment Management Company LLC, and Research Affiliates LLC, filed on April 27, 2007 as Exhibit (d)(16) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(18) Portfolio Management Agreement, dated December 1, 2005, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Salomon Brothers Asset Management Inc, filed on April 27, 2006 as Exhibit (d)(13) to Registrant's Post-Effective Amendment No. 17, is incorporated by reference. (d)(18)(i) First Amendment to Portfolio Management Agreement, dated September 30, 2006, to the Portfolio Management Agreement dated December 1, 2005, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Salomon Brothers Asset Management Inc (ClearBridge Advisors, LLC is the successor as of 10-1-06), filed on December 27, 2006 as Exhibit (d)(16)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (d)(18)(ii) Amended Schedule A to the Portfolio Management Agreement dated December 1, 2005, between USAllianz Advisers, LLC, USAllianz Variable Insurance Products Trust, and Salomon Brothers Asset Management Inc, filed on April 27, 2007 as Exhibit (d)(18)(ii) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(19) Subadvisory Agreement, dated February 23, 2007, between Allianz Life Advisers, LLC and Schroder Investment Management North America Inc, filed on April 27, 2007 as Exhibit (d)(19) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (d)(20) Subadvisory Agreement, dated June 13, 2007, between Allianz Life Advisers, LLC and Turner Investment Partners, Inc., filed on June 22, 2007 as Exhibit (6)(t) to Registrant's Registration Statement on Form N-14, is incorporated by reference. (d)(21) Subadvisory Agreement, dated May 1, 2006, between Allianz Life Advisers, LLC and Van Kampen Asset Management, filed on April 27, 2006 as Exhibit (d)(19) to Registrant's Post-Effective Amendment No. 17, is incorporated by reference. (e)(1) Distribution Agreement, dated August 28, 2007, between Allianz Variable Insurance Products Trust, Allianz Variable Insurance Products Fund of Funds Trust and Allianz Life Financial Services, LLC, filed herewith. (e)(2) Participation Agreement dated August 28, 2007 between Allianz Variable Insurance Products Trust, Allianz Life Insurance Company of North America, and Allianz Life Financial Services, LLC, filed herewith. (e)(3) Participation Agreement dated August 28, 2007 between Allianz Variable Insurance Products Trust, Allianz Life Insurance Company of New York, and Allianz Life Financial Services, LLC, filed herewith. (f) N/A (g) Custody Agreement Amended and Restated, dated May 31, 2001, between USAllianz Variable Insurance Products Trust and The Northern Trust Company, filed on December 27, 2006 as Exhibit (g) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (h)(1) Amended and Restated Services Agreement dated October 23, 2007 between Allianz Variable Insurance Products Trust and Citi Fund Services Ohio, Inc., filed herewith. (h)(2) Administrative Services Agreement, dated November 1, 2006, by and among Allianz Variable Insurance Products Trust, Allianz Variable Insurance Products Fund of Funds Trust, and Allianz Life Advisers LLC, filed on December 27, 2006 as Exhibit (h)(2) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (h)(3) Chief Compliance Officer Agreement, dated November 1, 2006, by and among Allianz Variable Insurance Products Trust, Allianz Variable Insurance Products Fund of Funds Trust, and Allianz Life Advisers LLC, filed on December 27, 2006 as Exhibit (h)(3) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (h)(4) Compliance Services Agreement, dated November 1, 2006, by and among Allianz Variable Insurance Products Trust, Allianz Variable Insurance Products Fund of Funds Trust, and Allianz Life Advisers LLC, filed on December 27, 2006 as Exhibit (h)(4) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (h)(5) Amended Expense Limitation Agreement, dated May 1, 2008 between Allianz Life Advisers LLC and Allianz Variable Insurance Products Trust, filed herewith. (h)(6) Securities Lending Authorization Agreement, dated August 4, 2003, between USAllianz Variable Insurance Products Trust and The Northern Trust Company, filed on April 28, 2004 as Exhibit (h)(7) to Registrant's Post-Effective Amendment No. 13, is incorporated by reference. (h)(6)(i) Amended Schedule C, dated January 1, 2006, to the Securities Lending Authorization Agreement, dated August 4, 2003, between USAllianz Variable Insurance Products Trust and The Northern Trust Company, filed on December 27, 2006 as Exhibit (h)(6)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (h)(6)(ii) List of Lending Funds dated April 18, 2007 to Securities Lending Authorization Agreement, dated August 4, 2003, between USAllianz Variable Insurance Products Trust and The Northern Trust Company, filed on April 27, 2007 as Exhibit (h)(6)(ii) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (h)(7) Securities Lending Authorization Agreement, dated December 16, 2004, between Dresdner Bank AG, New York Branch and USAllianz Variable Insurance Products Trust, , filed on April 29, 2005 as Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 15, is incorporated by reference. (h)(7)(i) Exhibit A dated March 27, 2007 to the Securities Lending Authorization Agreement, dated December 16, 2004, between Dresdner Bank AG, New York Branch and USAllianz Variable Insurance Products Trust, filed on April 27, 2007 as Exhibit (h)(7)(i) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (h)(8) Brokerage Transaction Agreement dated February 6, 2003 between Lynch, Jone & Ryan Inc., and USAllianz Investor Services, filed on December 27, 2006 as Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (i) Opinion and consent of counsel, filed herewith. (j) Consent of Independent Registered Public Accounting Firm, filed herewith. (k) N/A (l) N/A (m) Rule 12b-1 Plan of Distribution, filed on October 26, 1999 as Exhibit (m) to Registrant's Pre-Effective Amendment No. 2, is incorporated by reference. (n) Rule 18f-3 Multiple Class Plan, dated February 23, 2007 for the Allianz Variable Insurance Products Trust, filed on April 27, 2007 as Exhibit (n) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (p)(1) Code of Ethics of Allianz Life Advisers, LLC, revised July 27, 2006, filed on December 27, 2006 as Exhibit (p)(1) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(2) Code of Ethics of Allianz Life Financial Services, LLC, dated August 21, 2007, filed herewith. (p)(3) Code of Ethics of A I M Capital Management, Inc., amended effective February 16, 2006, filed on December 27, 2006 as Exhibit (p)(3)(i) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(4) Code of Ethics of Allianz Global Investors of America L.P., effective July 31, 2006, filed on December 27, 2006 as Exhibit (p)(3)(ii) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(5) Code of Ethics of Allianz Variable Insurance Products Trust, revised August 29, 2006, filed herewith. (p)(6) Code of Ethics of BlackRock Institutional Management Corporation, revised as of April 26, 2007, filed herewith. (p)(7) Code of Ethics of Citigroup Asset Management - North America, as amended September 13, 2005, filed on December 27, 2006 as Exhibit (p)(3)(iii) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(8) Code of Ethics of ClearBridge Advisors, LLC, amended June 1, 2007, filed herewith. (p)(9) Code of Ethics of Columbia Management Advisors, LLC, effective January 1, 2006, filed on December 27, 2006 as Exhibit (p)(3)(iv) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(10) Code of Ethics of Davis Selected Advisers, L.P., as amended effective February 1, 2005, filed on April 29, 2005 as Exhibit (p)(1)(ix) to Registrant's Post-Effective Amendment No. 15, is incorporated by reference. (p)(11) Code of Ethics of First Trust Advisers, L.P., dated as of May 31, 2006, filed on December 27, 2006 as Exhibit (p)(3)(vi) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(12) Code of Ethics of Franklin Templeton Investments, revised May 1, 2007, filed herewith. (p)(13) Code of Ethics of Jennison Associates LLC, as amended January 22, 2008, filed herewith. (p)(14) Code of Ethics of Legg Mason Capital Management, Inc., dated February 28, 2006, filed on December 27, 2006 as Exhibit (p)(3)(ix) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(15) Code of Ethics of Mellon Financial Corporation, dated February 2006, filed on December 27, 2006 as Exhibit (p)(3)(x) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(16) Code of Ethics of Morgan Stanley, restated as of April 26, 2006, filed on December 27, 2006 as Exhibit (p)(3)(xi) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference. (p)(17) Code of Ethics of Neuberger Berman Management Inc., effective September 2006, filed on December 27, 2006 as Exhibit (p)(3)(xii) to Registrant's Post-Effective Amendment No. 20, is incorporated by reference (p)(18) Code of Ethics of Nicholas-Applegate Capital Management LLC, dated May 10, 2007, filed herewith. (p)(19) Code of Ethics of OppenheimerFunds, Inc., dated as of November 30, 2007, filed herewith. (p)(20) Code of Ethics of Pacific Investment Management Company LLC, filed on April 27, 2006 as Exhibit (p)(1)(xvi) to Registrant's Post-Effective Amendment No. 17, is incorporated by reference. (p)(21) Code of Ethics of Research Affiliates, LLC, filed on April 27, 2007 as Exhibit (p)(3)(xviii) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (p)(22) Code of Ethics of Schroder Investment Management North America Inc., effective September 12, 2006, filed on April 27, 2007 as Exhibit (p)(3)(xix) to Registrant's Post-Effective Amendment No. 23, is incorporated by reference. (p)(23) Code of Ethics of Turner Investment Partners, Inc., effective February 1, 2005, filed herewith. (q) Powers of Attorney, filed herewith. (r) Company Organizational Chart, filed herewith. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT The Company organizational chart is incorporated in this filing as Exhibit (r). ITEM 25. INDEMNIFICATION The Trust's Agreement and Declaration of Trust provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Trust, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in or not opposed to the best interests of the Trust or that such indemnification would relieve any officer or Trustee of any liability to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties or, in a criminal proceeding, such Trustee or officers had reasonable cause to believe their conduct was unlawful. The Trust, at its expense, provides liability insurance for the benefit of its Trustees and officers. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER REGISTRATION NO. 1. A I M Capital Management, Inc. - this information is included in the Form 801-15211 ADV filed by A I M Capital Management, Inc. and is incorporated herein by reference. 2. Allianz Investment Management LLC (previously Allianz Life Advisers, LLC) 801-60167 - this information is included in Form ADV filed with the SEC by Allianz Life Advisers and is incorporated by reference herein. 3. BlackRock Institutional Management Corporation - this information is in 801-13304 Form ADV filed with the SEC by BlackRock Institutional Management Corporation and is incorporated by reference herein. 4. ClearBridge Advisors LLC - this information is included in Form ADV 801-64710 filed with the SEC by ClearBridge Advisors LLC and is incorporated herein by reference. 5. Columbia Management Advisers, LLC - this information is included in Form ADV 801-50372 filed with the SEC by Columbia Management Advisers, LLC and is incorporated by reference herein. 6. Davis Selected Advisers, L.P. - this information is included in Form ADV 801-53272 filed with the SEC by Davis Selected Advisers, L.P. and is incorporated herein by reference. 7. The Dreyfus Corporation - this information is included in Form ADV filed 801-8147 with the SEC by The Dreyfus Corporation and is incorporated herein by reference. 8. First Trust Advisors L.P. - this information is included in Form ADV filed 801-39950 with the SEC by First Trust Advisors L.P. and is incorporated herein by reference 9. Founders Asset Management LLC - this information is included in Form ADV 801-55220 filed with the SEC by Founders Asset Management LLC and is incorporated by reference herein. 10. Franklin Advisory Services, LLC - this information is included in Form ADV 801-51967 filed with the SEC by Franklin Advisory Services, LLC and is incorporated herein by reference. 11. Jennison Associates LLC - this information is included in Form ADV filed 801-5608 with the SEC by Jennison Associates LLC and is incorporated herein by reference. 12. Legg Mason Capital Management, Inc. - this information is included in Form 801-18115 ADV filed with the SEC by Legg Mason Capital Management, Inc. and is incorporated herein by reference. 13. Neuberger Berman Management Inc. - this information is included in Form ADV 801-8259 filed with the SEC by Neuberger Berman Management Inc. and is incorporated herein by reference. 14. Nicholas-Applegate Capital Management LLC - this information is included in 801-21442 Form ADV filed with the SEC by Nicholas-Applegate Capital Management LLC and is incorporated herein by reference. 15. Oppenheimer Capital LLC - this information is included in the Form ADV 801-10708 filed with the SEC by Oppenheimer Capital LLC and is incorporated by reference herein. 16. OppenheimerFunds, Inc. - this information is included in the Form ADV filed 801-8253 with the SEC by OppenheimerFunds, Inc. and is incorporated herein by reference. 17. Pacific Investment Management Company LLC - this information is included in 801-48187 Form ADV filed with the SEC by Pacific Investment Management Company LLC and is incorporated herein by reference. 18. Schroder Investment Management North America Inc. and Schroder Investment 801-15834 Management North America Limited - this information is included in Form ADV 801-37163 filed with the SEC by Schroder Investment Management North America Inc. and Schroder Investment Management North America Limited and is incorporated herein by reference. 19. Turner Investment Partners, Inc. - this information is included in Form ADV 801-36220 filed with the SEC by Turner Investment Partners, Inc. and is incorporated herein by reference. 20. Van Kampen Asset Management - this information is included in the Form 801-1669 ADV filed with the SEC by Van Kampen Asset Management and is incorporated by reference herein.
ITEM 27. PRINCIPAL UNDERWRITER (a) Allianz Life Financial Services, LLC ("ALFS"), whose address is 5701 Golden Hills Drive, Minneapolis, Minnesota 55416, serves as the Funds' distributor. ALFS is affiliated with the Manager. ALFS acts a principal underwriter for the following investment companies: Allianz Variable Insurance Products Fund of Funds Trust Allianz Variable Insurance Products Trust (b) Officers and Directors. Name and Principal Position Business Address with Underwriter ----------------------- --------------------- Robert DeChellis Chief Executive Officer and President Stewart Gregg Secretary Michael Brennan Chief Compliance Officer Angela Wilson Chief Financial Officer (c) Not applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS Registrant's accounts and records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are in the physical possession of the following: Citi Fund Services Ohio, Inc 3435 Stelzer Road, Columbus, Ohio 43219 31a-1(a) 31a-1(b)(2)A, B, C and D 31a-1(b) 5, 6, 8, 9, 10, 11, 12 31a-2(a) 1 and 2 31a-2(c) Citi Fund Services 60 State Street, Suite 1300, Boston MA 02109 31a-1(b)4 Allianz Invesment Management LLC 5701 Golden Hills Drive, Minneapolis, Minnesota 55416 31a-1(b) 11 31a-1(c) A I M Capital Management, Inc. 11 Greenway Plaza, Suite 106, Houston, Texas 77046 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Blackrock Institutional Management Corporation 100 Bellevue Parkway, Wilmington, DE 19809 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) ClearBridge Advisors LLC 620 Eighth Avenue, 49th Floor, NY, NY 10018 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Columbia Management Advisors, LLC 100 Federal Street, Boston, MA 02110 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Davis Selected Advisers, L.P. 2949 East Elvira Road, Suite 101 Tucson, Arizona 85706 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) The Dreyfus Corporation 200 Park Avenue, New York, New York 10166 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) First Trust Advisers L.P. 101 Warrenville Rd, Ste 300, Lisle, IL 60532 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Founders Asset Management LLC 210 University Blvd., Ste 800, Denver, CO 80206 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Franklin Advisory Services, LLC One Parker Plaza, Ninth Floor, Fort Lee, New Jersey 07024 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Jennison Associates LLC 466 Lexington Avenue, New York, NY 10017 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Legg Mason Capital Management, Inc. 100 Light Street, Baltimore Maryland 21202 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Neuberger Berman Management Inc. 605 Third Avenue 2nd Floor, New York, NY 10158-0180 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Nicholas-Applegate Capital Management LLC 600 West Broadway, Ste 2900, San Diego, CA 92101 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Oppenheimer Capital LLC 1345 Avenue of the Americas, 48th Floor, New York, NY 10105 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) OppenheimerFunds, Inc. 498 Seventh Avenue, New York, NY 10018 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Pacific Investment Management Company LLC 840 Newport Center Drive, Newport Beach, CA 92660 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Prudential Investment Management, Inc. Two Gateway Plaza, Newark, New Jersey, 07102 31a-1(f) Schroder Investment Management North America Inc. 875 Third Avenue, 22nd Floor, New York, NY 10022 and Schroder Investment Management North America Limited, 31 Gresham Street, Longon EC2V 7QA England. 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Turner Investment Partners, Inc. 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312-2414 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) Van Kampen Asset Management Inc. 1221 Avenue of the Americas, New York, New York 10020 31a-1(b) 31a-1(c) 31a-1(e) 31a-2(b) 31a-2(d) ITEM 29. MANAGEMENT SERVICES N/A ITEM 30. UNDERTAKINGS N/A SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Post Effective Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed below on its behalf by the undersigned, thereunto duly authorized, in the City of Golden Valley, in the State of Minnesota on the 24th day of April, 2008. ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST By: /s/ Jeffrey Kletti ------------------------------------ Jeffrey Kletti, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement of Allianz Variable Insurance Products Trust has been signed below by the following persons in the capacities indicated on April 24, 2008. SIGNATURE TITLE - ---------- ----- /s/ Peter R. Burnim* Trustee - --------------------------- Peter R. Burnim /s/ Peggy L. Ettestad* Trustee - --------------------------- Peggy L. Ettestad /s/ Roger A. Gelfenbien* Trustee - --------------------------- Roger A. Gelfenbien /s/ Dickson W. Lewis* Trustee - --------------------------- Dickson W. Lewis /s/ Claire R. Leonardi* Trustee - --------------------------- Claire R. Leonardi /s/ Peter W. McClean* Trustee - --------------------------- Peter W. McClean /s/ Arthur C. Reeds III* Trustee - --------------------------- Arthur C. Reeds III /s/ Troy Sheets Treasurer (principal financial and - --------------------------- accounting officer) Troy Sheets /s/ Robert DeChellis* Trustee - -------------------------- Robert DeChellis By: /s/ Jeffrey W. Kletti --------------------------- Jeffrey Kletti, President and Trustee *Pursuant to powers of attorney filed as Exhibit (q) to this Registration Statement EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 24 TO FORM N-1A ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
INDEX TO EXHIBITS (d)(3) Subadvisory Agreement dtd 11-28-07 - BlackRock (e)(1) Distribution Agreement dtd 8-28-07 (e)(2) Participation Agreement dtd 8-28-07 Allianz of NA (e)(3) Participation Agreement dtd 8-28-07 Allianz of NY (h)(1) Amended Services Agreement dtd 10-23-07 Citi Fund Services (h)(5) Amended Expense Limitation Agreement effective 5-1-08 (i) Opinion and Consent of Counsel (j) Consent of Independent Registered Public Accounting Firm (p)(2) Code of Ethics of Allianz Life Financial Servies, LLC (p)(5) Code of Ethics of Allianz Variable Insurance Products Trust (p)(6) Code of Ethics of BlackRock (p)(8) Code of Ethics of Clearbridge (p)(12) Code of Ethics of Franklin (p)(13) Code of Ethics of Jennison (p)(18) Code of Ethics of Nicholas Applegate (p)(19) Code of Ethics of Oppenheimer Funds (p)(23) Code of Ethics of Turner (q) Powers of Attorney (r) Company Organizational Chart
EX-99.D.3 2 file002.txt SUBADVISORY AGREEMENT SUBADVISORY AGREEMENT Agreement made as of the 28th day of November, 2007, by and between Allianz Life Advisers, LLC, a Minnesota limited liability company ("Manager"), and BlackRock Institutional Management Corporation, a Delaware corporation ("Subadviser"). WHEREAS the Allianz Variable Insurance Products Trust, a Delaware statutory trust registered as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of each of its series listed in Schedule A (each severally, the "Fund"), has entered into an investment management agreement with Manager (the "Management Agreement") pursuant to which Manager provides investment advisory services to the Fund; and WHEREAS Manager and the Fund each desire to retain Subadviser to manage all or a part of the assets of the Fund, and Subadviser is willing to render such investment management services in accordance with the terms and conditions set forth in this Agreement; NOW, THEREFORE, the parties, intending to be legally bound, agree as follows: 1. SUBADVISER'S DUTIES. (a) PORTFOLIO MANAGEMENT. Subject to supervision by Manager and the Fund's Board of Trustees (the "Board"), Subadviser shall manage the investment operations and the composition of that portion of assets of the Fund which is allocated to Subadviser from time to time by Manager (which portion may include any or all of the Fund's assets), including the purchase, retention, and disposition thereof, in accordance with the Fund's investment objectives, policies, and restrictions, and subject to the following understandings: (i) INVESTMENT DECISIONS. Subadviser shall determine from time to time what investments and securities will be purchased, retained, or sold with respect to that portion of the Fund allocated to it by Manager, and what portion of such assets will be invested or held uninvested as cash. Subadviser is prohibited from consulting with any other subadviser of the Fund concerning transactions of the Fund in securities or other assets, other than for purposes of complying with the conditions of Rule 12d3-1(a) or (b) under the 1940 Act. Unless Manager or the Fund gives written instructions to the contrary, Subadviser shall vote, or abstain from voting, all 1 proxies, if applicable, with respect to companies whose securities are held in that portion of the Fund allocated to it by Manager, using its best good faith judgment to vote, or abstain from voting, such proxies in the manner that best serves the interests of the Fund's shareholders. Upon 60 days' written notice to Subadviser, the Board may withdraw the authority granted to Subadviser to vote, or abstain from voting, such proxies pursuant to this subsection. Subadviser shall have no responsibility or obligation hereunder for pursuing any claim or potential claim in any litigation or proceeding, including class action securities litigation, affecting securities purchased, sold, or held at any time by the Fund, including, without limitation, to file proofs of claim or other documents related to such proceedings (the "Litigation") or to investigate, initiate, supervise, or monitor the Litigation involving Fund assets, and Manager acknowledges and agrees that no such power, authority, responsibility, or obligation is delegated hereunder; provided, however, that Subadviser shall forward to Manager any notice of any such potential claim it shall have received and cooperate reasonably with Manager in any possible proceeding. (ii) INVESTMENT LIMITS. In the performance of its duties and obligations under this Agreement, Subadviser shall act in conformity with applicable limits and requirements, as amended from time to time, as set forth in the (A) Fund's Prospectus and Statement of Additional Information ("SAI"); (B) instructions and directions of Manager and of the Board; (C) requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, as applicable to the Fund, including, but not limited to, Section 817(h); and all other applicable federal and state laws and regulations; (D) the procedures and standards set forth in, or established in accordance with, the Management Agreement to the extent communicated to Subadviser; and (E) any policies and procedures of Subadviser communicated to the Fund and/or Manager. (iii)PORTFOLIO TRANSACTIONS. (A) TRADING. With respect to the securities and other investments to be purchased or sold for the Fund, Subadviser shall place orders with or through such persons, brokers, dealers, or futures commission merchants (including, but not limited to, broker-dealers that are affiliated with Manager or Subadviser) as may be selected by Subadviser; provided, however, that such orders shall be consistent with the brokerage policy set forth in the Fund's Prospectus and SAI, or approved by the Board; conform with federal securities laws; and be consistent with seeking best execution. Within the framework of this policy, Subadviser may, to the extent permitted by applicable law, consider the research or 2 brokerage services, or both, provided by, and the financial responsibility of, brokers, dealers, or futures commission merchants who may effect, or be a party to, any such transaction or other transactions to which Subadviser's other clients may be a party. To the extent permitted by applicable law or published positions of the Securities and Exchange Commission ("SEC"), Subadviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having cause the Fund to pay a broker, dealer or futures commission merchant that provides brokerage and research service to Subadviser an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker, dealer or futures commission merchant would have charged for effecting that transaction if Subadviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker, dealer or futures commission merchant, viewed in terms of either that particular transaction or Subadviser's overall responsibilities with respect to the Fund and to other clients of Subadviser as to which Subadviser exercises investment discretion. (B) AGGREGATION OF TRADES. On occasions when Subadviser deems the purchase or sale of a security or futures contract to be in the best interest of the Fund as well as other clients of Subadviser, Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be sold or purchased in order to seek best execution. In such event, Subadviser will make allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, in the manner Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients. Manager hereby acknowledges that such aggregation of orders may not result in more favorable pricing or lower brokerage commissions in all instances. (iv) RECORDS AND REPORTS. Subadviser (A) shall maintain such books and records as are required based on the services provided by Subadviser pursuant to this Agreement under the 1940 Act and as are necessary for Manager to meet its record keeping obligations generally set forth under Section 31 and related rules thereunder, (B) shall render to the Board such 3 periodic and special reports as the Board or Manager may reasonably request in writing, and (C) shall meet with any persons at the request of Manager or the Board for the purpose of reviewing Subadviser's performance under this Agreement at reasonable times and upon reasonable advance written notice. (v) TRANSACTION REPORTS. On each business day Subadviser shall provide to the Fund's custodian and the Fund's administrator information relating to all transactions concerning the Fund's assets and shall provide Manager with such information upon Manager's request. (b) COMPLIANCE PROGRAM AND ONGOING CERTIFICATION(S). Upon Manager's request, Subadviser shall timely provide to Manager (i) information and commentary for the Fund's annual and semi-annual reports, in a format approved by Manager, and shall (A) certify that such information and commentary discuss the factors that materially affected the performance of the portion of the Fund allocated to Subadviser under this Agreement, including the relevant market conditions and the investment techniques and strategies used, and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information and commentary not misleading, and (B) provide additional certifications related to Subadviser's management of the Fund in order to support the Fund's filings on Form N-CSR and Form N-Q, and the Fund's Principal Executive Officer's and Principal Financial Officer's certifications under Rule 30a-2 under the 1940 Act, thereon; (ii) a quarterly sub-certification with respect to compliance matters related to Subadviser and the Subadviser's management of the Fund, in a form reasonably requested by Manager, as it may be amended from time to time; (iii) a quarterly certification from the Subadviser's Chief Compliance Officer, appointed under Rule 206(4)-7 under the Investment Advisers Act of 1940 (the "Advisers Act"), or his or her designee, with respect to the design and operation of Subadviser's compliance program, in a form reasonably requested by Manager; and (iv) such other information or certifications requested by the Fund's Chief Compliance Officer as shall be reasonably requested. (c) MAINTENANCE OF RECORDS. Subadviser shall timely furnish to Manager all information relating to Subadviser's services hereunder which are needed by Manager to maintain the books and records of the Fund required under the 1940 Act. Subadviser shall maintain for the Fund the records required by paragraphs (b)(5), (b)(6), (b)(7), (b)(9), (b)(10) and (f) of Rule 31a-1 under the 1940 Act and any additional records as agreed upon by Subadviser and Manager. Subadviser agrees that all records that it maintains for the Fund are the property of the Fund and Subadviser will surrender promptly 4 to the Fund any of such records upon the Fund's request; provided, however, that Subadviser may retain a copy of such records. Subadviser further agrees to preserve for the periods prescribed under the 1940 Act any such records as are required to be maintained by it pursuant to Section 1(a) hereof. (d) FIDELITY BOND AND CODE OF ETHICS. Subadviser will provide the Fund with periodic written certifications that, with respect to its activities on behalf of the Fund, Subadviser maintains (i) adequate fidelity bond insurance and (ii) an appropriate Code of Ethics and related reporting procedures. (e) CONFIDENTIALITY. Subadviser agrees that it shall exercise the same standard of care that it uses to protect its own confidential and proprietary information, but no less than reasonable care, to protect the confidentiality of the Portfolio Information. As used herein "Portfolio Information" means confidential and proprietary information of the Fund or Manager that is received by Subadviser in connection with this Agreement, including information with regard to the portfolio holdings and characteristics of the portion of the Fund allocated to Subadviser that Subadviser manages under the terms of this Agreement. Subadviser will restrict access to the Portfolio Information to those employees of Subadviser who will use it only for the purpose of managing its portion of the Fund. The foregoing shall not prevent Subadviser from disclosing Portfolio Information that is (1) publicly known or becomes publicly known through no unauthorized act, (2) rightfully received from a third party without obligation of confidentiality, (3) approved in writing by Manager for disclosure, or (4) required to be disclosed pursuant to a requirement of a governmental agency, court order, or law so long as Subadviser provides Manager with prompt written notice of such requirement prior to any such disclosure. 2. MANAGER'S DUTIES. Manager shall oversee and review Subadviser's performance of its duties under this Agreement. Manager shall also retain direct portfolio management responsibility with respect to any assets of the Fund that are not allocated by it to the portfolio management of Subadviser as provided in Section 1(a) hereof or to any other subadviser. Manager will periodically provide to Subadviser a list of the affiliates of Manager or the Fund (other than affiliates of Subadviser) to which investment restrictions apply, and will specifically identify in writing (a) all publicly traded companies in which the Fund may not invest, together with ticker symbols for all such companies (Subadviser will assume that any company name not accompanied by a ticker symbol is not a publicly traded company), and (b) any affiliated brokers and any restrictions that apply to the use of those brokers by the Fund. 3. DOCUMENTS PROVIDED TO SUBADVISER. Manager has delivered or will deliver to Subadviser current copies and supplements thereto of the Fund's Prospectus and SAI, policies, and procedures, and will promptly deliver to it all future amendments and supplements, if any. 5 4. COMPENSATION OF SUBADVISER. Subadviser will bear all expenses in connection with the performance of its services under this Agreement, which expenses shall not include brokerage fees or commissions in connection with the effectuation of securities transactions for the Fund. For the services provided and the expenses assumed pursuant to this Agreement, Manager will pay to Subadviser, effective from the date of this Agreement, a fee which shall be accrued daily and paid monthly, on or before the last business day of the next succeeding calendar month, based on the Fund's assets allocated to Subadviser under this Agreement at the annual rates as a percentage of such average daily net assets set forth in the attached Schedule A, which Schedule may be modified from time to time upon mutual written agreement of the parties to reflect changes in annual rates, subject to any approvals required by the 1940 Act. For the purpose of determining fees payable to the Subadviser, the value of the Fund's average daily assets allocated to Subadviser under this Agreement shall be computed at the times and in the manner specified in the Fund's Prospectus or Statement of Additional Information as from time to time in effect. If this Agreement becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of the month or from the beginning of such month to the date of termination, as the case may be, shall be prorated according to the proportion that such partial month bears to the full month in which such effectiveness or termination occurs. 5. REPRESENTATIONS OF SUBADVISER. Subadviser represents and warrants as follows: (a) Subadviser (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement; (iii) has appointed a Chief Compliance Officer under Rule 206(4)-7 under the Advisers Act; (iv) has adopted written policies and procedures that are reasonably designed to prevent violations of the Advisers Act and the 1940 Act from occurring, detect violations that have occurred, and correct promptly any violations that have occurred, and will provide promptly notice of any material violations relating to the Fund to Manager; (v) has met and will seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency; (vi) has the authority to enter into and perform the services contemplated by this Agreement; and (vii) will immediately notify Manager and the Fund of the occurrence of any event that would disqualify Subadviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act or in the event that Subadviser or any of its affiliates becomes aware that it is the subject of an administrative proceeding or enforcement action by the SEC or other regulatory authority. Subadviser further agrees to notify Manager and the Fund immediately of any material fact known to Subadviser concerning Subadviser that is not 6 contained in the Fund's registration statement, or any amendment or supplement thereto, but that is required to be disclosed therein, and of any statement contained therein that becomes untrue in any material respect. (b) Subadviser has adopted a written code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and has provided Manager with a copy of the code of ethics. Within 60 days of the end of the last calendar quarter of each year that this Agreement is in effect, a duly authorized officer of Subadviser shall certify to Manager that Subadviser has complied with the requirements of Rule 17j-1 during the previous year and that there has been no material violation of Subadviser's code of ethics or, if such a violation has occurred, that appropriate action was taken in response to such violation. (c) Subadviser has provided Manager with a copy of its Form ADV Part II at least 48 hours prior to the execution of this Agreement, which as of the date of this Agreement is its Form ADV Part II as most recently deemed to be filed with the SEC, and promptly will furnish a copy of all amendments thereto to Manager. (d) Subadviser will promptly notify Manager of any changes in its controlling shareholders or in the key personnel who are either the portfolio manager(s) responsible for the Fund or the Subadviser's Chief Executive Officer or President, or if there is otherwise a change in control or management of Subadviser. (e) Subadviser agrees that neither it nor any of its affiliates will in any way refer directly or indirectly to its relationship with the Fund or Manager, or any of their respective affiliates in offering, marketing, or other promotional materials without the prior written consent of Manager, which consent shall not be unreasonably withheld. 6. REPRESENTATIONS OF MANAGER. Manager represents and warrants as follows: (a) Manager (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement, (iii) has met and will seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency necessary to be met in order to perform the services contemplated by this Agreement; (iv) has the authority to enter into and perform the services contemplated by this Agreement; and (v) will promptly notify Subadviser of the occurrence of any event that would disqualify Manager from serving as an investment 7 adviser of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise. (b) Manager agrees that neither it nor any of its affiliates will in any way refer directly or indirectly to its relationship with Subadviser, or any of its affiliates in offering, marketing, or other promotional materials without the prior written consent of Subadviser, which consent shall not be unreasonably withheld. 7. LIABILITY AND INDEMNIFICATION. (a) Subadviser agrees to perform faithfully the services required to be rendered by Subadviser under this Agreement, but nothing herein contained shall make Subadviser or any of its officers, directors, or employees liable for any loss sustained by the Fund or its officers, directors, or shareholders, Manager, or any other person on account of the services which Subadviser may render or fail to render under this Agreement; provided, however, that nothing herein shall protect Subadviser against liability to the Fund or its officers, directors, shareholders, Manager, or any other person to which Subadviser would otherwise be subject, by reason of its willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement. Nothing in this Agreement shall protect Subadviser from any liabilities that it may have under the Securities Act of 1933, as amended, (the "1933 Act"), the 1940 Act, or the Advisers Act. Subadviser does not warrant that the portion of the assets of the Fund managed by Subadviser will achieve any particular rate of return or that its performance will match that of any benchmark index or other standard or objective. (b) Except as may otherwise be provided by the 1940 Act or any other federal securities law, Subadviser, any of its affiliates, and any of the officers, directors, employees, consultants, or agents thereof shall not be liable for any losses, claims, damages, liabilities, or litigation (including legal and other expenses) incurred or suffered by the Fund, Manager, or any affiliated persons thereof (within the meaning of Section 2(a)(3) of the 1940 Act) or controlling persons thereof (as described in Section 15 of the 1933 Act) (collectively, "Fund and Manager Indemnitees") as a result of any error of judgment or mistake of law by Subadviser with respect to the Fund, except that nothing in this Agreement shall operate or purport to operate in any way to exculpate, waive, or limit the liability of Subadviser for, and Subadviser shall indemnify and hold harmless the Fund and Manager Indemnitees against, any and all losses, claims, damages, liabilities, or litigation (including reasonable legal and other expenses) to which any of the Fund and Manager Indemnitees may become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common law, or otherwise arising out of or based on (i) any willful misconduct, bad faith, reckless disregard, 8 or gross negligence of Subadviser in the performance of any of its duties or obligations hereunder; (ii) any untrue statement of a material fact regarding the Subadviser contained in the Prospectus and SAI, proxy materials, reports, advertisements, sales literature, or other materials pertaining to the Fund or the omission to state therein a material fact regarding the Subadviser which was required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon written information furnished to Manager or the Fund by the Subadviser Indemnitees (as defined below) for use therein; or (iii) any violation of federal or state statutes or regulations by Subadviser. It is further understood and agreed that Subadviser may rely upon information furnished to it by Manager that it reasonably believes to be accurate and reliable. (c) Except as may otherwise be provided by the 1940 Act or any other federal securities law, Manager and the Fund shall not be liable for any losses, claims, damages, liabilities, or litigation (including legal and other expenses) incurred or suffered by Subadviser or any of its affiliated persons thereof (within the meaning of Section 2(a)(3) of the 1940 Act) or controlling persons (as described in Section 15 of the 1933 Act) (collectively, "Subadviser Indemnitees") as a result of any error of judgment or mistake of law by Manager with respect to the Fund, except that nothing in this Agreement shall operate or purport to operate in any way to exculpate, waive, or limit the liability of Manager for, and Manager shall indemnify and hold harmless the Subadviser Indemnitees against any and all losses, claims, damages, liabilities, or litigation (including reasonable legal and other expenses) to which any of the Subadviser Indemnitees may become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common law, or otherwise arising out of or based on (i) any willful misconduct, bad faith, reckless disregard, or gross negligence of Manager in the performance of any of its duties or obligations hereunder; (ii) any untrue statement of a material fact contained in the Prospectus and SAI, proxy materials, reports, advertisements, sales literature, or other materials pertaining to the Fund or the omission to state therein a material fact which was required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission concerned Subadviser and was made in reliance upon written information furnished to Manager or the Fund by a Subadviser Indemnitee for use therein, or (iii) any violation of federal or state statutes or regulations by Manager or the Fund. It is further understood and agreed that Manager may rely upon information furnished to it by Subadviser that it reasonably believes to be accurate and reliable. (d) After receipt by Manager, the Fund, or Subadviser, their affiliates, or any officer, director, employee, or agent of any of the foregoing, entitled to indemnification as stated 9 in (b) or (c) above ("Indemnified Party") of notice of the commencement of any action, if a claim in respect thereof is to be made against any person obligated to provide indemnification under this section ("Indemnifying Party"), such Indemnified Party shall notify the Indemnifying Party in writing of the commencement thereof as soon as practicable after the summons or other first written notification giving information about the nature of the claim that has been served upon the Indemnified Party; provided that the failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability under this section, except to the extent that such Indemnifying Party is damaged as a result of the failure to give such notice. The Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel satisfactory to the Indemnified Party to represent the Indemnified Party in the proceeding, and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (1) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, or (2) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation by both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. 8. DURATION AND TERMINATION. (a) Unless sooner terminated as provided herein, this Agreement shall continue in effect for a period of more than two years from the date written above only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act. Thereafter, if not terminated, this Agreement shall continue automatically for successive periods of 12 months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Board members who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party, and (ii) by the Board or by a vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund. (b) Notwithstanding the foregoing, this Agreement may be terminated at any time, without the payment of any penalty, by the Board or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund on 10 60 days' written notice to Subadviser. This Agreement may also be terminated, without the payment of any penalty, by Manager (i) upon 60 days' (or such shorter period as Manager and Subadviser shall agree) written notice to Subadviser; (ii) upon material breach by Subadviser of any representations and warranties set forth in this Agreement, if such breach has not been cured within 20 days after written notice of such breach; or (iii) immediately if, in the reasonable judgment of Manager, Subadviser becomes unable to discharge its duties and obligations under this Agreement, including circumstances such as the insolvency of Subadviser or other circumstances that could adversely affect the Fund. Subadviser may terminate this Agreement at any time, without payment of any penalty, (1) upon 60 days' (or such shorter period as Manager and Subadviser shall agree) written notice to Manager; or (2) upon material breach by Manager of any representations and warranties set forth in the Agreement, if such breach has not been cured within 20 days after written notice of such breach. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Management Agreement. (c) In the event of termination of the Agreement, those sections of the Agreement which govern conduct of the parties' future interactions with respect to the Subadviser having provided investment management services to the Fund for the duration of the Agreement, including, but not limited to, Sections 1(a)(iv)(A), 1(e), 7, 14, 16, and 17, shall survive such termination of the Agreement. 9. SUBADVISER'S SERVICES ARE NOT EXCLUSIVE. Nothing in this Agreement shall limit or restrict the right of Subadviser or any of its directors, officers, or employees to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, or limit or restrict Subadviser's right to engage in any other business or to render services of any kind to any other mutual fund, corporation, firm, individual, or association. 10. REFERENCES TO SUBADVISER. (a) The name "BlackRock" is the property of Subadviser for copyright and other purposes. Subadviser agrees that, for so long as Subadviser is the Fund's sole subadviser, the name "BlackRock" may be used in the name of the Fund and that such use of the name "BlackRock" may include use of the name in prospectuses, reports, and sales materials. (b) During the term of this Agreement, Manager agrees to furnish to Subadviser at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature, or other material prepared for distribution to sales personnel, shareholders of the Fund or the public, which refer to 11 Subadviser or its clients in any way, prior to use thereof and not to use such material if Subadviser reasonably objects in writing five business days (or such other time as may be mutually agreed upon) after receipt thereof. Such material may be furnished to Subadviser hereunder by overnight delivery or electronic transmission. Subadviser's right to object to such materials is limited to the portions of such materials that expressly relate to Subadviser, its services, and its clients. 11. NOTICES. Any notice under this Agreement must be given in writing as provided below or to another address as either party may designate in writing to the other. Subadviser: Timothy Stegner BlackRock, Inc. 7783 East 6th Place Denver, CO 80230 303.344.5444 with a copy to: Denis Molleur BlackRock, Inc. 800 Scudders Mill Road Plainsboro, NJ 08536 609.282.2382 Manager: Jeffrey W. Kletti, President Allianz Life Advisers, LLC 5701 Golden Hills Drive Minneapolis, MN 55416-1297 Fax: 763.765.6597 with a copy to: Chief Legal Officer Allianz Life Advisers, LLC 5701 Golden Hills Drive Minneapolis, MN 55416-1297 Tel: 763.765.7330 Fax: 763.765.6355 12 12. AMENDMENTS. This Agreement, or any portion hereof, may be amended by mutual agreement in writing, subject to approval by the Board and the Fund's shareholders to the extent required by the 1940 Act. 13. ASSIGNMENT. Subadviser shall not make an assignment of this Agreement (as defined in the 1940 Act) without the prior written consent of the Fund and Manager. Notwithstanding the foregoing, no assignment shall be deemed to result from any changes in the directors, officers, or employees of Manager or Subadviser except as may be provided to the contrary in the 1940 Act or the rules and regulations thereunder. 14. GOVERNING LAW. This Agreement, and, in the event of termination of the Agreement, those sections that survive such termination of the Agreement under Section 8, shall be governed by the laws of the State of Minnesota, without giving effect to the conflicts of laws principles thereof, or any applicable provisions of the 1940 Act. To the extent that the laws of the State of Minnesota, or any of the provision of this Agreement, conflict with applicable provisions of the 1940 Act, the latter shall control. 15. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding among the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. 16. SEVERABILITY. Should any part of this Agreement be held invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement and, in the event of termination of the Agreement, those sections that survive such termination of the Agreement under Section 8, shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. 17. INTERPRETATION. Any questions of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act shall be resolved by reference to such term or provision in the 1940 Act and to interpretation thereof, if any, by the federal courts or, in the absence of any controlling decision of any such court, by rules, regulations, or orders of the SEC validly issued pursuant to the 1940 Act. Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is altered by a rule, regulation, or order of the SEC, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation, or order. 18. HEADINGS. The headings in this Agreement are intended solely as a convenience and are not intended to modify any other provision herein. 13 19. AUTHORIZATION. Each of the parties represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action by such party and when so executed and delivered, this Agreement will be the valid and binding obligation of such party in accordance with its terms. 14 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. ALLIANZ LIFE ADVISERS, LLC BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION By: /s/ Brian Muench By: /s/ Denis R. Molleur Name: Brian Muench Name: Denis R. Molleur Title: Vice President Title: Managing Director 15 SCHEDULE A Compensation pursuant to Section 4 of Subadvisory Agreement shall be calculated in accordance with the following schedule: AVERAGE DAILY NET ASSETS* RATE First $500 million 0.09% Next $500 million 0.07% Thereafter 0.06% *When average daily net assets exceed the first breakpoint, multiple rates will apply, resulting in a blended rate. For example, if average daily net assets are $1.2 billion, a rate of 9 bps would apply to $500 million, a rate of 7 bps would apply to $500 million, and a rate of 6 bps would apply to the remaining $200 million. The rates set forth above apply to average daily net assets that are subject to the Subadviser's investment discretion in the following fund: AZL Money Market Fund Date: November 28, 2007 16 EX-99.E.1 3 file003.txt DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT AZL FUNDS AND FUSION FUNDS THIS AGREEMENT is made as of August 28, 2007, by and among Allianz Variable Insurance Products Trust and Allianz Variable Insurance Products Fund of Funds Trust, each of which is a Delaware statutory trust (each trust, hereinafter, the "Trust"), on behalf of each series of each Trust listed on Schedule I (each, a "Fund" and collectively, the "Funds"), and Allianz Life Financial Services, LLC, a Minnesota limited liability company (the "Distributor"). Absent written notification to the contrary by either the Trust or the Distributor, each new investment portfolio established in the future shall automatically become a "Fund" for all purposes hereunder and shares of each new class established in the future shall automatically become "Shares" for all purposes hereunder as if set forth on Schedule I. WHEREAS, the Trust is registered with the Securities and Exchange Commission (the "SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, the Trust desires to retain the Distributor as the exclusive distributor of the units of beneficial interest in all classes of shares ("Shares") of the Funds, and the Distributor is willing to render such services; and WHEREAS, the Distributor is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member of the National Association of Securities Dealers, Inc. (the "NASD"). NOW THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. SERVICES AS DISTRIBUTOR. 1.1 The Distributor will act as agent for the distribution of Shares in accordance with any instructions of the Trust's Board of Trustees and with the Trust's registration statement then in effect under the Securities Act of 1933, as amended (the "1933 Act"), and will transmit promptly any orders properly received by it for the purchase or redemption of Shares to the Trust or its transfer agent, or their designated agents. As used in this Agreement, the term "registration statement" shall mean any registration statement, specifically including, among other items, any then-current prospectus together with any related then-current statement of additional information, filed with the SEC with respect to Shares, and any amendments and supplements thereto which at any time shall have been filed. 1.2 The Distributor agrees to use appropriate efforts to solicit orders for the sale of Shares and will undertake such advertising and promotion as it believes appropriate in connection with such solicitation. The Distributor agrees to offer and sell Shares at the applicable public offering price or net asset value next determined after an order is received. The Trust understands that the Distributor may in the future be the distributor of shares of other investment company portfolios including portfolios having investment objectives similar to those of the Funds. The Trust further understands that existing and future investors in the Funds may invest in shares of such other portfolios. The Trust agrees that the Distributor's duties to such portfolios shall not be deemed in conflict with its duties to the Trust under this paragraph 1.2. 1.3 The Distributor shall, at its own expense, finance such activities as it deems reasonable and which are primarily intended to result in the sale of Shares, including, but not limited to, advertising; compensation of underwriters, dealers, and sales personnel; the printing and mailing of prospectuses to other than current shareholders; and the printing and mailing of sales literature. 1.4 The Trust shall be responsible for expenses relating to the execution of any and all documents and the furnishing of any and all information and otherwise taking, or causing to be taken, all actions that may be reasonably necessary in connection with the registration of Shares under the 1933 Act and the Trust under the 1940 Act and the qualification of Shares for sale under the so-called "blue sky" laws in such states as the Trust directs and in such states as the Distributor may recommend to the Trust which the Trust approves, and the Trust shall pay all fees and other expenses incurred in connection with such registration and qualification. The Trust shall be also responsible for the preparation, printing, and distribution of prospectuses and statements of additional information to shareholders and the direct expenses of the issue of Shares. 1.5 The Distributor shall be responsible for preparing, reviewing, and providing advice on all sales literature (such as, advertisements, brochures, and shareholder communications) with respect to each of the Funds and shall file, or cause to be filed, with the NASD or the appropriate regulators all such materials as are required to be filed under applicable laws and regulations in compliance with such laws and regulations. 1.6 In connection with all matters relating to this Agreement, the Trust and the Distributor agree to comply with all applicable laws, rules, and regulations, including, without limitation, all rules and regulations made or adopted pursuant to the 1933 Act, the 1934 Act, the 1940 Act, the regulations of the NASD, and all other applicable federal and state laws, rules, and regulations. The Distributor agrees to provide the Trust with such certifications, reports, and other information as the Trust may reasonably request from time to time to assist it in complying with, and monitoring for compliance with, such laws, rules, and regulations. 1.7 Whenever in their judgment such action is warranted by unusual market, economic, or political conditions, or by other circumstances of any kind, the Trust's officers may decline to accept any orders for, or make any sales of, Shares until such time as those officers deem it advisable to accept such orders and to make such sales. 1.8 The Trust shall furnish from time to time, for use in connection with the sale of Shares, such information with respect to the Funds and Shares as the Distributor may reasonably request and the Trust warrants that such information shall be true and correct. Without limiting the foregoing, the Trust shall also furnish the Distributor upon request with: (a) audited annual and unaudited semi-annual statements of the Trust's books and accounts with respect to each Fund, and (b) from time to time such additional information regarding the Funds' financial condition as the Distributor may reasonably request. 2 1.9 The Trust may from time to time adopt one or more distribution plans pursuant to Rule 12b-1 under the 1940 Act. As compensation for services rendered hereunder, the Distributor shall be entitled to receive from the Trust the payments set forth on Schedule II attached hereto, as the same may be amended from time to time by agreement of the parties. Distributor, from time to time, may assign to any third party all or any portion of amounts payable to the Distributor under this Agreement. 1.10 The Distributor shall prepare reports for the Board of Trustees of the Trust regarding its activities under this Agreement as from time to time shall be reasonably requested by the Board, including reports regarding the use of Rule 12b-1 payments received by the Distributor, if any. 1.11 The Distributor is authorized to enter into written agreements with banks, broker/dealers, and other financial institutions (collectively, "Intermediaries"), based on such form(s) of sales support agreements as may be approved by the Board of Trustees from time to time. The Distributor also may enter into such agreements based on such additional forms of agreement as it deems appropriate; provided, however, that the Distributor determines that the Trust's responsibility or liability to any person under, or on account of any acts or statements of any such selling agent under, any such sales support agreement does not exceed its responsibility or liability under the form(s) approved by the Board of Trustees; and provided further that the Distributor determines that the overall terms of any such sales support agreement are not materially less advantageous to the Trust than the overall terms of the form(s) approved by the Board of Trustees. In entering into and performing such agreements, the Distributor shall act as principal and not as agent for the Trust or any Fund. Upon the failure of any Intermediary to pay for any order for the purchase of Shares in accordance with the terms of the Fund's prospectus, the Fund shall have the right to cancel the sale of such Shares, and thereupon the Distributor shall be responsible for any loss sustained as a result thereof. 2. REPRESENTATIONS; INDEMNIFICATION. 2.1 The Trust represents to the Distributor that all registration statements with respect to Shares and shareholder reports with respect to Funds filed by the Trust with the SEC have been prepared in conformity with the requirements of the 1933 Act, the 1934 Act, and the 1940 Act, as applicable, and the applicable rules and regulations of the SEC thereunder. The Trust further represents and warrants to the Distributor that any registration statement, when such registration statement becomes effective, and any shareholder report, when such report is filed, will contain all statements required to be stated therein in conformity with the 1933 Act, the 1934 Act, and the 1940 Act, as applicable, and the applicable rules and regulations of the SEC; that all statements of fact contained in any such registration statement or shareholder report will be true and correct when such registration statement becomes effective, or when such shareholder report is filed; and that no registration statement, when such registration statement becomes effective, and no shareholder report, when such shareholder report is filed, will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of Shares; provided, however, that the foregoing representations and warranties shall not apply to any untrue statement of material fact or omission made in any registration statement or shareholder report in reliance upon and in conformity with any information furnished to the Trust by the Distributor or any affiliate thereof 3 and used in preparation thereof. The Trust authorizes the Distributor and authorized banks, broker/dealers, and other financial institutions to use any prospectus or statement of additional information in the form furnished from time to time in connection with the sale of Shares and represented by the Trust as being the then-current form of prospectus or then-current form of statement of additional information. 2.2 The Trust agrees to indemnify, defend, and hold the Distributor, its several officers and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act free and harmless from and against any and all claims, demands, liabilities, and expenses (including the cost of investigating or defending such claims, demands, or liabilities, and any counsel fees incurred in connection therewith) which the Distributor, its officers and directors, or any such controlling person may incur under the 1933 Act or under common law or otherwise, arising out of or based upon (a) any breach by the Trust of any provision of this Agreement or (b) any untrue statement, or alleged untrue statement, of a material fact contained in any registration statement or shareholder report or arising out of or based upon any omission, or alleged omission, to state a material fact required to be stated in any registration statement or shareholder report or necessary to make any statement in such documents not misleading; provided, however, that the Trust's agreement to indemnify the Distributor, its officers and directors, and any such controlling person shall not be deemed to cover any claims, demands, liabilities, or expenses arising out of any untrue statement or alleged untrue statement or omission or alleged omission made in any registration statement or shareholder report or in any financial or other statements in reliance upon and in conformity with any information furnished to the Trust by the Distributor or any affiliate thereof and used in the preparation thereof; and provided further that the Trust's agreement to indemnify the Distributor, its officers and directors, and any such controlling person shall not be deemed to cover any liability to the Trust or its shareholders to which the Distributor, its officers and directors, or any such controlling person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the Distributor's, any such officer's or director's, or any such controlling person's duties, or by reason of the Distributor's, any such officer's or director's, or any such controlling person's reckless disregard of its obligations and duties under this Agreement. 2.3 The Trust's agreement to indemnify the Distributor, its officers and directors, and any such controlling person, as aforesaid, is expressly conditioned upon the Trust's being notified of any action brought against the Distributor, its officers or directors, or any such controlling person, such notification to be given in writing and to be transmitted by personal delivery, first class mail, overnight courier, facsimile, or other electronic means to the address or facsimile number contained in paragraph 8 of this Agreement, or to such other addresses or facsimile numbers as the parties hereto may specify from time to time in writing and such notification to be sent to the Trust within a reasonable period of time after the summons or other first legal process shall have been served. The failure to so notify the Trust of any such action shall not relieve the Trust from any liability hereunder, which the Trust may have to the person against whom such action is brought by reason of any such untrue or alleged untrue statement, or omission or alleged omission, except to the extent the Trust has been actually prejudiced by such delay. The Trust will be entitled to assume at its own expense the defense of any suit brought to enforce any such claim, demand, or liability, but, in such case, such defense shall be conducted by counsel of good standing chosen by the Trust and approved by the Distributor, 4 which approval shall not unreasonably be withheld. In the event the Trust elects to assume the defense of any such suit and retain counsel approved by the Distributor, the defendant or defendants in such suit shall bear the fees and expenses of any additional counsel retained by any of them; but in case the Trust does not elect to assume the defense of any such suit, or in case the Distributor reasonably does not approve of counsel chosen by the Trust, the Trust will reimburse the Distributor, its officers and directors, or the controlling person or persons named as defendant or defendants in such suit, for the fees and expenses of any counsel retained by the Distributor or them. 2.4 The Trust's indemnification agreement contained in paragraph 2.2 and the Trust's representations and warranties in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Distributor, its officers or directors, or any controlling person, and shall survive the delivery of any Shares. This agreement of indemnity will inure exclusively to the Distributor's benefit, to the benefit of its several officers and directors, and their respective estates, and to the benefit of the controlling persons and their successors. The Trust agrees promptly to notify the Distributor of the commencement of any litigation or proceedings against the Trust or any of its officers or Trustees in connection with the issue and sale of any Shares. 2.5 The Distributor agrees to indemnify, defend, and hold the Trust, its several officers and Trustees, and any person who controls the Trust within the meaning of Section 15 of the 1933 Act free and harmless from and against any and all claims, demands, liabilities, and expenses (including the costs of investigating or defending such claims, demands, or liabilities and any counsel fees incurred in connection therewith) which the Trust, its officers or Trustees, or any such controlling person, may incur under the 1933 Act or under common law or otherwise, but only to the extent that such liability or expense incurred by the Trust, its officers or Trustees, or such controlling person resulting from such claims or demands, shall arise out of or be based upon (a) any untrue, or alleged untrue, statement of a material fact contained in information furnished by the Distributor or any affiliate thereof to the Trust or its counsel and used in the Trust's registration statement or shareholder reports, or any omission, or alleged omission, to state a material fact in connection with such information furnished by the Distributor or any affiliate thereof to the Trust or its counsel required to be stated in such information or necessary to make such information not misleading, (b) any untrue statement of a material fact contained in any sales literature prepared by the Distributor, or any omission to state a material fact required to be stated therein or necessary to make such sales literature not misleading (except to the extent arising out of information furnished by the Trust to the Distributor for use therein), (c) any willful misfeasance, bad faith, or gross negligence in the performance of the Distributor's obligations and duties under the Agreement or by reason of its reckless disregard thereof, or (d) any breach by the Distributor of any provision of this Agreement. The Distributor's agreement to indemnify the Trust, its officers and Trustees, and any such controlling person, as aforesaid, is expressly conditioned upon the Distributor's being notified of any action brought against the Trust, its officers or Trustees, or any such controlling person, such notification to be given in writing and to be transmitted by personal delivery, first class mail, overnight courier, facsimile or other electronic means to the address or facsimile number contained in paragraph 8 of this Agreement, or to such other addresses or facsimile numbers as the parties hereto may specify from time to time in writing and such notification to be sent to the Distributor by the person against whom such action is brought within a reasonable period of time after the summons or other first legal process shall have been served. The failure to so notify the Distributor of any such action 5 shall not relieve the Distributor or any affiliate thereof from any liability hereunder, which the Distributor or any affiliate thereof may have to the Trust, its officers or Trustees, or to such controlling person by reason of any such untrue or alleged untrue statement, or omission or alleged omission, or other conduct covered by this indemnity agreement, except to the extent the Distributor has been actually prejudiced by such delay. The Distributor shall have the right to control the defense of such action, with counsel of good standing of its own choosing, approved by the Board of Trustees of the Trust, which approval shall not unreasonably be withheld, if such action is based solely upon such misstatement or omission, or alleged misstatement or omission, on the Distributor's part or any affiliate thereof. 2.6 The Trust agrees to advise the Distributor as soon as reasonably practicable of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement then in effect or of the initiation of any proceeding for that purpose. Thereafter, no Shares shall be offered by either the Distributor or the Trust under any of the provisions of this Agreement, and no orders for the purchase or sale of Shares hereunder shall be accepted by the Trust if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the 1933 Act, or if and so long as a current prospectus, as required by Section 10(b) of the 1933 Act is not on file with the SEC; provided, however, that nothing contained in this paragraph 2.6 shall in any way restrict or have any application to, or bearing upon, the Trust's obligation to repurchase Shares from any shareholder in accordance with the provisions of the Trust's prospectus or Declaration of Trust. 3. CONFIDENTIALITY. The Trust and Distributor may receive from each other information, or access to information, about the customers or about consumers generally (collectively, "Customer Information") including, but not limited to, nonpublic personal information such as a customer's name, address, telephone number, account relationships, account balances, and account histories. Each of the Trust and Distributor agrees on behalf of their respective employees that all information, including Customer Information, obtained pursuant to this Agreement shall be considered confidential information. Except as permitted by law or required by order of a court, a governmental authority, or a self-regulatory organization having jurisdiction over the parties, none of the parties shall disclose such confidential information to any other person or entity or use such confidential information other than to carry out the purposes of this Agreement, including its use under applicable provisions of the SEC's Regulation S-P in the ordinary course of carrying out the purposes of this Agreement. 4. ANTI-MONEY LAUNDERING PROGRAM. The Distributor represents and warrants that it (a) has adopted an anti-money laundering compliance program ("AML Program") that satisfies the requirements of all applicable laws and regulations; and (b) will notify the Trust promptly if an inspection by the appropriate regulatory authorities of its AML Program identifies any material deficiency, and will promptly remedy any material deficiency of which it learns. 6 5. LIMITATIONS OF LIABILITY. Except as otherwise provided in paragraph 2.5, the Distributor shall not be liable for any error of judgment or mistake of law, or for any loss suffered by the Trust or any Fund in connection with matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith, or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations and duties under this Agreement. 6. TERM; TERMINATION. 6.1 This Agreement shall become effective on the date of its execution and, unless sooner terminated as provided herein, shall continue in effect for a period of two (2) years from the date written above. This Agreement shall thereafter continue from year to year, provided such continuance is specifically approved at least annually by (i) the Trust's Board of Trustees, or (ii) a vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, provided that in either event the continuance is also approved by the majority of the Trust's Trustees who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party, by vote cast in person at a meeting called for the purpose of voting on such approval. 6.2 This Agreement is terminable with respect to a Fund, without penalty, on not less than sixty (60) days' written notice, by the Trust's Board of Trustees, by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of such Fund, or by the Distributor. This Agreement will also terminate automatically in the event of its assignment (as defined in the 1940 Act). Upon termination, the obligations of the parties under this Agreement shall cease except for unfulfilled obligations and liabilities arising prior to termination and the provisions of Sections 2, 3, 5, and 7. 7. LIMITED RECOURSE. The names "Allianz Variable Insurance Products Trust," "Allianz Variable Insurance Products Fund of Funds Trust," "Trustees of Allianz Variable Insurance Products Trust," and "Trustees of Allianz Variable Insurance Products Fund of Funds Trust" refer respectively to each Trust created by its respective Declaration of Trust and the Trustees as Trustees but not individually or personally. All parties hereto acknowledge and agree that any and all liabilities of the Trust arising, directly or indirectly, under this Agreement will be satisfied solely out of the assets of the Trust and that no Trustee, officer, or shareholder shall be personally liable for any such liabilities. All persons dealing with any Fund of the Trust must look solely to the property belonging to such Fund for the enforcement of any claims against the Trust. 8. NOTICES. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to such address as may be designated for the receipt of such notice. Until further notice, it is agreed that the address of the Trust shall be: 5701 Golden Hills Drive Minneapolis, MN 55416-1207 Attention: Chief Legal Officer Fax: 763.765.6355 7 and that of the Distributor shall be: 5701 Golden Hills Drive Minneapolis, MN 55416-1207 Attention: Chief Legal Officer Fax: 763.765.6355 9. MISCELLANEOUS. 9.1 A provision of this Agreement may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party against which an enforcement of the change, waiver, discharge or termination is sought. 9.2 This Agreement shall be governed by the laws of the Minnesota as in effect as of the date hereof and the applicable provisions of the 1940 Act. To the extent that the applicable law of Minnesota, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. 9.3 This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 8 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. EACH TRUST DESIGNATED IN SCHEDULE I, on behalf of its respective Funds By: /s/ Brian Muench Brian Muench Vice President of each Trust ALLIANZ LIFE FINANCIAL SERVICES, LLC By: /s/ Robert De Chellis Robert De Chellis President 9 SCHEDULE I ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AZL AIM Basic Value Fund AZL AIM International Equity Fund AZL Columbia Technology Fund AZL Davis NY Venture Fund AZL Dreyfus Founders Equity Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL First Trust Target Double Play Fund AZL Franklin Small Cap Value Fund AZL Jennison 20/20 Focus Fund AZL Jennison Growth Fund AZL LMP Large Cap Growth Fund AZL Legg Mason Growth Fund AZL Legg Mason Value Fund AZL Money Market Fund AZL NACM International Fund AZL Neuberger Berman Regency Fund AZL OCC Opportunity Fund AZL OCC Renaissance Fund AZL OCC Value Fund AZL Oppenheimer Developing Markets Fund AZL Oppenheimer Global Fund AZL Oppenheimer International Growth Fund AZL Oppenheimer Main Street Fund AZL PIMCO Fundamental IndexPLUS Total Return Fund AZL S&P 500 Index Fund AZL Schroder International Small Cap Fund AZL Small Cap Stock Index Fund AZL TargetPLUS Balanced Fund AZL TargetPLUS Equity Fund AZL TargetPLUS Moderate Fund AZL TargetPLUS Growth Fund AZL Turner Quantitative Small Cap Growth Fund AZL Van Kampen Aggressive Growth Fund AZL Van Kampen Comstock Fund AZL Van Kampen Equity and Income Fund AZL Van Kampen Global Franchise Fund AZL Van Kampen Global Real Estate Fund AZL Van Kampen Growth and Income Fund AZL Van Kampen Mid Cap Growth Fund AZL Van Kampen Strategic Growth Fund ALLIANZ VARIABLE INSURANCE PRODUCTS FUND OF FUNDS TRUST AZL Fusion Balanced Fund AZL Fusion Moderate Fund AZL Fusion Growth Fund 10 SCHEDULE II COMPENSATION FEE AS A PERCENTAGE OF DAILY NET ASSETS 25 basis points Approved: August 28, 2007 11 EX-99.E.2 4 file004.txt PART AGMNT 8-28-07 AZ OF NA PARTICIPATION AGREEMENT THIS AGREEMENT is made this 28th day of August, 2007, by and among Allianz Variable Insurance Products Trust (the "Trust"), an open-end management investment company organized as a Delaware Business Trust, Allianz Life Insurance Company of North America, a life insurance company organized as a corporation under the laws of the State of Minnesota, (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth in Schedule A, as may be amended from time to time (the "Accounts"), and Allianz Life Financial Services, LLC, a Minnesota limited liability company, the Trust's distributor (the "Distributor"). WHEREAS, the Trust is registered with the Securities and Exchange Commission (the "Commission") as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. WHEREAS, the Trust and the Distributor desire that Trust shares be used as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by life insurance companies which have entered into fund participation agreements with the Trust (the "Participating Insurance Companies"); WHEREAS, the Company has registered or will register under the 1940 Act certain variable life insurance policies and variable annuity contracts, set forth in Schedule A, to be issued by the Company under which the Portfolios are to be made as investment vehicles (the "Contracts); WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act unless an exemption from registration under the 1940 Act is available and the Trust has been so advised; WHEREAS, the Company desires to use shares of the Portfolios indicated on Schedule A as investment vehicles for the Accounts; NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES 1.1. For purposes of this Article I, the Company shall be the Trust's agent for the receipt from each account of purchase orders and requests for redemption pursuant to the Contracts relating to each Portfolio, provided that the Company notifies the Trust of such purchase orders and requests for redemption by 9:00 a.m. Eastern time on the next following Business Day, as defined in Section 1.3. 1.2. The Trust shall make shares of the Portfolios available to the Accounts at the net asset value next computed after receipt of a purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prospectus of the Trust describing Portfolio purchase procedures. The Company will transmit orders from time to time to the Trust for the purchase and redemption of shares of the Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under Federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Portfolio. 1.3. The Company shall pay for the purchase of shares of a Portfolio on behalf of an Account with federal funds to be transmitted by wire to the Trust, with the reasonable expectation of receipt by the Trust by 4:00 p.m. Eastern time on the same Business Day that the Trust (or its agent) receives the purchase order. Upon receipt by the Trust of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust for this purpose. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Commission. 1.4. The Trust will redeem for cash any full or fractional shares of any Portfolio, when requested by the Company on behalf of an Account, at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust describing Portfolio redemption procedures. The Trust shall make payment for such shares in the manner established from time to time by the Trust. Proceeds of redemption with respect to a Portfolio will normally be paid to the Company for an Account in federal funds transmitted by wire to the Company by order of the Trust with the reasonable expectation of receipt by the Company by 4:00 p.m. Eastern time on the same Business Day that the Trust (or its agent) receives the request for redemption. Such payment may be delayed if, for example, the Portfolio's cash position so requires or if extraordinary market conditions exist, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. The Trust reserves the right to suspend the right of redemption, consistent with Section 22(3) of the 1940 Act and any rules thereunder. 2 1.5. Payments for the purchase of shares of the Trust's Portfolios by the Company under Section 1.3 and payments for the redemption of shares of the Trust's Portfolios under Section 1.4 on any Business Day may be netted against one another for the purpose of determining the amount of any wire transfer. 1.6. Issuance and transfer of the Trust's Portfolio shares will be by book entry only. Stock certificates will not be issued to the Company or the Accounts. Portfolio Shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each account. 1.7. The Trust shall furnish, on or before the ex-dividend date, notice to the Company of any income dividends or capital gain distributions payable on the shares of any Portfolio of the Trust. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of that Portfolio. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.8. The Trust shall calculate the net asset value of each Portfolio on each Business Day, as defined in Section 1.3. The Trust shall make the net asset value per share for each Portfolio available to the Company or its designated agent on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available to the Company by 6:30 p.m. Eastern time each Business Day. If the Trust provides materially incorrect share net asset value information, the number of shares purchased or redeemed shall be adjusted to reflect the correct net asset value per share. Any material error in the calculation or reporting of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to the Company. 1.9. The Trust agrees that its Portfolio shares will be sold only to Participating Insurance Companies and their segregated asset accounts, to the Fund Sponsor or its affiliates and to such other entities as any be permitted by Section 817(h) of the Code, the regulations hereunder, or judicial or administrative interpretations thereof. No shares of any Portfolio will be sold directly to the general public. The Company agrees that it will use Trust shares only for the purposes of funding the Contracts through the Accounts listed in Schedule A, as amended from time to time. 1.10. The Trust agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding materially to those contained in Section 2.11 and Article IV of this Agreement. 3 ARTICLE II. ------- OBLIGATIONS OF THE PARTIES 2.1. The Trust shall prepare and file with the Commission a registration statement under the Securities Act of 1933 as amended (the "1933 Act") and this Agreement shall not be effective until such registration has been declared effective by the Commission. 2.2. The Trust shall prepare and be responsible for filing with the Commission and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. The Trust shall bear the costs of registration and qualification of shares of the Portfolios, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.3. The Company shall distribute such prospectuses, proxy statements and periodic reports of the Trust to the Contract owners as required to be distributed to such Contract owners under applicable federal or state law. 2.4. The Trust shall provide such documentation (including a final copy of the Trust's prospectus as set in type or in camera-ready copy) and other assistance as is reasonably necessary in order for the Company to print the current prospectus for the Contracts issued by the Company. The Trust shall bear the expense of printing copies of its current prospectus that will be distributed to existing Contract owners, and the Company shall bear the expense of printing copies of the Trust's prospectus that are used in connection with offering the Contracts issued by the Company. 2.5. The Trust and the Distributor shall provide (1) at the Trust's expense, one copy of the Trust's current Statement of Additional Information ("SAI") to the Company and to any Contract owner who requests such SAI, (2) at the Company's expense, such additional copies of the Trust's current SAI as the Company shall reasonably request and that the Company shall require in accordance with applicable law in connection with offering the Contracts issued by the Company. 2.6. The Trust, at its expense, shall provide the Company with copies of its proxy material, periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably require for purposes of distributing to Contract owners. The Trust, at the Company's expense, shall provide the Company with copies of its periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably request for use in connection with offering the Contracts issued by the Company. If requested by the Company in lieu thereof, the Trust shall provide such documentation (including a final copy of the Trust's proxy materials, periodic reports to shareholders and other communications to shareholders, as set in type or in camera-ready copy) and other assistance as reasonably necessary in order for the Company to print such shareholder communications for distribution to Contract owners. 4 2.7. The Company shall furnish, or cause to be furnished, to the Trust or its designee a copy of each Contract prospectus and/or statement of additional information describing the Contracts, each report to Contract owners, proxy statement, application for exemption or request for no-action letter in which the Trust or the Distributor is named contemporaneously with the filing of such document with the Commission. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee each piece of sales literature or other promotional material in which the Trust or the Distributor is named, at least five Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within three Business Days after receipt of such material. 2.8. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or the Distributor in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust shares (as such registration statement and prospectus may be amended or supplemented from time to time), annual and semi-annual reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the prior written permission of the Trust, the Distributor or their respective designees. The Trust and the Distributor agree to respond to any request for approval on a prompt and timely basis. The Company shall adopt and implement procedures reasonably designed to ensure that "broker only" materials including information therein about the Trust or the Distributor are not distributed to existing or prospective Contract owners. 2.9. The Trust shall use its best efforts to provide the Company, on a timely basis, with such information about the Trust, the Portfolios and the Distributor, in such form as the Company may reasonably require, as the Company shall reasonably request in connection with the preparation of registration statements, prospectuses and annual and semi-annual reports pertaining to the Contracts. 2.10. The Trust and the Distributor shall not give, and agree that no affiliate of either of them shall give, any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the prior written permission of the Company. The Company agrees to respond to any request for approval on a prompt and timely basis. 5 2.11. So long as, and to the extent that, the Commission interprets the 1940 Act to require pass-through voting privileges for Contract owners, the Company will provide pass-through voting privileges to Contract owners whose cash values are invested, through the registered Accounts, in shares of one or more Portfolios of the Trust. The Trust shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by the Trust. With respect to each registered Account, the Company will vote shares of each Portfolio of the Trust held by a registered Account and for which no timely voting instructions from Contract owners are received in the same proportion as those shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Portfolio shares held to fund the Contracts without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. The Company reserves the right, to the extent permitted by law, to vote shares held in any Account in its sole discretion. 2.12. The Company and the Trust will each provide to the other information about the results of any regulatory examination relating to the Contracts or the Trust, including relevant portions of any "deficiency letter" and any response thereto. 2.13. No compensation shall be paid by the Trust to the Company, or by the Company to the Trust, under this Agreement (except for specified expense reimbursements). However, nothing herein shall prevent the parties hereto from otherwise agreeing to perform, and arranging for appropriate compensation for, other services relating to the Trust, the Accounts or both. 2.14. The Company shall take all such actions as are necessary under applicable federal and state law to permit the sale of the Contracts issued by the Company, including registering each Account as an investment company to the extent required under the 1940 Act, and registering the Contracts or interests in the Accounts under the Contracts to the extent required under the 1933 Act, and obtaining all necessary approvals to offer the Contracts from state insurance commissioners. 2.15. The Company shall make every effort to maintain the treatment of the Contracts issued by the Company as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code, and shall notify the Trust and the Distributor immediately upon having a reasonable basis for believing that such Contracts have ceased to be so treated or that they might not be so treated in the future. 2.16. The Company shall offer and sell the Contracts issued by the Company in accordance with the applicable provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1 934 Act"), the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the offering of variable life insurance policies and variable annuity contracts. 6 2.17. The Distributor shall sell and distribute the shares of the Portfolios of the Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law. 2.18. Each party hereto shall cooperate with each other party and all appropriate governmental authorities having jurisdiction (including, without limitation, the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. ARTICLE Ill. REPRESENTATIONS AND WARRANTIES 3.1. The Company represents and warrants that it is an insurance company duly organized and in good standing under the laws of the State of Minnesota and that it has legally and validly established each Account as a segregated asset account under such law as of the date set forth in Schedule A, and that Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, is registered as a broker-dealer under the 1934 Act and is a member in good standing of the National Association of Securities Dealers, Inc. 3.2. The Company represents and warrants that it has registered or, prior to any issuance or sale of the Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act and cause each Account to remain so registered to serve as a segregated asset account for the Contracts, unless an exemption from registration is available. 3.3. The Company represents and warrants that the Contracts will be registered under the 1933 Act unless an exemption from registration is available prior to any issuance or sale of the Contracts; the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and the sale of the Contracts shall comply in all material respects with state insurance law suitability requirements. 3.4. The Trust represents and warrants that it is duly organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act and the rules and regulations thereunder. 3.5. The Trust represents and warrants that the Portfolio shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and sold in accordance with all applicable federal and state laws, and the Trust shall be registered under the 1940 Act prior to and at the time of any issuance or sale of such shares. The Trust shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Trust shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 7 3.6. The Trust represents and warrants that the investments of each Portfolio will comply with the diversification requirements for variable annuity, endowment or life insurance contracts set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code", and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5), and will notify the Company immediately upon having a reasonable basis for believing any Portfolio has ceased to comply or might not so comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance within the grace period afforded by Regulation 1.817-5. 3.7. The Trust represents and warrants that it is currently qualified as a "regulated investment company" under Subchapter M of the Code, that it will make every effort to maintain such qualification and will notify the Company immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. 3.8. The Trust represents and warrants that it, its directors, officers, employees and others dealing with the money or securities, or both, of a Portfolio shall at all times be covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the minimum coverage required by Rule 17g-1 or other applicable regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company. 3.9. The Distributor represents and warrants that it is duly organized and validly existing under the laws of the State of Ohio and that it is registered, and will remain registered, during the term of this Agreement, as a broker-dealer under the 1934 Act and is a member in good standing of the National Association of Securities Dealers, Inc. ARTICLE IV. POTENTIAL CONFLICTS (This article intentionally left blank) ARTICLE V. INDEMNIFICATION 5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Distributor, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 5.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, 8 "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the Contracts or Trust shares and: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Company by or on behalf of the Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Trust by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; or (f) arise out of or result from the provision by the Company to the Trust of insufficient or incorrect information regarding the purchase or sale of shares of any Portfolio, or the failure of the Company to provide such information on a timely basis. 5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify and hold harmless the Company and each of its directors, officers, employees, and agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act and the Trust and each 9 of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" "or the purposes of this Section 5.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Distributor, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the Contracts or Trust shares and: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Trust (or any amendment or supplement thereto) (collectively, "Trust Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Distributor or the Trust by or on behalf of the Company for use in Trust documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Distributor or persons under its control, with respect to the sale or acquisition of the Contracts or Portfolio shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of the Distributor; or (d) arise out of or result from any failure by the Distributor to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Distributor in this Agreement or arise out of or result from any other material breach of this Agreement by the Distributor. 10 5.3. None of the Company, the Trust or the Distributor shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 5.4. None of the Company, the Trust or the Distributor shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified party unless such Indemnified Party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party from any liability which it may have to the Indemnified party in the absence of Sections 5.1 and 5.2. 5.5. In case any such action is brought against an Indemnified Party, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI. TERMINATION 6.1 This Agreement shall terminate: (a) at the option of any party upon 6 months advance written notice to the other parties, unless a shorter time is agreed to by the parties; (b) at the option of the Trust or the Distributor if the Contracts issued by the Company cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code (unless disqualification is caused by the Trust or the Distributor) or if the Contracts are not registered, issued or sold in accordance with applicable state and/or federal law; or (c) at the option of any party upon a determination by a majority of the Trustees of the Trust, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists; or 11 (d) at the option of the Company upon institution of formal proceedings against the Trust or the Distributor by the NASD, the SEC, or any state securities or insurance department or any other regulatory body regarding the Trust's or the Distributor's duties under this Agreement or related to the sale of Trust shares or the operation of the Trust; or (e) at the option of the Company if the Trust or a Portfolio fails to meet the diversification requirements specified in Section 3.6 hereof; or (f) at the option of the Company if shares of the Series are not reasonably available to meet the requirements of the Variable Contracts issued by the Company, as determined by the Company, and upon prompt notice by the Company to the other parties; or (g) at the option of the Company in the event any of the shares of the Portfolio are not registered, issued or sold in accordance with applicable state and/or federal law, or such law precludes the use of such shares as the underlying investment media of the Variable Contracts issued or to be issued by the Company; or (h) at the option of the Company, if the Portfolio fails to qualify as a Regulated investment Company under Subchapter M of the Code: or (i) at the option of the Distributor if it shall determine in its sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (j) immediately, in the event the Distributor ceases, for any reason, to act in the capacity of distributor for the Trust and its shares. 6.2. Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement. 6.3. The provisions of Article V and all warranties under Article Ill shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.11 shall survive the termination of this Agreement as long as shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. 12 ARTICLE VII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Allianz Variable Insurance Products Trust 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: H. Bernt von Ohlen If to the Distributor: Allianz Life Financial Services, LLC 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: Stewart D. Gregg If to the Company: Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: Stewart D. Gregg ARTICLE VIII. MISCELLANEOUS 8.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 8.2. This Agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument. 8.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 8.4. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Minnesota. It shall 13 also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the Commission granting exemptive relief therefrom and the conditions of such orders. Copies of any such orders shall be promptly forwarded by the Trust to the Company. 8.5. All liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities. 8.6. Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Commission, the National Association of Securities Dealers, Inc. and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 8.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 8.8. This Agreement shall not be exclusive in any respect. 8.9. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without prior written approval of the other party. 8.10. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. 8.11. Each party hereto shall, except as required by law or otherwise permitted by this Agreement, treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto, and shall not disclose such confidential information without the written consent of the affected party unless such information has become publicly available. 14 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. Allianz Life Financial Services, LLC By: /s/ Stewart Gregg Name: Stewart Gregg Title: Vice President and Secretary Allianz Variable Insurance Products Trust By: /s/ Brian Muench Name: Brian Muench Title: Vice President Allianz Life Insurance Company of North America By: /s/ Stewart Gregg Name: Stewart Gregg Title: Assistant Secretary 15 SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS AZL AIM Basic Value Fund AZL AIM International Equity Fund AZL Columbia Technology Fund AZL Davis NY Venture Fund AZL Dreyfus Founders Equity Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL First Trust Target Double Play Fund AZL Franklin Small Cap Value Fund AZL Jennison 20/20 Focus Fund AZL Jennison Growth Fund AZL LMP Large Cap Growth Fund AZL Legg Mason Growth Fund AZL Legg Mason Value Fund AZL Money Market Fund AZL NACM International Fund AZL Neuberger Berman Regency Fund AZL OCC Opportunity Fund AZL OCC Renaissance Fund AZL OCC Value Fund AZL Oppenheimer Developing Markets Fund AZL Oppenheimer Global Fund AZL Oppenheimer International Growth Fund AZL Oppenheimer Main Street Fund AZL PIMCO Fundamental IndexPLUS Total Return Fund AZL S&P 500 Index Fund AZL Schroder International Small Cap Fund AZL Small Cap Stock Index Fund AZL TargetPLUS Balanced Fund AZL TargetPLUS Equity Fund AZL TargetPLUS Growth Fund AZL TargetPLUS Moderate Fund AZL Turner Quantitative Small Cap Growth Fund AZL Van Kampen Aggressive Growth Fund AZL Van Kampen Comstock Fund AZL Van Kampen Equity and Income Fund AZL Van Kampen Global Franchise Fund AZL Van Kampen Global Real Estate Fund AZL Van Kampen Growth and Income Fund AZL Van Kampen Mid Cap Growth Fund AZL Van Kampen Strategic Growth Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS Allianz Life Variable Account A Allianz Life Variable Account B CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS ALLIANZ LIFE VARIABLE ACCOUNT A: Allianz LifeFund ValueLife Valuemark Life ALLIANZ LIFE VARIABLE ACCOUNT B: Allianz Alterity Allianz Custom Income Allianz Elite Allianz High Five Allianz High Five Bonus Allianz High Five L Allianz Rewards Allianz Valuemark II Allianz Valuemark III Allianz Valuemark IV Allianz Valuemark Income Plus Allianz Vision USAllianz Charter USAllianz Charter II USAllianz Dimensions 16 EX-99.E.3 5 file005.txt PART AGMT 8-28-07 AZ OF NY PARTICIPATION AGREEMENT THIS AGREEMENT is made this 28th day of August, 2007, by and among Allianz Variable Insurance Products Trust (the "Trust"), an open-end management investment company organized as a Delaware Business Trust, Allianz Life Insurance Company of New York, a life insurance company organized as a corporation under the laws of the State of New York, (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth in Schedule A, as may be amended from time to time (the "Accounts"), and Allianz Life Financial Services, LLC, a Minnesota limited liability company, the Trust's distributor (the "Distributor"). WHEREAS, the Trust is registered with the Securities and Exchange Commission (the "Commission") as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. WHEREAS, the Trust and the Distributor desire that Trust shares be used as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by life insurance companies which have entered into fund participation agreements with the Trust (the "Participating Insurance Companies"); WHEREAS, the Company has registered or will register under the 1940 Act certain variable life insurance policies and variable annuity contracts, set forth in Schedule A, to be issued by the Company under which the Portfolios are to be made as investment vehicles (the "Contracts); WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act unless an exemption from registration under the 1940 Act is available and the Trust has been so advised; WHEREAS, the Company desires to use shares of the Portfolios indicated on Schedule A as investment vehicles for the Accounts; NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES 1.1. For purposes of this Article I, the Company shall be the Trust's agent for the receipt from each account of purchase orders and requests for redemption pursuant to the Contracts relating to each Portfolio, provided that the Company notifies the Trust of such purchase orders and requests for redemption by 9:00 a.m. Eastern time on the next following Business Day, as defined in Section 1.3. 1.2. The Trust shall make shares of the Portfolios available to the Accounts at the net asset value next computed after receipt of a purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prospectus of the Trust describing Portfolio purchase procedures. The Company will transmit orders from time to time to the Trust for the purchase and redemption of shares of the Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under Federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Portfolio. 1.3. The Company shall pay for the purchase of shares of a Portfolio on behalf of an Account with federal funds to be transmitted by wire to the Trust, with the reasonable expectation of receipt by the Trust by 4:00 p.m. Eastern time on the same Business Day that the Trust (or its agent) receives the purchase order. Upon receipt by the Trust of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust for this purpose. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Commission. 1.4. The Trust will redeem for cash any full or fractional shares of any Portfolio, when requested by the Company on behalf of an Account, at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust describing Portfolio redemption procedures. The Trust shall make payment for such shares in the manner established from time to time by the Trust. Proceeds of redemption with respect to a Portfolio will normally be paid to the Company for an Account in federal funds transmitted by wire to the Company by order of the Trust with the reasonable expectation of receipt by the Company by 4:00 p.m. Eastern time on the same Business Day that the Trust (or its agent) receives the request for redemption. Such payment may be delayed if, for example, the Portfolio's cash position so requires or if extraordinary market conditions exist, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. The Trust reserves the right to suspend the right of redemption, consistent with Section 22(3) of the 1940 Act and any rules thereunder. 2 1.5. Payments for the purchase of shares of the Trust's Portfolios by the Company under Section 1.3 and payments for the redemption of shares of the Trust's Portfolios under Section 1.4 on any Business Day may be netted against one another for the purpose of determining the amount of any wire transfer. 1.6. Issuance and transfer of the Trust's Portfolio shares will be by book entry only. Stock certificates will not be issued to the Company or the Accounts. Portfolio Shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each account. 1.7. The Trust shall furnish, on or before the ex-dividend date, notice to the Company of any income dividends or capital gain distributions payable on the shares of any Portfolio of the Trust. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of that Portfolio. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.8. The Trust shall calculate the net asset value of each Portfolio on each Business Day, as defined in Section 1.3. The Trust shall make the net asset value per share for each Portfolio available to the Company or its designated agent on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available to the Company by 6:30 p.m. Eastern time each Business Day. If the Trust provides materially incorrect share net asset value information, the number of shares purchased or redeemed shall be adjusted to reflect the correct net asset value per share. Any material error in the calculation or reporting of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to the Company. 1.9. The Trust agrees that its Portfolio shares will be sold only to Participating Insurance Companies and their segregated asset accounts, to the Fund Sponsor or its affiliates and to such other entities as any be permitted by Section 817(h) of the Code, the regulations hereunder, or judicial or administrative interpretations thereof. No shares of any Portfolio will be sold directly to the general public. The Company agrees that it will use Trust shares only for the purposes of funding the Contracts through the Accounts listed in Schedule A, as amended from time to time. 1.10. The Trust agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding materially to those contained in Section 2.11 and Article IV of this Agreement. 3 ARTICLE II. ------- OBLIGATIONS OF THE PARTIES 2.1. The Trust shall prepare and file with the Commission a registration statement under the Securities Act of 1933 as amended (the "1933 Act") and this Agreement shall not be effective until such registration has been declared effective by the Commission. 2.2. The Trust shall prepare and be responsible for filing with the Commission and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. The Trust shall bear the costs of registration and qualification of shares of the Portfolios, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.3. The Company shall distribute such prospectuses, proxy statements and periodic reports of the Trust to the Contract owners as required to be distributed to such Contract owners under applicable federal or state law. 2.4. The Trust shall provide such documentation (including a final copy of the Trust's prospectus as set in type or in camera-ready copy) and other assistance as is reasonably necessary in order for the Company to print the current prospectus for the Contracts issued by the Company. The Trust shall bear the expense of printing copies of its current prospectus that will be distributed to existing Contract owners, and the Company shall bear the expense of printing copies of the Trust's prospectus that are used in connection with offering the Contracts issued by the Company. 2.5. The Trust and the Distributor shall provide (1) at the Trust's expense, one copy of the Trust's current Statement of Additional Information ("SAI") to the Company and to any Contract owner who requests such SAI, (2) at the Company's expense, such additional copies of the Trust's current SAI as the Company shall reasonably request and that the Company shall require in accordance with applicable law in connection with offering the Contracts issued by the Company. 2.6. The Trust, at its expense, shall provide the Company with copies of its proxy material, periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably require for purposes of distributing to Contract owners. The Trust, at the Company's expense, shall provide the Company with copies of its periodic reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably request for use in connection with offering the Contracts issued by the Company. If requested by the Company in lieu thereof, the Trust shall provide such documentation (including a final copy of the Trust's proxy materials, periodic reports to shareholders and other communications to shareholders, as set in type or in camera-ready copy) and other assistance as reasonably necessary in order for the Company to print such shareholder communications for distribution to Contract owners. 4 2.7. The Company shall furnish, or cause to be furnished, to the Trust or its designee a copy of each Contract prospectus and/or statement of additional information describing the Contracts, each report to Contract owners, proxy statement, application for exemption or request for no-action letter in which the Trust or the Distributor is named contemporaneously with the filing of such document with the Commission. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee each piece of sales literature or other promotional material in which the Trust or the Distributor is named, at least five Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within three Business Days after receipt of such material. 2.8. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or the Distributor in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust shares (as such registration statement and prospectus may be amended or supplemented from time to time), annual and semi-annual reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the prior written permission of the Trust, the Distributor or their respective designees. The Trust and the Distributor agree to respond to any request for approval on a prompt and timely basis. The Company shall adopt and implement procedures reasonably designed to ensure that "broker only" materials including information therein about the Trust or the Distributor are not distributed to existing or prospective Contract owners. 2.9. The Trust shall use its best efforts to provide the Company, on a timely basis, with such information about the Trust, the Portfolios and the Distributor, in such form as the Company may reasonably require, as the Company shall reasonably request in connection with the preparation of registration statements, prospectuses and annual and semi-annual reports pertaining to the Contracts. 2.10. The Trust and the Distributor shall not give, and agree that no affiliate of either of them shall give, any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the prior written permission of the Company. The Company agrees to respond to any request for approval on a prompt and timely basis. 5 2.11. So long as, and to the extent that, the Commission interprets the 1940 Act to require pass-through voting privileges for Contract owners, the Company will provide pass-through voting privileges to Contract owners whose cash values are invested, through the registered Accounts, in shares of one or more Portfolios of the Trust. The Trust shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by the Trust. With respect to each registered Account, the Company will vote shares of each Portfolio of the Trust held by a registered Account and for which no timely voting instructions from Contract owners are received in the same proportion as those shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Portfolio shares held to fund the Contracts without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. The Company reserves the right, to the extent permitted by law, to vote shares held in any Account in its sole discretion. 2.12. The Company and the Trust will each provide to the other information about the results of any regulatory examination relating to the Contracts or the Trust, including relevant portions of any "deficiency letter" and any response thereto. 2.13. No compensation shall be paid by the Trust to the Company, or by the Company to the Trust, under this Agreement (except for specified expense reimbursements). However, nothing herein shall prevent the parties hereto from otherwise agreeing to perform, and arranging for appropriate compensation for, other services relating to the Trust, the Accounts or both. 2.14. The Company shall take all such actions as are necessary under applicable federal and state law to permit the sale of the Contracts issued by the Company, including registering each Account as an investment company to the extent required under the 1940 Act, and registering the Contracts or interests in the Accounts under the Contracts to the extent required under the 1933 Act, and obtaining all necessary approvals to offer the Contracts from state insurance commissioners. 2.15. The Company shall make every effort to maintain the treatment of the Contracts issued by the Company as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code, and shall notify the Trust and the Distributor immediately upon having a reasonable basis for believing that such Contracts have ceased to be so treated or that they might not be so treated in the future. 2.16. The Company shall offer and sell the Contracts issued by the Company in accordance with the applicable provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1 934 Act"), the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the offering of variable life insurance policies and variable annuity contracts. 6 2.17. The Distributor shall sell and distribute the shares of the Portfolios of the Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law. 2.18. Each party hereto shall cooperate with each other party and all appropriate governmental authorities having jurisdiction (including, without limitation, the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. ARTICLE Ill. REPRESENTATIONS AND WARRANTIES 3.1. The Company represents and warrants that it is an insurance company duly organized and in good standing under the laws of the State of New York and that it has legally and validly established each Account as a segregated asset account under such law as of the date set forth in Schedule A, and that Allianz Life Financial Services, LLC, the principal underwriter for the Contracts, is registered as a broker-dealer under the 1934 Act and is a member in good standing of the National Association of Securities Dealers, Inc. 3.2. The Company represents and warrants that it has registered or, prior to any issuance or sale of the Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act and cause each Account to remain so registered to serve as a segregated asset account for the Contracts, unless an exemption from registration is available. 3.3. The Company represents and warrants that the Contracts will be registered under the 1933 Act unless an exemption from registration is available prior to any issuance or sale of the Contracts; the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and the sale of the Contracts shall comply in all material respects with state insurance law suitability requirements. 3.4. The Trust represents and warrants that it is duly organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act and the rules and regulations thereunder. 3.5. The Trust represents and warrants that the Portfolio shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and sold in accordance with all applicable federal and state laws, and the Trust shall be registered under the 1940 Act prior to and at the time of any issuance or sale of such shares. The Trust shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Trust shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 7 3.6. The Trust represents and warrants that the investments of each Portfolio will comply with the diversification requirements for variable annuity, endowment or life insurance contracts set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code", and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5), and will notify the Company immediately upon having a reasonable basis for believing any Portfolio has ceased to comply or might not so comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance within the grace period afforded by Regulation 1.817-5. 3.7. The Trust represents and warrants that it is currently qualified as a "regulated investment company" under Subchapter M of the Code, that it will make every effort to maintain such qualification and will notify the Company immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. 3.8. The Trust represents and warrants that it, its directors, officers, employees and others dealing with the money or securities, or both, of a Portfolio shall at all times be covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the minimum coverage required by Rule 17g-1 or other applicable regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company. 3.9. The Distributor represents and warrants that it is duly organized and validly existing under the laws of the State of Ohio and that it is registered, and will remain registered, during the term of this Agreement, as a broker-dealer under the 1934 Act and is a member in good standing of the National Association of Securities Dealers, Inc. ARTICLE IV. POTENTIAL CONFLICTS (This article intentionally left blank) ARTICLE V. INDEMNIFICATION 5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Distributor, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 5.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under 8 any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the Contracts or Trust shares and: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Company by or on behalf of the Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Trust by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; or (f) arise out of or result from the provision by the Company to the Trust of insufficient or incorrect information regarding the purchase or sale of shares of any Portfolio, or the failure of the Company to provide such information on a timely basis. 5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify and hold harmless the Company and each of its directors, officers, employees, and agents and each person, if any, who controls the Company within the meaning of Section 15 of 9 the 1933 Act and the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" "or the purposes of this Section 5.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Distributor, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the Contracts or Trust shares and: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Trust (or any amendment or supplement thereto) (collectively, "Trust Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Distributor or the Trust by or on behalf of the Company for use in Trust documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Distributor or persons under its control, with respect to the sale or acquisition of the Contracts or Portfolio shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of the Distributor; or (d) arise out of or result from any failure by the Distributor to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Distributor in this Agreement or arise out of or result from any other material breach of this Agreement by the Distributor. 10 5.3. None of the Company, the Trust or the Distributor shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 5.4. None of the Company, the Trust or the Distributor shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified party unless such Indemnified Party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party from any liability which it may have to the Indemnified party in the absence of Sections 5.1 and 5.2. 5.5. In case any such action is brought against an Indemnified Party, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI. TERMINATION 6.1 This Agreement shall terminate: (a) at the option of any party upon 6 months advance written notice to the other parties, unless a shorter time is agreed to by the parties; (b) at the option of the Trust or the Distributor if the Contracts issued by the Company cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code (unless disqualification is caused by the Trust or the Distributor) or if the Contracts are not registered, issued or sold in accordance with applicable state and/or federal law; or (c) at the option of any party upon a determination by a majority of the Trustees of the Trust, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists; or 11 (d) at the option of the Company upon institution of formal proceedings against the Trust or the Distributor by the NASD, the SEC, or any state securities or insurance department or any other regulatory body regarding the Trust's or the Distributor's duties under this Agreement or related to the sale of Trust shares or the operation of the Trust; or (e) at the option of the Company if the Trust or a Portfolio fails to meet the diversification requirements specified in Section 3.6 hereof; or (f) at the option of the Company if shares of the Series are not reasonably available to meet the requirements of the Variable Contracts issued by the Company, as determined by the Company, and upon prompt notice by the Company to the other parties; or (g) at the option of the Company in the event any of the shares of the Portfolio are not registered, issued or sold in accordance with applicable state and/or federal law, or such law precludes the use of such shares as the underlying investment media of the Variable Contracts issued or to be issued by the Company; or (h) at the option of the Company, if the Portfolio fails to qualify as a Regulated investment Company under Subchapter M of the Code: or (i) at the option of the Distributor if it shall determine in its sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (j) immediately, in the event the Distributor ceases, for any reason, to act in the capacity of distributor for the Trust and its shares. 6.2. Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement. 6.3. The provisions of Article V and all warranties under Article Ill shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.11 shall survive the termination of this Agreement as long as shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. 12 ARTICLE VII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Allianz Variable Insurance Products Trust 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: H. Bernt von Ohlen If to the Distributor: Allianz Life Financial Services, LLC 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: Stewart D. Gregg If to the Company: Allianz Life Insurance Company of New York 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: Stewart D. Gregg ARTICLE VIII. MISCELLANEOUS 8.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 8.2. This Agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument. 8.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 8.4. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Minnesota. It shall 13 also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the Commission granting exemptive relief therefrom and the conditions of such orders. Copies of any such orders shall be promptly forwarded by the Trust to the Company. 8.5. All liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities. 8.6. Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Commission, the National Association of Securities Dealers, Inc. and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 8.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 8.8. This Agreement shall not be exclusive in any respect. 8.9. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without prior written approval of the other party. 8.10. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. 8.11. Each party hereto shall, except as required by law or otherwise permitted by this Agreement, treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto, and shall not disclose such confidential information without the written consent of the affected party unless such information has become publicly available. 14 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. Allianz Life Financial Services, LLC By: /s/ Stewart Gregg Name: Stewart Gregg Title: Vice President and Secretary Allianz Variable Insurance Products Trust By: /s/ Brian Muench Name: Brian Muench Title: Vice President Allianz Life Insurance Company of New York By: /s/ Stewart Gregg Name: Stewart Gregg Title: Assistant Secretary 15 SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS AZL AIM Basic Value Fund AZL AIM International Equity Fund AZL Columbia Technology Fund AZL Davis NY Venture Fund AZL Dreyfus Founders Equity Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL First Trust Target Double Play Fund AZL Franklin Small Cap Value Fund AZL Jennison 20/20 Focus Fund AZL Jennison Growth Fund AZL LMP Large Cap Growth Fund AZL Legg Mason Growth Fund AZL Legg Mason Value Fund AZL Money Market Fund AZL NACM International Fund AZL Neuberger Berman Regency Fund AZL OCC Opportunity Fund AZL OCC Renaissance Fund AZL OCC Value Fund AZL Oppenheimer Developing Markets Fund AZL Oppenheimer Global Fund AZL Oppenheimer International Growth Fund AZL Oppenheimer Main Street Fund AZL PIMCO Fundamental IndexPLUS Total Return Fund AZL S&P 500 Index Fund AZL Schroder International Small Cap Fund AZL Small Cap Stock Index Fund AZL TargetPLUS Balanced Fund AZL TargetPLUS Equity Fund AZL TargetPLUS Growth Fund AZL TargetPLUS Moderate Fund AZL Turner Quantitative Small Cap Growth Fund AZL Van Kampen Aggressive Growth Fund AZL Van Kampen Comstock Fund AZL Van Kampen Equity and Income Fund AZL Van Kampen Global Franchise Fund AZL Van Kampen Global Real Estate Fund AZL Van Kampen Growth and Income Fund AZL Van Kampen Mid Cap Growth Fund AZL Van Kampen Strategic Growth Fund SEPARATE ACCOUNT UTILIZING THE FUNDS Allianz Life of NY Variable Account C CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS Allianz Advantage New York Allianz Charter II New York Allianz High Five New York Allianz Opportunity New York Valuemark II Valuemark IV 16 EX-99.H.1 6 file006.txt AMENDED SERVICES AGMT DTD 10-23-07 AMENDED AND RESTATED SERVICES AGREEMENT AMENDED AND RESTATED AGREEMENT made as of the 23rd of October, 2007, (the "Agreement") between ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST (the "Trust"), a Delaware statutory trust, and CITI FUND SERVICES OHIO, INC. ("CFS"), a Delaware corporation having its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219. WHEREAS, the Trust and CFS entered into an Amended and Restated Services Agreement as of November 1, 2006 (the "2006 Agreement"), under the terms of which CFS performs administration, fund accounting, transfer agency, and certain compliance services for the Trust and each series portfolio of the Trust; WHEREAS, the Trust desires that CFS continue to perform such services for the Trust and each series portfolio of the Trust, as now in existence and listed on Schedule A hereto, or as hereafter may be established from time to time (individually referred to herein as a "Portfolio," and collectively as the "Portfolios") WHEREAS, CFS is willing to perform such services on the terms and conditions set forth in this Agreement; and WHEREAS, CFS and the Trust wish to enter into a new Agreement in order to set forth the terms under which CFS will perform administration, fund accounting, transfer agency and compliance services (collectively, the "Services") for the Trust. NOW, THEREFORE, in consideration of the covenants hereinafter contained, the Trust and CFS hereby agree as follows: ARTICLE 1. SERVICES. A. ADMINISTRATIVE SERVICES. On behalf of the Trust and each of the Portfolios, CFS will investigate, assist in the selection of, and conduct relations with custodians, depositories, accountants, legal counsel, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and persons in any other capacity deemed to be necessary or desirable for the Trust's and each of the Portfolio's operations as agreed upon by CFS and the Trust. In addition, CFS shall provide the Trust's Board of Trustees (the "Board") with such reports regarding investment performance as it may reasonably request but shall have no responsibility for supervising the performance by any investment adviser or sub-adviser of its responsibilities. CFS shall provide the Trust and each of the Portfolios with all necessary office space, equipment, personnel, compensation, and facilities (including facilities for the Trust's shareholders' and Board meetings to the extent the Trust so requests) for rendering the administration services described hereunder and such other ancillary services as CFS shall, from time to time, determine to be necessary to perform its obligations as administrator 1 under this Agreement. In addition, at the request of the Trust or Board, CFS shall make reports to the Trust and the Board concerning the performance of such obligations hereunder. Without limiting the generality of the foregoing, CFS shall perform the administrative services described in Schedule B. CFS shall also perform such other administrative services for the Trust to the extent agreed upon in advance by the parties from time to time, for which CFS shall provide a quote as to fees and estimated expenses upon request, and the Trust will pay the amounts agreed upon by CFS and the Trust following the Trust's review of such quoted fees and estimated expenses and prior written approval of such fees and expenses. Except as explicitly set forth herein (including Schedule B), CFS shall perform only such additional services as described by amendment to this Agreement, in consideration of such fees as the parties hereto may agree. B. FUND ACCOUNTING SERVICES. CFS shall perform for the Trust the fund accounting services described in Schedule C. CFS shall also perform such special accounting services, and furnish such reports, for the Trust and the Portfolios to the extent agreed upon in advance by the parties from time to time, for which the Trust will pay the amounts agreed upon by CFS and the Trust. Except as explicitly set forth herein (including Schedule C), CFS shall perform only such additional services as are provided on an amendment to this Agreement, in consideration of such fees as the parties hereto may agree. CFS shall provide a quote as to fees and estimated expenses upon request, and the Trust will pay the amounts agreed upon by CFS and the Trust following the Trust's review of such quoted fees and estimated expenses and prior written approval of such fees and expenses. C. TRANSFER AGENCY SERVICES. CFS shall perform for the Trust the transfer agent services set forth in Schedule D hereto. CFS shall also perform such special transfer agency services, and furnish such reports, for the Trust and the Portfolios to the extent agreed upon by the parties from time to time, for which the Trust will pay the amounts agreed upon by CFS and the Trust. Except as explicitly set forth herein (including Schedule D), CFS shall perform only such additional services as are provided on an amendment to this Agreement, in consideration of such fees as the parties hereto may agree. CFS shall provide a quote as to fees and estimated expenses upon request, and the Trust will pay the amounts as may be agreed upon by CFS and the Trust following the Trust's review of such quoted fees and estimated expenses and prior written approval of such fees and expenses. D. COMPLIANCE SERVICES. CFS shall perform for the Trust the compliance services set forth in Schedule E hereto. The parties mutually agree to coordinate and cooperate in connection with the creation and maintenance of written compliance policies and procedures (the "Fund Compliance Program") which, in the aggregate, shall be deemed by the Board to be reasonably designed to prevent the Trust from violating the provisions of the Federal securities laws applicable to the Trust (the "Applicable Securities Laws"), as required under Rule 38a-1 under the 1940 Act. Except as explicitly set forth herein (including Schedule E), CFS shall perform only such additional compliance services as are provided on an amendment to this Agreement, in consideration of such fees as the parties hereto may agree. CFS shall provide a quote as to fees and estimated expenses upon request, and the Trust will pay the amounts as may be agreed upon by CFS and the Trust following 2 the Trust's review of such quoted fees and estimated expenses and prior written approval of such fees and expenses. E. CERTAIN DEADLINES AND SERVICE STANDARDS. From time to time, the Trust may propose certain deadlines and service standards applicable to CFS's provision of the Services or certain aspects of the Services, and such service standards shall be set forth as Schedule F to this Agreement. Notwithstanding the effective date of this Agreement, Schedule F may bear a different effective date, in which case such Schedule shall be in effect commencing on such effective date and continuing for the remaining term of this Agreement or until subsequently amended upon mutual agreement of the parties. During any period for which Schedule F is effective, CFS agrees to perform the relevant Services in accordance with and otherwise comply with the provisions set forth in Schedule F. However, such standards or deadlines shall not be used generally in the construction of the parties' rights and obligations under other provisions of this Agreement, and any acknowledgment by CFS that a particular deadline or other requirement set forth in Schedule F was not met in any particular case, shall be without prejudice to CFS and shall not be construed as an admission or as a waiver of any rights of CFS generally under this Agreement. F. INFORMATION TECHNOLOGY. During the Initial Term (as defined in Article 6) of the Agreement, at the request of the Trust or the Allianz Variable Insurance Products Fund of Funds Trust and its outstanding series (collectively, the "Trusts"), CFS shall perform up to 450 hours of process development or other work related to information technology projects for the benefit of the Trust or the Trusts, as the case may be. The Trust, or the Trusts, if appropriate, and CFS shall agree upon the scope of such process development or other project work. ARTICLE 2. SUBCONTRACTING. CFS may, at its expense, utilize agents in connection with the rendering of Services and may subcontract with any entity or person concerning the provision of the Services; provided that CFS shall not be relieved of any of its obligations under this Agreement by the appointment of such subcontractor, and provided, further, that CFS shall be responsible, to the extent provided in Article 7 hereof, for all acts of such subcontractor as if such acts were its own including any payment for services provided by subcontractor. ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES. A. CFS. CFS shall furnish at its own expense the executive, supervisory, and clerical personnel necessary to perform its obligations under this Agreement. CFS shall also provide the items which it is obligated to provide under this Agreement, and shall pay all compensation, if any, of officers of the Trust and Trustees of the Trust who are affiliated persons of CFS or any affiliated corporation of CFS. Unless otherwise specifically provided in this Agreement, CFS shall not be obligated to pay the compensation of any employee of the Trust or other person retained by the Board or the Trust to perform services on behalf of the Trust. 3 B. THE TRUST. The Trust assumes and shall pay or cause to be paid all other expenses of the Trust not otherwise allocated herein, including, without limitation, organization costs, taxes, expenses for legal and auditing services, the expenses of preparing (including typesetting), printing and mailing reports, prospectuses, statements of additional information, proxy solicitation material and notices to existing shareholders, all expenses incurred in connection with issuing and redeeming shares of beneficial interest in the Trust ("Shares"), the costs of obtaining securities pricing information, the costs of custodial services, the cost of registration of the Shares under Federal securities laws, fees and out-of-pocket expenses of Trustees who are not affiliated persons of CFS or any affiliated corporation of CFS, insurance and fidelity bond premiums and related expenses, interest, brokerage costs, litigation, and other extraordinary or nonrecurring expenses, all fees and charges of the investment advisers to the Trust, and any amounts payable as Rule 12b-1 fees, if any. ARTICLE 4. COMPENSATION OF CFS. -------------------- A. SERVICES FEE. For the Services to be rendered, and the facilities furnished and the expenses assumed by CFS pursuant to this Agreement in connection with the Services, the Trust shall pay to CFS the compensation specified in Schedule A attached hereto. Such compensation shall be calculated and accrued daily, and paid to CFS monthly. If this Agreement becomes effective subsequent to the first day of a month or terminates in accordance with its terms before the last day of a month, CFS's compensation for that part of the month in which this Agreement is in effect shall be prorated in a manner consistent with the calculation of the fees as set forth above. Payment of CFS's compensation for the preceding month shall be made promptly. B. REIMBURSEMENT OF EXPENSES. In addition to the fees payable by the Trust under Article 4(A), the Trust shall also reimburse CFS for its reasonable out-of-pocket expenses in providing Services. CFS shall use its best efforts in selecting and monitoring third party vendors used by CFS to ensure quality and financial competitiveness, shall make reasonable effort to provide estimated expenses in advance for extraordinary charges, shall respond within a reasonable time to inquiries of the Trust concerning expenses charged to the Trust, and upon request shall provide explanations of the charges and copies of back-up documents available to substantiate the charges. The expenses that may be incurred include the following: (i) All freight and other delivery and bonding charges incurred by CFS in delivering materials to and from the Trust and in delivering all materials to shareholders; (ii) All direct telephone, telephone transmission, and telecopy or other electronic transmission and remote system access expenses incurred by CFS in communication with the Trust, the Trust's investment adviser or custodian, dealers, or others as required for CFS to perform the Services; 4 (iii) The cost of obtaining security and issuer information; (iv) The cost of CD-ROM, computer disks, microfilm, or microfiche, and storage of records or other materials and data; (v) Costs of postage, bank services, couriers, stock computer paper, statements, labels, envelopes, reports, proxies, notices, or other form of printed material (including the cost of preparing and printing all printed material) which shall be required by CFS for the performance of the services to be provided hereunder, including print production charges incurred; (vi) All copy charges; (vii) The reasonable travel, lodging and other expenses incurred by officers and employees of CFS in connection with attendance at Board meetings or the performance of any due diligence of the Service Providers (as defined in Schedule E of this Agreement), if such due diligence is requested by the Trust; (viii) Any expenses CFS shall incur at the written direction of the Trust or an officer of the Trust thereunto duly authorized; (ix) Reasonable costs incurred by CFS in connection with the performance of services in addition to those contemplated by this Agreement and requested in writing by the Chief Compliance Officer under the Fund Compliance Program; and (x) Any additional expenses reasonably incurred by CFS in the performance of its duties and obligations under this Agreement. C. MISCELLANEOUS SERVICE FEES AND CHARGES. In addition to the amounts set forth in paragraphs (A) and (B) above, CFS shall be entitled to receive the following amounts from the Trust: (i) A fee for managing and overseeing the report, print and mail functions performed by CFS's third-party vendors, not to exceed $.04 per page for statements and $.03 per page for confirmations; fees for pre-approved programming in connection with creating or changing the forms of statements, billed at the rate of $150 per hour; (ii) System development fees, billed at the rate of $150 per hour, as requested and pre-approved by the Trust, and all systems-related expenses, agreed in advance, associated with the provision of special reports and services pursuant to any of the Schedules hereto; 5 (iii) Fees for development of custom interfaces pre-approved by the Trust, billed at a mutually agreed upon rate; (iv) Ad hoc reporting fees pre-approved by the Trust, billed at a mutually agreed upon rate; (v) Expenses associated with the tracking of "as-of trades", billed at the rate of $50 per hour, as approved by the Trust; (vi) Fees for pricing information used in connection with pricing the securities and other investments of each Portfolio, provided that the Portfolio shall not be charged an amount greater than the amount the Portfolio would be charged if it obtained the information directly from the relevant vendor or vendors, including fees paid by CFS to Fair Value Information Vendors (as defined in Schedule C) with respect to the provision of fair value pricing information to CFS for use in valuing the portfolio holdings of a specific Portfolio or Portfolios that the Trust designates as being subject to fair value determinations and for which services are to be provided by CFS hereunder (such costs shall be incurred at the discounted group rate made available to CFS clients, if applicable); and (vii) Expenses associated with CFS's anti-fraud procedures as it pertains to new account review and the performance of delegated services under the written anti-money laundering program ("AML Program") adopted by the Trust. If there are changes to any applicable laws which affect the Services provided by CFS under this Agreement, and of which CFS is notified in writing by the Trust or otherwise becomes aware, then CFS shall use reasonable efforts to develop and implement any necessary changes in the systems and take any other actions reasonably required so that the services provided by CFS continue to meet the requirements of applicable laws. CFS and the Trust shall negotiate in good faith the costs associated with such systems modifications and other changes as may be necessary in connection with the foregoing. D. SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation and reimbursement under this Agreement for Services performed and expenses incurred shall survive the termination of this Agreement, subject to Article 6. ARTICLE 5. STANDARD OF CARE; UNCONTROLLABLE EVENTS; LIMITATION OF LIABILITY. CFS shall use reasonable professional diligence to ensure the accuracy of all services performed under this Agreement, and shall be liable to the Trust only for actions taken or omitted by CFS involving bad faith, willful misfeasance, negligence or reckless disregard by it of its obligations and duties. The duties of CFS shall be confined to those expressly set 6 forth herein, and no implied duties are assumed by or may be asserted against CFS hereunder. CFS shall maintain adequate and reliable computer and other equipment necessary or appropriate to carry out its obligations under this Agreement. Upon the Trust's reasonable request, CFS shall provide supplemental information concerning the aspects of its disaster recovery and business continuity plan that are relevant to the services provided hereunder. Notwithstanding the foregoing or any other provision of this Agreement, CFS assumes no responsibility hereunder, and shall not be liable for, any damage, loss of data, delay or any other loss whatsoever caused by events beyond its reasonable control. Events beyond CFS's reasonable control include, without limitation, FORCE MAJEURE events. Force majeure events include natural disasters, actions or decrees of governmental bodies, and communication lines failures that are not the fault of either party. In the event of FORCE MAJEURE, computer or other equipment failures or other events beyond its reasonable control, (a) CFS shall follow applicable procedures in its disaster recovery and business continuity plan, (b) CFS shall use all commercially reasonable efforts to minimize any service interruption, and (c) Schedule F shall be applicable during any such FORCE MAJEURE event or disaster. CFS will notify the Trust promptly in the event that the CFS Incident Management Team declares a disaster under the disaster recovery and business continuity plan, and will provide the Trust with such information and updates as to the scope of the disaster and expected duration as may be reasonably available. CFS shall provide the Trust, at such times as the Trust may reasonably require, copies of reports rendered by independent public accountants on the internal controls and procedures of CFS relating to the services provided by CFS under this Agreement. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL CFS, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR PUNITIVE OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ARTICLE 6. TERM. This Agreement shall become effective as of January 1, 2008 (the "Effective Date"). This Agreement shall continue in effect until December 31, 2010 (the "Initial Term"). Thereafter, unless otherwise terminated as provided herein, and in each instance subject to the prior approval of the Board of Trustees of the Trust, this Agreement may be renewed for successive one-year periods ("Rollover Periods"). This Agreement may be terminated only (i) by provision of a notice of nonrenewal in the manner set forth below, (ii) by mutual agreement of the parties, (iii) for "cause," as defined below, upon the provision of sixty (60) days advance written notice by the party alleging cause, (iv) by the refusal of either party to consent in writing to a proposed assignment of this Agreement by the other party as required by Article 23, or (v) as provided in Schedule F. Written notice of nonrenewal must be 7 provided at least sixty (60) days prior to the end of the Initial Term or any Rollover Period, as the case may be. For purposes of this Agreement, "cause" shall mean (a) a material breach of this Agreement that has not been remedied for thirty (30) days following written notice of such breach from the non-breaching party; (b) a final, unappealable, judicial, regulatory or administrative ruling or order in which the party to be terminated has been found guilty of criminal or unethical behavior in the conduct of its business; or (c) financial difficulties on the part of the party to be terminated which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors. CFS shall not terminate this Agreement pursuant to clause (a) above based solely upon the Trust's failure to pay an amount to CFS which is the subject of a good faith dispute, if (i) the Trust is attempting in good faith to resolve such dispute with as much expediency as may be possible under the circumstances, and (ii) the Trust continues to perform its obligations hereunder in all other material respects (including paying all fees and expenses not subject to reasonable dispute hereunder). Notwithstanding the foregoing, following any such termination, in the event that CFS in fact continues to perform any one or more of the Services contemplated by this Agreement (or any Schedule or exhibit hereto) with the consent of the Trust, the provisions of this Agreement, including without limitation the provisions dealing with indemnification, shall continue in full force and effect. Fees and out-of-pocket expenses incurred prior to termination and unpaid by the Trust upon such termination shall be immediately due and payable upon and notwithstanding such termination. Except as specifically provided below in this paragraph, CFS shall be entitled to collect from the Trust the amount of all of CFS's reasonable out of pocket expenses in connection with CFS's activities in effecting a termination, including without limitation, the delivery to the Trust and/or its investment adviser and/or other parties of the Trust's property, records, instruments and documents. In the event of a termination by the Trust for "cause" hereunder, CFS shall provide such transition assistance as is reasonably required to facilitate an orderly transition of services. Such transition assistance shall be considered Services subject to all of the terms and conditions of this Agreement; provided, however, that CFS shall not be entitled to reimbursement of the costs for electronic transfers of data in implementing a conversion from its systems in connection with such a termination by the Trust for "cause" hereunder. If, for any reason other than (i) nonrenewal, (ii) mutual agreement of the parties, (iii) "cause" for termination of CFS hereunder, or (iv) termination as provided in Schedule F, the Services are terminated hereunder, CFS is replaced as administrator, fund accountant or transfer agent, or if a third party is added to perform all or part of the Services provided by CFS under this Agreement (excluding any subcontractor appointed as provided in Article 2 hereof), then the Trust shall make a one-time cash payment, in consideration of the fee 8 structure and services to be provided under this Agreement, and not as a penalty, to CFS equal to the balance that would have been due CFS for the Services hereunder during (x) the next (6) months or (y) if less than six (6), the number of months remaining in the then-current term of this Agreement, assuming for purposes of the calculation of the one-time payment that the fees that would have been earned by CFS for each month shall be based upon the average monthly amount of fees payable to CFS during the six (6) months prior to the date on which the Services terminate, CFS is replaced or a third party is added; provided, however, that in the event of a termination of the Services of the type described in this paragraph during the first six (6) months of the Initial Term (as defined in Article 6), the one-time cash payment by the Trust shall be equal to the amount that would have been due CFS for the Services hereunder during the next twelve (12) months, assuming for purposes of the calculation of the one-time payment that the fees that would have been earned by CFS for each month shall be based upon the average monthly amount of fees payable to CFS during such period of the Initial Term as shall have elapsed. The liquidated damages provision set forth above shall not be applicable to liquidations of individual Portfolios of the Trust which may occur from time to time for legitimate economic or regulatory reasons, rather than pursuant to any express or tacit plan, understanding or arrangement whereby the assets of the Portfolio are designed or intended to migrate, directly or indirectly, to another investment company or other investment vehicle; nor shall such liquidated damages provision be applicable to Portfolios of the Trust that are established subsequent to the Effective Date of this Agreement through a reorganization or other transaction in which the assets of such Portfolio are initially acquired or otherwise transferred from another investment vehicle. In addition, it is understood and agreed that Allianz Life Advisers, LLC and its affiliates and, in the case of the legal services listed in Schedule B attached hereto, counsel to the Trust, may render certain services to the Trust (i.e., services that are not "core" services hereunder but which would otherwise be rendered by (CFS hereunder) and that the liquidated damages provision is not intended to apply to such arrangements, provided that CFS's compensation hereunder continues to be paid in full without offset or credit for such services rendered by Allianz Life Advisers, LLC and its affiliates. Except as provided in the above paragraph, in the event the Trust or any Portfolio is merged into another legal entity in part or in whole pursuant to any form of business reorganization or is liquidated in part or in whole prior to the expiration of the then-current term of this Agreement, the parties acknowledge and agree that the liquidated damages provision set forth above shall be applicable in those instances in which CFS is not retained to provide services consistent with this Agreement. In such cases, the one-time cash payment for liquidated damages referenced above shall be due and payable on the day prior to the first day in which services are terminated, CFS is replaced or a third party is added. The parties further acknowledge and agree that, in the event the Services are terminated, CFS is replaced, or a third party is added, under circumstances in which the liquidated damages provision would be applicable as set forth above, (i) a determination of actual damages incurred by CFS would be difficult, and (ii) the liquidated damages provision contained herein is intended to adequately compensate CFS for damages incurred and is not intended to constitute any form of penalty. 9 ARTICLE 7. INDEMNIFICATION. The Trust agrees to indemnify and hold harmless CFS, its employees, agents, directors, officers and nominees from and against any and all claims, demands, actions and suits, and from and against any and all judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees, disbursements, payments and expenses (including reasonable investigation expenses) arising out of or relating to CFS's actions taken or omissions with respect to the performance of services under this Agreement or based, if applicable, upon reasonable reliance on information, records, instructions or requests given or made to CFS by the Trust, the investment adviser, fund accountant or custodian thereof; provided that this indemnification shall not apply to actions or omissions of CFS in cases of its own bad faith, willful misfeasance, negligence or reckless disregard by it of its obligations and duties. CFS shall indemnify, defend, and hold harmless the Trust, its employees, agents, trustees, officers and nominees from and against any and all claims, demands, actions and suits and from and against any and all judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and disbursements, payments and expenses (including reasonable investigation expenses) resulting directly and proximately from CFS's bad faith, willful misfeasance or negligence in the performance of its duties or by reason of reckless disregard of its obligations and duties hereunder. The indemnification rights hereunder shall include the right to advances of defense expenses (including reasonable attorney fees) in the event of any pending or threatened litigation with respect to which indemnification hereunder may ultimately be merited. In order that the indemnification provisions contained herein shall apply, however, it is understood that if in any case a party may be asked to indemnify or hold the other party harmless, the indemnifying party shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the indemnified party will use all reasonable care to identify and notify the indemnifying party promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the indemnifying party, but failure to do so in good faith shall not affect the rights hereunder except to the extent the indemnifying party is materially prejudiced thereby. Prior to confessing or settling any claim against it which may be the subject of this indemnification, an indemnified party hereunder shall give the indemnifying party or parties written notice of and reasonable opportunity to defend against said claim in its own name or names, or in the name of the indemnified party. The indemnifying party shall be entitled to participate at its own expense or, if it so elects, to assume the defense of any suit brought to enforce any claims subject to this indemnity provision. If the indemnifying party elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by it and reasonably satisfactory to the indemnified party, whose approval shall not be unreasonably withheld. In the event that the indemnifying party elects to assume the defense of any suit and retain counsel, the indemnified party shall bear the fees and expenses of any additional counsel retained by it. If the indemnifying party does not elect to assume the defense of suit, it will reimburse the indemnified party for the reasonable fees and expenses of any counsel retained by the 10 indemnified party. The indemnity and defense provisions set forth herein shall indefinitely survive the termination of this Agreement. ARTICLE 8. COMPLIANCE WITH GOVERNING DOCUMENTS AND LAWS. -------------------------------------------- In the performance of its duties and obligations under this Agreement, CFS shall act in conformity with the Trust's Declaration of Trust and Bylaws, will safeguard and promote the welfare of the Trust, and will comply with the instructions and directions received from the Board; provided that such instructions or directions are not in conflict with the terms of this Agreement, the Trust's governing documents, or any applicable laws. Except for the obligations of CFS explicitly set forth in this Agreement, the Trust assumes full responsibility for its compliance with all laws, rules and regulations of governmental authorities having jurisdiction over it including, the preparation and contents of each registration statement of the Trust and amendment thereto, and the preparation, contents and distribution of each prospectus of the Portfolios and the compliance of the same with all applicable requirements of the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"), and any other laws, rules and regulations of any other governmental authorities having jurisdiction. CFS shall have no obligation to take cognizance of any laws relating to the sale of Fund shares. The Trust represents and warrants that no shares of a Fund will be offered to the public by the Trust unless covered by an effective registration statement filed by the Trust under the 1933 Act and the 1940 Act. The Trust acknowledges that it is a financial institution subject to the law entitled United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism ("U.S.A. Patriot") Act of 2001 and applicable provisions of the Bank Secrecy Act (collectively, the "AML Acts") and shall comply with the AML Acts and applicable regulations adopted thereunder (collectively, the "Applicable AML Laws") in all relevant respects, subject to the delegation of certain responsibilities to CFS, as provided in the next paragraph below. The Trust hereby delegates to CFS the performance, on behalf of the Trust, of the anti-money laundering services set forth under Item 5 of Schedule D as concerns the shareholder accounts maintained by CFS pursuant to this Agreement CFS agrees to the foregoing delegation and agrees to perform such services in accordance with the Trust's AML Program. In connection therewith, CFS agrees to maintain policies and procedures, and related internal controls, that are consistent with the Trust's AML Program and the requirement that the Trust employ procedures reasonably designed to achieve compliance with the Applicable AML Laws, including the requirement to have policies and procedures that can be reasonably expected to detect and cause the reporting of transactions under Section 5318 of the Bank Secrecy Act. The Trust maintains full responsibility for ensuring that its AML Program is, and shall continue to be, reasonably designed to ensure compliance with the Applicable AML Laws, in light of the particular business of the Trust, taking into account factors such as its size, location, activities and risks or vulnerabilities to money laundering. 11 ARTICLE 9. INSTRUCTIONS / CERTAIN PROCEDURES. --------------------------------- Whenever CFS is requested or authorized to take action hereunder pursuant to instructions from a shareholder, or a properly authorized agent of a shareholder ("shareholder's agent"), concerning an account in a Fund, CFS shall be entitled to rely upon any certificate, letter or other instrument or communication (including electronic mail), reasonably believed by CFS to be genuine and to have been properly made, signed or authorized by an officer or other authorized agent of the Trust or by the shareholder or shareholder's agent, as the case may be, and shall be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by an officer of the Trust or any other person authorized by the Board or by the shareholder or shareholder's agent, as the case may be. As to the services to be provided hereunder, CFS may rely conclusively upon the terms of the Prospectuses and Statement of Additional Information of the Trust and the other documents of the Trust furnished to CFS pursuant to Articles 19 and 21 relating to the relevant Funds to the extent that such services are described therein unless CFS receives written instructions to the contrary in a timely manner from the Trust. The parties hereto may amend any procedures adopted, approved or set forth herein by written agreement as may be appropriate or practical under the circumstances, and CFS may conclusively assume that any special procedure which has been approved by an executive officer of the Trust (other than an officer or employee of CFS) does not conflict with or violate any requirements of the Trust's Declaration of Trust, By-Laws or then-current prospectuses, or any rule, regulation or requirement of any regulatory body. The Trust acknowledges receipt of a copy of CFS's policy related to the acceptance of trades for prior day processing (the "CFS As-Of Trading Policy"). CFS may amend the CFS As-of Trading Policy from time to time in its sole discretion. A copy of any such amendments shall be delivered to the Trust upon request. CFS may apply the CFS As-Of Trading Policy whenever applicable, unless CFS agrees in writing to process trades according to such other as-of trading policy as may be adopted by the Trust and furnished to CFS by the Trust. The Trust acknowledges and agrees that deviations from CFS's written transfer agent compliance procedures may involve a substantial risk of loss. In the event an authorized representative of the Trust (other than an officer or employee of CFS or its affiliates) requests that an exception be made from any written compliance or transfer agency procedures adopted by CFS, or any requirements of the AML Program, CFS may in its sole discretion determine whether to permit such exception. In the event CFS determines to permit such exception, the same shall become effective when set forth in a written instrument executed by an authorized representative of the Trust (other than an officer or employee of CFS or its affiliates) and delivered to CFS (an "Exception"); provided that an Exception concerning the requirements of the Trust's AML Program shall also be authorized by the Trust's AML Compliance Officer (as defined in Article 16 of this Agreement). An Exception shall be deemed to remain effective until the relevant instrument expires according to its terms (or if no expiration date is stated, until CFS receives written notice from the Trust that such 12 instrument has been terminated and the Exception is no longer in effect). Notwithstanding any provision in this Agreement that expressly or by implication provides to the contrary, as long as CFS acts in good faith, CFS shall have no liability for any loss, liability, expenses or damages to the Trust resulting from the Exception, and the Trust shall indemnify CFS and hold CFS harmless from any loss, liability, expenses (including reasonable attorneys fees) and damages resulting to CFS therefrom. The Trust instructs and authorizes CFS to provide information pertaining to each affected Portfolio's investments to Fair Value Information Vendors (as defined in Schedule C) in connection with the fair value determinations made under the Trust's Valuation Procedures (as defined in Schedule C) and other legitimate purposes related to the services to be provided hereunder. The Trust understands and acknowledges that while CFS's services related to fair value pricing are intended to assist the Trust and its Board in its obligations to price and monitor pricing of each affected Portfolio's investments, CFS does not assume responsibility for the accuracy or appropriateness of pricing information or methodologies, including any fair value pricing information or adjustment factors. Notwithstanding the foregoing, the parties acknowledge that CFS is not responsible to (i) adopt policies and procedures to monitor for circumstances that may necessitate the use of fair value prices, (ii) establish criteria for determining when market quotations are no longer reliable for a particular portfolio security, (iii) determine a methodology or methodologies by which the Trust determines the current fair value of the portfolio security, and (iv) regularly review the appropriateness and accuracy of the method used in valuing securities and make any necessary adjustments. ARTICLE 10. RECORD RETENTION AND CONFIDENTIALITY. ------------------------------------ CFS shall keep and maintain on behalf of the Trust all books and records which the Trust or CFS is, or may be, required to keep and maintain pursuant to any applicable statutes, rules and regulations, including without limitation Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance of books and records in connection with the services to be provided hereunder. CFS further agrees that all such books and records shall be the property of the Trust and to make such books and records available for inspection by the Trust or by the Securities and Exchange Commission (the "SEC") at reasonable times. CFS shall otherwise keep confidential all books and records relating to the Trust and its shareholders, except when (i) disclosure is required by law, (ii) CFS is advised by counsel that it may incur liability for failure to make a disclosure, (iii) CFS is requested to divulge such information by duly-constituted authorities or court process, or (iv) CFS is requested to make a disclosure by a shareholder or shareholder's agent with respect to information concerning an account as to which such shareholder has either a legal or beneficial interest or when requested by the Trust or the dealer of record as to such account. CFS shall provide the Trust with reasonable advance notice of disclosure pursuant to items (i) - (iii) of the previous sentence, to the extent reasonably practicable. The provisions of this Article 10 are subject to the provisions of Article 8. 13 ARTICLE 11. REPORTS. ------- CFS shall furnish to the Trust and to its properly-authorized auditors, investment advisers, examiners, distributors, dealers, underwriters, salesmen, insurance companies and others designated by the Trust in writing, such reports at such times as are prescribed in the Schedules attached hereto, or as subsequently agreed upon by the parties pursuant to an amendment to a Schedule hereto. The Trust agrees to examine each such report or copy within twenty (20) days and will report or cause to be reported any errors or discrepancies therein. In the event that errors or discrepancies, except such errors and discrepancies as may not reasonably be expected to be discovered by the recipient within twenty (20) days after conducting a diligent examination, are not so reported within the aforesaid period of time, a report will for all purposes be accepted by and binding upon the Trust and any other recipient, and if CFS is not otherwise liable, under the terms of this Agreement, with respect to the matter or event giving rise to errors or discrepancies therein, CFS shall have no further responsibility except to perform reasonable corrections of such errors and discrepancies in the report within a reasonable time after being requested to do so by the Trust. ARTICLE 12. RIGHTS OF OWNERSHIP. ------------------- All computer programs and procedures employed or developed by or on behalf of CFS to perform services required to be provided by CFS under this Agreement are the property of CFS. All records and other data except such computer programs and procedures are the exclusive property of the Trust and all such other records and data shall be furnished to the Trust in appropriate form as soon as practicable after termination of this Agreement for any reason. ARTICLE 13. LEGAL ADVICE. ------------ CFS shall notify the Trust at any time CFS believes that it is in need of the advice of counsel to the Trust with regard to CFS's responsibilities and duties pursuant to this Agreement. CFS may rely upon the advice of counsel to the Trust; however, this Agreement shall not obligate counsel to the Trust to render such advice. After so notifying the Trust, if CFS does not obtain the advice of counsel to the Trust within a reasonable period of time, CFS shall be entitled to seek, receive and act upon advice of legal counsel of its choosing at the expense of the Trust unless relating to a matter involving CFS's willful misfeasance, bad faith, negligence or reckless disregard of CFS's responsibilities and duties hereunder. CFS shall in no event be liable to the Trust or any Fund or any shareholder or beneficial owner of the Trust for any action reasonably taken pursuant to legal advice rendered in accordance with this paragraph. ARTICLE 14. RETURN OF RECORDS. ----------------- CFS may upon termination of this Agreement, and shall promptly upon the Trust's demand, turn over to the Trust and cease to retain CFS's files, records and documents created and maintained by CFS pursuant to this Agreement which are no longer needed by CFS in the performance of Services or for its legal protection. If not so turned over to the Trust, such documents and records shall be retained by CFS until at least the earlier of six 14 years from the year of creation or the termination of this Agreement, unless the Trust authorizes in writing the destruction of such records and documents. ARTICLE 15. BANK ACCOUNTS. ------------- CFS is hereby granted such power and authority as may be necessary to establish one or more bank accounts for the Trust with such bank or banks as are selected or approved by the Trust, as may be necessary or appropriate from time to time in connection with the services required to be performed hereunder. The Trust shall be deemed to be the customer of such Bank or Banks for all purposes in connection with such accounts. To the extent that the performance of such services hereunder shall require CFS to disburse amounts from such accounts in payment of dividends, redemption proceeds or for other purposes hereunder, the Trust shall provide such bank or banks with all instructions and authorizations necessary for CFS to effect such disbursements. ARTICLE 16. REPRESENTATIONS AND WARRANTIES OF THE TRUST. ------------------------------------------- The Trust represents and warrants to CFS that: (a) as of the close of business on the Effective Date, each Portfolio which is in existence as of the Effective Date has authorized unlimited shares of beneficial interest, (b) by virtue of its Declaration of Trust, shares of beneficial interest of each Portfolio which are redeemed by the Trust may be sold by the Trust from its treasury, (c) this Agreement has been duly authorized by the Trust and, when executed and delivered by the Trust, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties, and (d) the list of officers provided to CFS pursuant to Article 19 is accurate and complete as of the Effective Date, and the Trust will notify CFS promptly of any changes in the Trust's officers. The Trust also represents and warrants that (a) the Trust has adopted the written AML Program that has been submitted to CFS pursuant to Article 19, and has appointed an officer of the Trust as the Trust's anti-money laundering compliance officer ("AML Compliance Officer"), (b) the AML Program and the designation of the AML Compliance Officer have been approved by the Board, and (c) the delegation of certain services thereunder to CFS, as provided in Article 8, has been approved by the Board, and (d) the Trust will submit any amendments to the AML Program that might have a material impact upon CFS's services to CFS for CFS's review, and consent prior to adoption in accordance with Article 21. The Trust also represents and warrants that is has approved each independent pricing vendor and Fair Valuation Vendor to be used by CFS in rendering fund accounting services, including Fair Value Support Services hereunder and will notify CFS promptly of any changes in such vendors. ARTICLE 17. REPRESENTATIONS AND WARRANTIES OF CFS. ------------------------------------- CFS represents and warrants that: (a) CFS is and shall continue to be in compliance in all material respects with all provisions of law, including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), applicable to CFS in connection 15 with the performance of Services under this Agreement; (b) the various procedures and systems which CFS has implemented with regard to safekeeping from loss or damage attributable to fire, theft or any other cause of the blank checks, records, and other data of the Trust and CFS's records, data, equipment, facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as are reasonably required for the secure performance of its obligations hereunder; and (c) this Agreement has been duly authorized by CFS and, when executed and delivered by CFS, will constitute a legal, valid and binding obligation of CFS, enforceable against CFS in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the right and remedies of creditors and secured parties. ARTICLE 18. INSURANCE. --------- CFS shall maintain a fidelity bond covering larceny and embezzlement and an insurance policy with respect to directors and officers errors and omissions coverage in amounts that are appropriate in light of its duties and responsibilities hereunder. Upon the request of the Trust, CFS shall provide evidence that coverage is in place. CFS shall notify the Trust should its insurance coverage with respect to professional liability or errors and omissions coverage be canceled, or upon CFS's receipt of notice of cancellation from its insurance carrier. Such notification shall include the date of cancellation and the reasons therefor. CFS shall notify the Trust of any material claims against it with respect to services performed under this Agreement, whether or not they may be covered by insurance, and shall notify the Trust should the total outstanding claims made by CFS under its insurance coverage materially impair, or threaten to materially impair, the adequacy of its coverage. ARTICLE 19. INFORMATION TO BE FURNISHED BY THE TRUST. ---------------------------------------- The Trust has furnished to CFS the following, as amended and current as of the Effective Date: (a) Copies of the Declaration of Trust of the Trust and of any amendments thereto. (b) Copies of the following documents: 1. The Trust's By-Laws and any amendments thereto; 2. Certified copies of resolutions of the Board covering the approval of this Agreement and authorization the officers of the Trust to execute and deliver this Agreement, and authorization for the officers of the Trust to instruct CFS hereunder; and (c) A list of all officers of the Trust, with the Trust's AML Compliance Officer included among the officers therein, and any other persons (who may be associated with the Trust or its investment advisor), together with specimen signatures of those officers and other persons 16 who (except as otherwise provided herein to the contrary) shall be authorized to instruct CFS in all matters. (d) Prospectus and Statement of Additional Information; (e) A certificate as to shares of beneficial interest of the Trust authorized, issued, and outstanding as of the Effective Date and as to receipt of full consideration by the Trust for all shares outstanding, such statement to be certified by the Treasurer of the Trust. (f) A copy of the Trust's written AML Program, including any related written Policies and Procedures. (g) A copy of the Fund Compliance Program or the various policies and procedures of the Trust that have been adopted through the date hereof which pertain to compliance matters that are required to be covered by the Fund Compliance Program, including the compliance programs of Service Providers other than CFS, as necessary under Rule 38a-1 for inclusion in the Fund Compliance Program in accordance with Schedule E of this Agreement. (h) The Trust's disclosure and control procedures (the "DCPs"). (i) The Trust's Valuation Procedures as defined in Schedule C. ARTICLE 20. INFORMATION FURNISHED BY CFS. ---------------------------- CFS has furnished to the Trust copies of, or evidence of, the following: (a) Approval of this Agreement by CFS, and authorization of a specified officer of CFS to execute and deliver this Agreement; (b) CFS's Articles of Incorporation and any amendments thereto; (c) CFS's Bylaws and any amendments thereto; (d) Executive Summary of CFS's Disaster Recovery and Business Continuity Plan; (e) SEC Transfer Agent filings (Forms TA-1 and TA-2); (f) The most recent annual report of Citigroup Inc.; (g) The current CFS "As-of" Trading policy; and (h) The most recent independent accountant's report covering internal controls related to CFS's fund accounting responsibilities and transfer agency operations, as filed with the SEC pursuant to Rule 17Ad-13 under the Exchange Act. 17 ARTICLE 21. AMENDMENTS TO DOCUMENTS. The Trust shall furnish CFS written copies of any amendments to, or changes in, any of the items referred to in Article 19 hereof forthwith upon such amendments or changes becoming effective. In addition, the Trust will provide CFS with advance notice of any material amendments to the items set forth in Article 19 which might have the effect of changing the procedures employed by CFS in providing. the services hereunder or affecting the duties of CFS hereunder (including, without limitation, the designation of any additional Fair Value Information Vendors). CFS will not be responsible for changing or conforming its services to any such amendments until CFS has reviewed and accepted responsibility for the relevant changes in services. CFS will consider such changes in good faith. In the event that any such amendment, or change in laws applicable to the Trust would require CFS to make specific changes to its service model, CFS will use reasonable good faith efforts to inform the Trust of the changes that would be necessary, and set out the estimated costs and estimated implementation timetable for any additional services. The parties shall then in good faith agree to mutually agreeable terms applicable to such additional service. CFS may reasonably rely on any documents provided pursuant to Articles 19 and 21 and any amendments to or changes in any of the documents and other items to be provided by the Trust pursuant to Articles 19 and 21 of this Agreement and, subject to the provisions of Article 7 hereof, the Trust agrees to indemnify and hold harmless CFS. Although CFS is authorized to rely on the above-mentioned amendments to and changes in the documents and other items to be provided pursuant to Articles 19 and 21 hereof, in the event the same relate to services provided by CFS hereunder, CFS shall have no liability for failure to comply with or take any action in conformity with such amendments or changes unless the Trust first obtains CFS's written consent to and approval of such amendments or changes. ARTICLE 22. NOTICES. ------- Any notice provided hereunder shall be sufficiently given when sent by registered mail, overnight courier service or certified mail to the party required to be served with such notice at the following address: or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section. If to the Trust: Allianz Variable Insurance Products Trust 5701 Golden Hills Drive Minneapolis, Minnesota 55416 Attention: Jeffrey Kletti Copy to: H. Bernt von Ohlen, Chief Legal Officer Allianz Life Advisers, LLC 5701 Golden Hills Drive Minneapolis, Minnesota 55416 18 If to CFS: Citi Fund Services Ohio, Inc. 3435 Stelzer Road Columbus, Ohio 43119 Attention: Fred Naddaff Copy to: Citi Investor Services, Inc. Two Portland Square Portland, Maine 04101 Attention: Legal Department ARTICLE 23. ASSIGNMENT. ---------- This Agreement and the rights and duties hereunder shall not be assignable by either of the parties hereto except by the specific written consent of the other party. In the case of CFS, an "assignment" shall be deemed to include any of the following: (a) any direct or indirect transfer or hypothecation of this Agreement to any entity other than (i) Citigroup Inc. ("Citigroup") or (ii) an entity directly or indirectly controlled by Citigroup (an "Affiliated Entity"); (b) any direct or indirect transfer or hypothecation of 25% or more of the outstanding voting securities by security holders of CFS (whether or not such security holders act collectively) to any entity other than (i) Citigroup or (ii) an Affiliated Entity; (c) any direct or indirect transfer or hypothecation of 50% or more of the outstanding voting securities by security holders of Citigroup (whether or not such security holders act collectively) to any one entity other than an Affiliated Entity; (d) the issuance by CFS of 25% or more of its voting securities to any entity other than (i) Citigroup or (ii) an Affiliated Entity; (e) the issuance by Citigroup of 50% or more of its voting securities to any entity or group of entities acting in concert or which are under common control; (f) a sale, lease, assignment, transfer or other disposition of all or a substantial part of the assets of CFS to any entity other than (i) Citigroup or (ii) an Affiliated Entity; (g) a merger, consolidation, share exchange, or other similar corporate transaction between CFS and another entity (or entities) other than (i) Citigroup or (ii) an Affiliated Entity; (h) a merger, consolidation, share exchange, or other similar corporate transaction between Citigroup and another entity (or entities) following which Citigroup shareholders (prior to the transaction) end up with less than a majority of the outstanding equity securities of the combined entity or entities (following the transaction). For purposes of this Article 23, "control" shall mean the right to vote the majority of the outstanding shares of voting stock of the entity. This Article 23 shall not limit or in any way 19 affect CFS's right to appoint a subcontractor pursuant to Article 2 hereof. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns. ARTICLE 24. ACTIVITIES OF CFS. ----------------- The services of CFS rendered to the Trust hereunder are not to be deemed to be exclusive. CFS is free to render such services to others and to have other businesses and interests. It is understood that Trustees, officers, employees and Shareholders of the Trust are or may be or become interested in CFS, as officers, employees or otherwise and that partners, officers and employees of CFS and its counsel are or may be or become similarly interested in the Trust, and that CFS may be or become interested in the Trust as a Shareholder or otherwise. ARTICLE 25. AUDIT RIGHTS. ------------ The Trust may, at its own expense, perform an audit of CFS's operations and procedures in order to evaluate and to assess whether the performance of Services is consistent with the terms of this Agreement. Such audit may be performed on-site including review of relevant documents and interviews of appropriate personnel. The audit may be conducted by personnel of or auditors hired by the Trust. Such audits may be performed once per year during the term of this Agreement, upon reasonable notice to CFS, during normal business hours at a mutually convenient time and in a manner that is not disruptive of CFS's operations. The right to conduct any such audit on-site shall be subject to the obligation to maintain the confidentiality of all proprietary or confidential information of CFS and its clients, including all non-public information concerning CFS's operations. CFS may require that any representatives or agents of the Trust that would be involved in on-site audit activities enter into a separate confidentiality agreement reflecting the foregoing requirements. ARTICLE 26. PRIVACY. ------- Nonpublic personal financial information relating to consumers or customers of the Trust provided by, or at the direction of the Trust to CFS, or collected or retained by CFS in the course of performing its duties as transfer agent, shall be considered confidential information. CFS shall not give, sell or in any way transfer such confidential information to any person or entity, other than affiliates of CFS except at the direction of the Trust or as required or permitted by law (including Applicable AML Laws). CFS represents, warrants and agrees that it has in place and will maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of records and information relating to consumers or customers of the Trust. The Trust represents to CFS that it has adopted a Statement of its privacy policies and practices as required by the Commission's Regulation S-P and agrees to provide CFS with a copy of that statement annually. 20 ARTICLE 27. GOVERNING LAW. ------------- This Agreement shall be construed in accordance with the laws of the state of Ohio and the applicable provisions of the 1940 Act. To the extent that the applicable laws of the State of Ohio, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. ARTICLE 28. SEVERABILITY. ------------ If any provision of this Agreement is construed to be invalid, illegal or unenforceable, such invalidity or unenforceability shall not invalidate or render unenforceable the remaining provisions of this Agreement. ARTICLE 29. MISCELLANEOUS. ------------- (a) Paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (b) This Agreement constitutes the complete agreement of the parties hereto as to the subject matter covered by this Agreement, and supersedes all prior negotiations, understandings and agreements bearing upon the subject matter covered herein, including, without limitation, the 2006 Agreement. (c) This Agreement may be executed in counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same agreement. (d) No amendment to this Agreement shall be valid unless made in writing and executed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST By: /s/ Brian Muench Title: Vice President CITI FUND SERVICES OHIO, INC. By: /s/ Fred Nadaff Title: Director and President 21 SCHEDULE A TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. PORTFOLIOS AZL AIM International Equity Fund AZL Columbia Technology Fund AZL Davis NY Venture Fund AZL Dreyfus Founders Equity Growth Fund AZL Dreyfus Premier Small Cap Value Fund AZL First Trust Target Double Play Fund AZL Franklin Small Cap Value Fund AZL Jennison 20/20 Focus Fund AZL Jennison Growth Fund AZL LMP Large Cap Growth Fund AZL Legg Mason Growth Fund AZL Legg Mason Value Fund AZL Money Market Fund AZL NACM International Fund AZL Neuberger Berman Regency Fund AZL OCC Opportunity Fund AZL OCC Value Fund AZL Oppenheimer Developing Markets Fund AZL Oppenheimer Global Fund AZL Oppenheimer International Growth Fund AZL Oppenheimer Main Street Fund AZL PIMCO Fundamental IndexPLUS Total Return Fund AZL S&P 500 Index Fund AZL Schroder International Small Cap Fund AZL Small Cap Stock Index Fund AZL TargetPLUS Balanced Fund AZL TargetPLUS Equity Fund AZL TargetPLUS Moderate Fund AZL TargetPLUS Growth Fund AZL Turner Quantitative Small Cap Growth Fund AZL Van Kampen Comstock Fund AZL Van Kampen Equity and Income Fund AZL Van Kampen Global Franchise Fund AZL Van Kampen Global Real Estate Fund AZL Van Kampen Growth and Income Fund AZL Van Kampen Mid Cap Growth Fund FEES FOR SERVICES In accordance with Article 4, paragraph A of the Agreement, the Trust shall pay the following fees to CFS as compensation for the Services rendered hereunder. All fees shall be aggregated and paid monthly. A. ASSET-BASED FEES The following asset-based fees ("Asset-Based Fees") shall be payable by the Trust: AGGREGATE NET ASSET LEVELS FEES* -------------------------- ------ Less than $4 billion 5 bps $4 billion to $6 billion 4 bps $6 billion to $8 billion 2 bps Greater than $8 billion 1 bp * Fees are stated in basis points as an annual rate based on average daily net assets of all Portfolios in the aggregate. Such fees shall be determined monthly, with breakpoints applicable incrementally to the Trust's aggregate net assets for the relevant month. On a monthly basis, the Asset-Based Fee payable for the month shall be totaled, and such total shall be subject to an aggregate minimum in an amount determined by multiplying $60,000 times the total number of Portfolios of the Trust, and dividing by twelve. B. ACCOUNT-BASED FEES In addition to the fees payable under paragraph a above, for each open or closed account reflected on CFS's transfer agency system at any time during each annual period there shall be an account-based fee of $20 per annum. C. ADDITIONAL CLASS FEE In addition to the fees payable under paragraphs a and b above, in the event there are additional classes of shares of any Portfolio, there shall be a fee of $10,000 annually for each such additional class of shares of any Portfolio. D. COMPLIANCE SERVICES FEE In addition to the fees payable under paragraphs a, b, and c above, the Trust shall pay an annual fee of $85,000 for the Compliance Services set forth in Schedule E of this agreement. E. FAIR VALUE SUPPORT SERVICES As compensation for Fair Value Support Services (the services set forth in Items 3 and 4 (as they relate to fair value determinations) of Schedule C to this Agreement), CFS shall receive 23 the following annual servicing fee for each Portfolio that the Trust designates as being subject to fair value determinations and for which Fair Value Support Services are to be provided by CFS hereunder, as follows: Annual Fee for Fair Value Support Services to be provided by CFS: For each Portfolio with less than 200 securities: $5,000 For each Portfolio with at least 200 securities: $7,500 (The Annual Fee is to be billed in equal monthly installments with respect to each Portfolio of the Trust that the Trust designates as being subject to fair value determinations and for which services are to be provided by CFS hereunder.) The foregoing CFS fee(s) does not include out of pocket costs. CFS will also be reimbursed by the Trust for the actual costs charged by Fair Value Information Vendors with respect to the provision of fair value pricing information to CFS for use in valuing the portfolio holdings of a specific Portfolio or Portfolios. F. PERFORMANCE REPORTING FEE As compensation for the Performance Reporting Services provided from time to time, the Trust shall pay the fees and rates agreed upon at the time a request is made for such Performance Reporting Services based upon the schedule of fees attached hereto as Schedule A-1. A quote shall be provided upon request. CFS shall provide the Trust with a proposal approximately six (6) weeks prior to the end of the Trust's fiscal year, and the Trust shall advise CFS of the Trust's acceptance of such proposal within two (2) weeks of submission thereof. OUT-OF-POCKET EXPENSES AND MISCELLANEOUS CHARGES In addition to the above fees, CFS shall be entitled to receive payment for certain out-of-pocket expenses and miscellaneous charges, as provided in paragraphs (B) and (C) of Article 4 of the Agreement. 24 SCHEDULE A-1 TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC.
CREATIVE DIRECTION AND DESIGN Creation/Design of Cover Artwork $ 500.00 Flat fee Creation/Design of Book Style $1,000.00 Flat fee EDITORIAL SERVICES Freelance writing services can be acquired to write the Chairman's Letter, Shareholder Letter and Management's Discussion of Fund Performance section, these services are supplied by freelance writers which are under contract with CFS. $300.00 to $500.00 per Fund COORDINATION CHARGES Chairman's/Shareholder Letter and 1 Fund $3,000 Flat fee Each additional Fund $ 500 Per Fund The Coordination charges include the following services: Coordination with all CFS internal and external contacts which includes: Citi Research, the Manager, and/or portfolio managers and Bank Managers to provide all required research data, Distributor Compliance to ensure FINRA-related review, approval and filing (if necessary), Fund Counsel, Financial Services, external auditing firms and all editorial services. Also includes coordination with the print vendor to verify that the client-requested stylistic criteria has been met. - -------------------------------------------------------------------------------------------------------------------- TYPESETTING - INITIAL COMPOSITION New set page (from disk) $45.00 per page New set page (from hardcopy) $45.00 per page Quick Turnaround (QTA)/Rush Charges $15.00 per page in addition to new set charge Quick Turnaround (QTA)/Rush Charges Graphs $20.00 per page in addition to new set charge TYPESETTING - CHANGES TO EXISTING COMPOSITION Author alterations - includes 5 alteration cycles - additional cycles will be charged at an additional $15.00 $90.00 per page times 5 alteration cycles Additional Alteration cycles billed outside the allotted 5 cycles $15.00 per page per page in addition to Author Quick Turnaround (QTA)/Rush Charges $30.00 alteration charge 25 CHARTING New Chart $65.00 per chart Author alterations to charts - includes 2 alteration cycles - additional cycles will be charged at an additional $15.00 $25.00 per page times 2 alteration cycles Additional Alteration cycles billed outside the allotted 2 cycles $15.00 per page in addition to Author Quick Turnaround (QTA)/Rush Charges $20.00 alteration ANCILLARY ITEMS Color Laser Proof $0.20 per page
26 SCHEDULE B TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. ADMINISTRATION SERVICES 1) Investigate and assist in the selection of and conduct relations with custodians, depositories, accountants, legal counsel, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and persons in any other capacity deemed to be necessary or desirable for the Portfolios' operations. However, CFS shall have no responsibility for supervising the performance(,) of any investment adviser or sub-adviser. 2) Provide the Trustees of the Trust or Allianz Life Advisers, LLC (the "Manager") with reports regarding the Portfolios' investment performance as they may reasonably request. 3) Provide the Trust and the Manager with regulatory reporting. 4) Provide the Trust with all necessary office space, equipment, personnel, and facilities (including facilities for Shareholders' and Trustees' meetings) for handling the affairs of the Portfolios and such other services as CFS shall, from time to time, determine to be necessary to perform its obligations under this Agreement. 5) At the request of the Board of Trustees, CFS shall make reports to the Trustees concerning the performance of its obligations under this Agreement. 6) Calculate contractual Trust expenses and control all disbursements for the Trust. 7) Compute the Trust's yields, total return, expense ratios, portfolio turnover rate and if required, portfolio average dollar-weighted maturity. 8) Provide Trust counsel with information required in the preparation of prospectuses, statements of additional information, registration statements and proxy materials, and any supplements to these materials, if applicable. 9) Coordinate and prepare, with the assistance of the Manager and sub-advisers, communications to Shareholders, as applicable, including the annual and semi-annual report to Shareholders. 10) Administer contracts on behalf of the Trust with, among others, the Trust's sub-advisers, distributor, custodian, transfer agent and fund accountant. 27 11) Supervise the Trust's transfer agent with respect to the payment of dividends and other distributions to Shareholders. 12) Calculate performance data of the Portfolios. 13) Disseminate Portfolio performance data to information services covering the investment company industry. 14) Coordinate and supervise the preparation of the Trust's tax returns. 15) Upon request, examine and review the operations and performance of the various organizations providing services to the Trust or any Portfolio of the Trust, including, without limitation, the Trust's sub-advisers, distributor, custodian, fund accountant, transfer agent, outside legal counsel and independent public accountants. 16) At the request of the Trustees or the Manager, report to the Board on the performance of the organizations providing services to the Trust or to any Portfolio of the Trust. 17) Assist with the layout and printing of Prospectuses and assist with and coordinate layout and printing of the Trust's semi-annual and annual reports to Shareholders. 18) Assist with the design and development of the Portfolios, including new classes, investment objectives, policies, structure, and fund combinations, reorganizations, or liquidations. 19) Provide individuals reasonably acceptable to the Trust's Trustees to serve as officers of the Trust (to serve only in ministerial or administrative capacities relevant to CFS's services hereunder, except as otherwise provided in Schedule E hereto or in a written agreement between the parties), upon designation as such by the Board. 20) Advise the Trust and its Trustees on matters concerning the Trust and its affairs. 21) Obtain and keep in effect at the expense of the Trust a fidelity bond and trustees and officers errors and omissions insurance policy for the Trust in accordance with the requirements of Rules 17g-1 and 17d-1(7) under the 1940 Act, and effect any required SEC filings of the bond and policy. 22) Monitor and advise the Trust and its Portfolios on their regulated investment company status under the Internal Revenue Code of 1986, as amended. 23) Furnish advice and recommendations with respect to other aspects of the business and affairs of the Portfolios as the Trust and CFS shall determine desirable. 24) Prepare and file with the SEC the semi-annual report for the Trusts on Form NSAR and all required notices pursuant on Form 24-2. 26) From time to time, upon request of the Trust, provide performance reporting services ("Performance Reporting Services") consisting of one or more of the following: 28 (a) Creation of templates for the Management's Discussion of Fund Performance ("MDFP") section of the annual or semi-annual report; (b) Creation of templates for, and typesetting of, the annual and semi-annual reports, including the financial statements; (c) Population of the templates with data obtained from third parties, and coordination with third parties responsible for the review of the MDFP; (d) Coordination with the print vendor for final printing and distribution; and (e) Creation of templates for, and preparation of, reports to the Trust's Board. LEGAL SERVICES 1) Prepare revised policies and procedures. 2) Prepare amendments to Declaration of Trust and file amendments with applicable states. 3) Prepare amendments to By-Laws. 4) Prepare the following Board meeting materials, and coordinate and handle dissemination of materials to all relevant parties. a) Agenda b) Resolutions c) Minutes d) Trustee memoranda e) Presentation materials 5) Attend Board meetings and record minutes 6) Oversee and coordinate proxy solicitations if requested. 7) Prepare Shareholder meeting materials if requested. 8) Attend Shareholder meetings and record minutes if requested. 29 COMPLIANCE MONITORING AND REPORTING SERVICES - REPORTS Assist in developing compliance procedures and provide compliance monitoring services incorporating those procedures for each Portfolio, including the items covered by the reports listed below as may be relevant to each Portfolio, as are determinable based upon the Portfolios' accounting records. All reports listed below are to be prepared on a daily basis unless otherwise specified: 1) Rule 2a-7 requirements, including: a) Tier 2 percentage b) Issuer concentration c) Weighted average portfolio maturity d) Maximum maturity e) Amount of deviation from amortized cost (weekly) f) Guarantors (monthly) 2) Single issuer percentage limitation (Sec. 5(b)-1) 3) Short sale compliance (limits on percentage of assets) 4) Fundamental policy and investment objective compliance 5) Foreign issuer test 6) Investment Grade Test 7) Borrowings Test 8) Repo test 9) Industry Concentration 10) Diversification Test 11) Securities related issuers 12) Percentage of when-issued securities In addition, CFS will also complete the following compliance tests on a quarterly basis, except as otherwise specified below: (a) SEC Primary Investment Policy Test (daily) 30 (b) IRS 50% Diversification Test (c) IRS 25% Single Issuer Test (d) IRS 90% Gross Income Test (e) 817(h) Diversification Test (f) SEC 25% Industry Test (daily) (g) Sub-adviser Portfolio Brokerage Practices CFS shall also prepare such other reports as reasonably may be requested by the Manager. 31 SCHEDULE C TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. FUND ACCOUNTING SERVICES 1) Keep and maintain all books and records of each Portfolio as required by Rules 31a-1 and 31 a-2 under the 1940 Act. 2) Calculate the net asset value per share ("NAV") of each class of shares offered by each Portfolio in accordance with the relevant provisions of the applicable Prospectus of each Portfolio and applicable regulations under the 1940 Act. 3) Apply securities pricing information as required or authorized under the terms of the valuation policies and procedures of the Trust ("Valuation Procedures"), including (A) pricing information from independent pricing services with respect to securities for which market quotations are readily available; (B) if applicable to a particular Portfolio or Portfolios, fair value pricing information or adjustment factors from independent fair value pricing services or other vendors approved by the Trust (collectively, "Fair Value Information Vendors") with respect to securities for which market quotations are not readily available, for which a significant event has occurred following the close of the relevant market but prior to the Portfolio's pricing time, or which are otherwise required to be made subject to a fair value determination under the Valuation Procedures; and (C) prices obtained from each Portfolio's sub-investment adviser or other designee, as approved by the Board. 4) Coordinate the preparation of reports that are prepared or provided by Fair Value Information Vendors which help the Trust to monitor and evaluate its use of fair pricing information under its Valuation Procedures. 5) Verify and reconcile with the Trust's custodian all daily trade activity. 6) Compute, as appropriate, each Portfolio's net income and capital gains, dividend payables, dividend factors, 7-day yields, 7-day effective yields, 30-day yields, and weighted average Portfolio maturity. 7) Review daily the net asset value calculation and dividend factor (if any) for each Portfolio prior to release to Shareholders. 8) Check and confirm the net asset values and dividend factors for reasonableness and deviations. 32 9) Distribute net asset values and yields to NASDAQ. 10) Report to the Trust the daily market pricing of securities in any money market Portfolios, with the comparison to the amortized basis. 11) Determine unrealized appreciation and depreciation on securities held in variable net asset value Portfolios. 12) Amortize premiums and accrete discounts on securities purchased at a price other than face value, in accordance with the pricing policies that are established for the Trust. 13) Update the fund accounting system to reflect rate changes, as received from a Portfolio's sub-adviser, on variable interest rate instruments. 14) Post Portfolio transactions to appropriate categories. 15) Accrue expenses of each Portfolio according to instructions received from the Portfolio's Administrator. 16) Determine the outstanding receivables and payables for all (1) security trades, (2) Portfolio share transactions and (3) income and expense accounts. 17) Provide accounting reports in connection with the Trust's regular annual audit and other audits and examinations by regulatory agencies. 18) Provide such periodic reports as the parties shall agree upon. 19) Provide a monthly download (and hard copy thereof) of the financial statements described below, upon request of the Trust or the Manager. The download will consist of: a) Unaudited Statement of Assets and Liabilities b) Unaudited Statement of Operations c) Unaudited Statement of Changes in Net Assets d) Unaudited Condensed Financial Information 20) Provide accounting information for the following: a) the Trust's reports with the SEC on Form N-SAR and N-CSR b) the Trust's annual, and semi-annual Shareholder reports c) registration statements on Form N-1A and other filings relating to the registration of shares d) CFS's monitoring of each Portfolio's status as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended e) Annual audit by the Trust's auditors 33 f) Examinations performed by the SEC SCHEDULE D TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. TRANSFER AGENCY SERVICES 1) SHAREHOLDER TRANSACTIONS a. Process shareholder purchase and redemption orders. b. Set up shareholder account information, including address, dividend option, taxpayer identification numbers and wire instructions. c. Issue shareholder confirmations in compliance with Rule l0b-10 under the Securities Exchange Act of 1934, as amended. d. Issue periodic statements for shareholders. e. Process transfers and exchanges for shareholders. f. Process dividend payments, including the purchase of new shares, through dividend reimbursement for shareholders. 2) SHAREHOLDER INFORMATION SERVICES a. Make information available to shareholder servicing unit and other remote access units regarding trade date, share price, current holdings, yields, and dividend information. b. Produce detailed history of transactions through duplicate or special order statements upon request. 3) DEALER/LOAD PROCESSING (IF APPLICABLE) a. Calculate fees due under 12b-1 plans for distribution and marketing expenses. 4) SHAREHOLDER ACCOUNT MAINTENANCE a. Maintain all shareholder records for each account in the Trust. b. Issue shareholder statements on scheduled cycle, providing duplicate second and third party copies if required. c. Maintain account documentation files for each shareholder. 35 5) ANTI-MONEY LAUNDERING SERVICES a. Verify shareholder identity upon opening new accounts. b. Maintain all records or other documentation related to shareholder accounts and transactions therein that are required to be prepared and maintained pursuant to the Trust's AML Program, and make the same available for inspection by (i) the Trust's AML Compliance Officer, (ii) any auditor of the Trust's AML Program or related procedures, policies or controls that has been designated by the Trust in writing, or (iii) regulatory or law enforcement authorities, and otherwise make said records or other documents available at the direction of the Trust's AML Compliance Officer. REPORTS 1) Daily Shareholder Activity Journal 2) Daily Fund Activity Summary Report a. Beginning Balance b. Dealer Transactions c. Shareholder Transactions d. Reinvested Dividends e. Exchanges f. Adjustments g. Ending Balance 3) Monthly Dealer Processing Reports 4) Monthly Dividend Reports 5) A copy of the most recent report by independent public accountants describing control structure policies and procedures relating to transfer agency operations pursuant to AICPA Statement on Auditing Standards Number 70. 6) Such special reports and additional information that the parties may agree upon, from time to time. 36 SCHEDULE E TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. 1. GENERAL FUND COMPLIANCE SERVICES. (1) Assist the Trust in maintaining the Fund Compliance Program; (2) Assist the Trust's Chief Compliance Officer (the "Chief Compliance Officer") in the preparation and evaluation of the results of annual reviews of the compliance policies and procedures of the service providers to the Trust as provided in Rule 38a-1 ("Service Providers"); (3) Provide support services to the Chief Compliance Officer, including support for conducting an annual review of the Fund Compliance Program; (4) Assist the Chief Compliance Officer in developing standards for reports to the Board by CFS and other Service Providers; (5) Assist the Chief Compliance Officer in developing standards for reports to the Board by the Chief Compliance Officer; (6) Assist the Chief Compliance Officer in preparing or providing documentation for the Board to make findings and conduct reviews pertaining to the Fund Compliance Program and compliance programs and related policies and procedures of Service Providers; (7) Perform risk-based testing and reporting of the compliance policies and procedures of each service (other than the services set forth in this Schedule E) provided to the Trust by CFS and/or provided by any CFS affiliate acting as the Trust's distributor, taking into account reasonable requests from the Chief Compliance Officer to the extent practicable; (8) Provide copies of any compliance policies and procedures and any amendments thereto relating to CFS and any CFS affiliate acting as the Trust's distributor as the Trust or the Chief Compliance Officer may reasonably request in connection with the Fund Compliance Program; and (9) Provide information reasonably requested by the Chief Compliance Officer, or the Board in connection with the Board's determination regarding the adequacy and effectiveness of the compliance policies and procedures of CFS and any CFS affiliate acting as the Trust's distributor. 37 The Trust will provide or arrange for the provision of the Chief Compliance Officer. The Trust acknowledges that CFS will not be responsible for providing the Chief Compliance Officer, and that if the Trust elects to have CFS provide the Chief Compliance Officer in the future, additional terms and conditions and additional fees will apply. The Trust will provide to CFS copies of the Fund Compliance Program, related policies and procedures, and all other books and records of the Trust as CFS deems necessary or desirable in order to perform its obligations under this Agreement. 2. SUB-CERTIFICATIONS. To assist the Trust in connection with its obligations under the Sarbanes-Oxley Act of 2002, Rule 30a-2 under the 1940 Act, and related laws (collectively, "Sarbanes-Oxley"), CFS will internally establish and maintain its own controls and procedures designed to ensure that information recorded, processed, summarized, or reported by CFS on behalf of the Trust and included in the Trust's reports on Form N-CSR and any other reports required to be certified pursuant to Sarbanes-Oxley (collectively, "Reports") is (i) recorded, processed, summarized, and reported by CFS within the time periods specified in the Commission's rules and forms and the Trust's disclosure and control procedures (the "Trust DCPs"), and (ii) communicated to the relevant officers of the Trust who are required to certify Reports under Sarbanes-Oxley ("Certifying Officers"), in a manner consistent with the Trust DCPs. Solely for the purpose of providing a Certifying Officer with a basis for his or her certification of any Report, CFS will (i) provide a sub-certification with respect to CFS's services during any fiscal period in which CFS served as a financial administrator to the Trust consistent with the requirements of the certification required under Sarbanes-Oxley and/or (ii) inform the Certifying Officers of any reason why all or part of such required certification would be inaccurate. In rendering any such subcertification, CFS may (i) limit its representations to information prepared, processed and reported by CFS; (ii) rely upon and assume the accuracy of the information provided by officers (other than employees or officers of CFS) and other authorized agents of the Trust, including all other Service Providers, and compliance by such officers and agents with the Trust DCPs; and (iii) assume that the Trust has selected appropriate accounting policies for the Fund(s). The Trust shall assist and cooperate with CFS (and shall cause its officers and other Service Providers to assist and cooperate with CFS) to facilitate the delivery of information requested by CFS in connection with the preparation of any Report, so that CFS may submit a draft of such Report to the Trust's DCP Committee prior to the date it is to be filed. 3. PROVISION OF EXECUTIVE OFFICERS. (a) PROVISION OF EXECUTIVE OFFICERS. Subject to the provisions of this Section 3(a) and Section 3(b) below, CFS shall make an employee available to the Trust to serve, upon designation as such by the Board, for purposes of executing registration statements and amendments thereto, on behalf of the Trust, as the Principal Financial Officer and the Principal Accounting Officer of the Trust or under such other title to perform similar functions, and to serve as a Certifying Officer under Sarbanes-Oxley. CFS's obligation in this regard shall be met by providing an appropriately qualified employee of CFS (or its 38 affiliates) who, in the exercise of his or her duties to the Trust, shall act in good faith and in a manner reasonably believed by him or her to be in the best interests of the Trust. CFS shall select, and may replace, the specific employee whom it makes available to serve in the designated capacity as Principal Financial Officer and Principal Accounting Officer and as a Certifying Officer, in CFS's reasonable discretion, taking into account such person's responsibilities concerning, and familiarity with, the Trust's operations. For so long as CFS provides a Certifying Officer, the Trust DCPs shall contain (or the Trust and CFS shall otherwise establish) mutually agreeable procedures governing the certification of Reports by Certifying Officers, and the parties shall comply with such procedures in all material respects. Among other things, the procedures shall provide as follows: (i) The Trust shall establish and maintain a Disclosure Controls and Procedures Committee (the "DCP Committee") to evaluate the Trust DCPs in accordance with Rule 30a-3 under the 1940 Act. The DCP Committee shall include (at a minimum) the Trust's Principal Executive Officer, Chief Financial Officer, and Chief Legal Officer (if any) and such other individuals as may be necessary or appropriate to enable the DCP Committee to ensure the cooperation of, and to oversee, each of the Trust's agents that records, processes, summarizes, or reports information contained in Reports (or any information from which such information is derived), including the Trust's other service providers (the "Other Providers"). (ii) The Trust shall require (a) Service Providers to provide sub-certifications on internal controls, upon which the Certifying Officers may rely in certifying Reports, in form and content reasonably acceptable to the Certifying Officers and consistent with Sarbanes-Oxley, and (b) that such sub-certifications are delivered to the DCP Committee and the Certifying Officers sufficiently in advance of the DCP Committee meeting described in (iii) below. (iii) The DCP Committee shall (a) establish a schedule to ensure that all required disclosures in any Report, including the financial statements, are identified and prepared in a timeframe sufficient for it to review such disclosures, (b) meet prior to the filing date of each Report to review the accuracy and completeness of the relevant Report, and (c) record its considerations and conclusions in a written memorandum sufficient for it to adequately to support conclusions pertaining to Trust DCPs as required by Item 9 of Form N-CSR or other Report. In conducting its review and evaluations, the DCP Committee shall: (A) review SAS 70 reports pertaining to CFS and other Service Providers, if applicable, or in the absence of any such reports, consider the adequacy of the sub-certifications supplied by the Service Providers; (B) consider whether there are any significant deficiencies or material weaknesses in the design or operation of the Trust DCPs or internal controls over financial reporting that could adversely affect the Trust's ability to record, process, summarize, and report financial information, and in the event that any such weaknesses or deficiencies are identified, disclose them to the Trust's Certifying Officers, audit committee, and auditors; 39 (C) consider whether, to the knowledge of any member of the DCP Committee, there has been or may have been any fraud, whether or not material, and, if so, disclose the facts and circumstances thereof to the Certifying Officers, and the Trust's audit committee and auditors; and (D) determine whether there was any change in internal controls over financial reporting that occurred during the Trust's most recent fiscal half-year that has materially affected or is reasonably likely to materially affect, the Trust's internal control over financial reporting. A Certifying Officer shall have the full discretion to decline to certify a particular Report that fails to meet the standards set forth in the certification, and to report matters involving fraud or other failures to meet the standards of applicable law to the audit committee of the Board. The Trust shall, in its own capacity, take all reasonably necessary and appropriate measures to comply with its obligations under Sarbanes-Oxley. Without limitation of the foregoing, except for those obligations which are expressly delegated to or assumed by CFS in this Agreement, the Trust shall maintain responsibility for, and shall support and facilitate the role of each Certifying Officer and the DCP Committee in, designing and maintaining the Trust's DCPs in accordance with applicable laws. (b) ADDITIONAL PROVISIONS CONCERNING EXECUTIVE OFFICERS. It is mutually agreed and acknowledged by the parties that the Principal Financial Officer and the Principal Accounting Officer contemplated under the provisions of this Section 3 of this Schedule E will be an executive officer of the Trust, along with any other officers so designated after the date hereof pursuant to the terms of this Schedule E and the Agreement (each, an "Executive Officer"). The provisions of Section 3 are subject to the internal policies of CFS concerning the activities of its employees and their service as officers of funds (the "CFS Policies"), a copy of which shall be provided to the Trust upon request. The Trust shall provide coverage to each Executive Officer under its directors and officers liability policy that is appropriate to the Executive Officer's role and title, and consistent with coverage applicable to the other officers holding positions of executive management. In appropriate circumstances, each Executive Officer shall have the discretion to resign from his or her position, in the event that he or she reasonably determines that there has been or is likely to be (a) a material deviation from the CFS Policies, (b) an ongoing pattern of conduct involving the continuous or repeated violation of Applicable AML Laws or Applicable Securities Laws, or (c) a material deviation by the Trust from the terms of this Agreement governing the services of such Executive Officer that is not caused by such Executive Officer or CFS. In addition, each Executive Officer shall have reasonable discretion to resign from his or her position in the event that he or she determines that he or she has not received sufficient cooperation from the Trust or its Other Providers to make an informed determination regarding any of the matters listed above, and shall at all times have the right to resign his or her position for any or no reason, as permitted under applicable federal and/or state law. 40 Each Executive Officer may, and the Trust shall, promptly notify CFS of any issue, matter or event that would be reasonably likely to result in any claim by the Trust, one or more Trust shareholder(s) or any third party which involves an allegation that any Executive Officer failed to exercise his or her obligations to the Trust in a manner consistent with applicable laws (including but not limited to any claim that a Report failed to meet the standards of Sarbanes-Oxley and other applicable laws). Notwithstanding any provision of the Agreement that expressly or by implication provides to the contrary, (a) it is expressly agreed and acknowledged that CFS cannot ensure that the Trust complies with Applicable AML Laws or the Applicable Securities Laws, and (b) whenever an employee or agent of CFS serves as an Executive Officer of the Trust, the Trust shall indemnify the Executive Officer and CFS and hold the Executive Officer and CFS harmless from any loss, liability, expenses (including reasonable attorneys fees) and damages incurred by them arising out of or related to the service of such employee or agent of CFS as an Executive Officer of the Trust, provided that such Executive Officer has not acted with "Disabling Conduct" as defined in the Trust's Agreement and Declaration of Trust, dated July 13, 1999. 41 SCHEDULE F TO THE AMENDED AND RESTATED SERVICES AGREEMENT DATED OCTOBER 23, 2007, BETWEEN ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST AND CITI FUND SERVICES OHIO, INC. In the event that CFS fails to perform the same service standard listed below during any three (3) consecutive months, the Trust may provide a notice requiring CFS to cure said failure. In the event CFS fails to perform pursuant to the relevant standard in the month following receipt of such notice, the Trust shall have the right, exercisable within the next thirty (30) days only, to terminate this Agreement upon sixty (60) days' notice to CFS. For purposes of the foregoing, a "failure to perform" means a failure to meet the service standard under the terms of the Agreement governing the Services, for which CFS would not be excused and for which CFS would be responsible under the Agreement (including, without limitation, under Articles 5 and 9). The required Performance Level associated with a Function will be measured by dividing the total number of times that Function was correctly performed during the month by the total number of times that Function occurred during the month. EXAMPLE: With respect to, the calculation of NAVs, assuming 22 business days and 9 non-money market funds in existence in Month 1, there should be 198 NAV calculations in Month 1. If there are 2 NAV errors in Month 1, the Performance Level for the month is 98.9% (196/198). An inaccurate calculation of the NAV is defined as when the correct calculation is $.01 per share or more difference from the originally stated NAV. Such inaccuracy is considered one event and will only be counted on the day it first occurred, unless the source of the inaccuracy changes during the relevant period. An NAV error occurs at the Fund level and not the class level. It is anticipated that the Funds would not wish to deliver an NAV to NASDAQ if the accuracy of the NAV is in question at the time it is necessary to transmit the NAV to NASDAQ. If CFS has reason to believe that an NAV is or may be incorrect, it may either "withhold" the NAV from NASDAQ or "withdraw" an NAV previously submitted, in consultation with the Funds' pricing committee or the appropriate representative of the Funds. In such event, CFS shall not be deemed to have failed to report to NASDAQ by the applicable cut-off time. 42 PERFORMANCE STANDARDS
- ---------------------------------------------------------------- ------------------------------------------------------ FUNCTION/TASK STANDARD PERFORMANCE MEASURE - ---------------------------------------------------------------- ------------------------------------------------------ FUND ADMINISTRATION - - MONTHLY COMPLIANCE REPORTS Completed review and results sent no later than 10 + SEC COMPLIANCE CHECK business days after CFS's receipt of source reports + ADVISER COMPLIANCE REPORTS + IRS COMPLIANCE CHECK - ---------------------------------------------------------------- ------------------------------------------------------ - ---------------------------------------------------------------- ------------------------------------------------------ FUND ACCOUNTING 99% accurately completed and reviewed before publication - - NAVS ACCURATELY COMPLETED AND REVIEWED - - NAVS INTERFACED WITH T/A - ---------------------------------------------------------------- ------------------------------------------------------ - ---------------------------------------------------------------- ------------------------------------------------------ TRANSFER AGENT 98% entered on the transfer agency system accurately - - PERCENTAGE OF ACCURATELY PROCESSED MANUAL FINANCIAL before pending entries become final TRANSACTIONS - ---------------------------------------------------------------- ------------------------------------------------------
43 EX-99.H.5 7 file007.txt EXPENSE LIMITATION AGREEMENT EXHIBIT A To the Amended Expense Limitation Agreement Dated May 1, 2007, between Allianz Variable Insurance Products Trust and Allianz Life Advisers, LLC EFFECTIVE THROUGH APRIL 30, 2009 NAME OF FUND EXPENSE LIMITATION - ------------------------------------------------------- AZL AIM International Equity Fund.................1.45% AZL Columbia Technology Fund......................1.35% AZL Davis NY Venture Fund Class 1 shares...............................0.95% Class 2 shares...............................1.20% AZL Dreyfus Founders Equity Growth Fund...........1.20% AZL Dreyfus Premier Small Cap Value Fund Class 1 shares ..............................1.10% Class 2 shares...............................1.35% AZL First Trust Target Double Play Fund...........0.79% AZL Franklin Small Cap Value Fund.................1.35% AZL Jennison 20/20 Focus Fund.....................1.20% AZL Jennison Growth Fund..........................1.20% AZL LMP Large Cap Growth Fund.....................1.20% AZL Legg Mason Growth Fund........................1.30% AZL Legg Mason Value Fund.........................1.20% AZL Money Market Fund.............................0.87% AZL NACM International Fund.......................1.45% AZL Neuberger Berman Regency Fund.................1.30% AZL OCC Opportunity Fund..........................1.35% AZL OCC Value Fund................................1.20% AZL Oppenheimer Global Fund Class 1 shares...............................1.14% Class 2 shares...............................1.39% AZL Oppenheimer International Growth Fund.........1.45% NAME OF FUND EXPENSE LIMITATION - -------------------------------------------------------- AZL Oppenheimer Main Street Fund Class 1 shares...............................0.95% Class 2 shares...............................1.20% AZL PIMCO Fundamental IndexPLUS Total Return Fund............................1.20% AZL S&P 500 Index Fund Class 1 shares...............................0.24% Class 2 shares...............................0.49% AZL Schroder Emerging Markets Equity Fund Class 1 shares...............................1.40% Class 2 shares...............................1.65% AZL Schroder International Small Cap Fund.........1.65% AZL Small Cap Stock Index Fund....................0.58% AZL TargetPLUS Balanced Fund......................0.89% AZL TargetPLUS Equity Fund........................0.79% AZL TargetPLUS Growth Fund........................0.89% AZL TargetPLUS Moderate Fund......................0.89% AZL Turner Quantitative Cap Growth Fund...........1.35% AZL Van Kampen Comstock Fund......................1.20% AZL Van Kampen Equity and Income Fund.............1.20% AZL Van Kampen Global Franchise Fund..............1.39% AZL Van Kampen Global Real Estate Fund............1.35% AZL Van Kampen Growth and Income Fund.............1.20% AZL Van Kampen Mid Cap Growth Fund................1.30% ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST By: /s/ Jeffrey W. Kletti ----------------------------------------------- Name: Jeffrey W. Kletti Title: President ALLIANZ LIFE ADVISERS, LLC By: /s/ Brian Muench ------------------------------------------------ Name: Brian Muench Title: Vice President EX-99.I 8 file008.txt OPINION AND CONSENT OF COUNSEL Allianz Variable Insurance Products Trust 5701 Golden Hills Drive Minneapolis, MN 55416 Dear Sir/Madam: Reference is made to Post-Effective Amendment Number 24 to the Registration Statement on Form N-1A (file No. 333-83423) which you will file with the Securities and Exchange Commission pursuant to the Securities Act of 1933 for the purpose of the registration for sale by the Allianz Variable Insurance Products Trust (the "Trust") of an indefinite number of shares of beneficial interest of the thirty six (36) series thereof (collectively, the "Funds"). We are familiar with the proceedings to date with respect to the proposed sale by the Trust and the Funds, and have examined such records, documents and matters of law and have satisfied ourselves as to such matters of fact as we consider relevant for the purposes of this opinion. We are of the opinion that: (a) the Trust is a legally organized statutory trust under Delaware law; and (b) the shares of beneficial interest to be sold by the thirty six (36) Funds will be legally issued, fully paid and nonassessable when issued and sold upon the terms and in the manner set forth in said Registration Statement. We consent to the reference to this firm under the caption "Management of the Trust - Legal Counsel" in the Statement of Additional Information, and to the use of this opinion as an exhibit to the Registration Statement. Dated: April 11, 2008 Very truly yours, /s/ Dorsey & Whitney LLP Dorsey & Whitney LLP MJR EX-99.J 9 file009.txt CONSENT OF IND REG PUBLIC ACCT FIRM CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of the Allianz Variable Insurance Products Trust: We consent to the use of our report dated February 28, 2008 for the Allianz Variable Insurance Products Trust, incorporated by reference herein, and to the references to our firm under the headings "Financial Highlights" in the Prospectus and "Independent Registered Public Accounting Firm" in the Statement of Additional Information. /s/ KPMG LLP Columbus, Ohio April 23, 2008 EX-99.P.2 10 file010.txt ALFS COE ALLIANZ LIFE FINANCIAL SERVICES, LLC CODE OF ETHICS AND INSIDER TRADING POLICY EFFECTIVE AUGUST 21, 2007 TABLE OF CONTENTS SECTION 1. PERSONAL TRADING, CONDUCT, AND REPORTING..........................4 1.1 Statement of General Principles.................................4 1.2 Disclosure and Reporting Requirements...........................4 1.3 Substantive Restrictions on Personal Investing Activities.......6 1.4 Trading While In Possession of Material, Non-public Information.7 1.5 Sanctions.......................................................7 1.6 Confidential Information........................................7 1.7 Gifts...........................................................7 1.8 Services as Director............................................7 1.9 Responsibilities of the Chief Compliance Officer................8 1.10 Responsibilities of the Board of Trustees.......................9 1.11 Records.........................................................9 1.12 Regular Reporting to Fund Trustees.............................10 1.13 Amendments to the Code.........................................10 SECTION 2. INSIDER TRADING POLICY AND PROCEDURES............................10 2.1 Statement of General Principles................................10 2.2 Policy Statement on Insider Trading............................11 2.3 Procedures to Implement the Policy Against Insider Trading.....15 2.4 Chinese Wall Procedures........................................16 2.5 Resolving Issues Concerning Insider Trading....................16 APPENDIX I....................................................................16 APPENDIX II...................................................................21 APPENDIX III..................................................................22 APPENDIX IV...................................................................23 APPENDIX V....................................................................25 APPENDIX VI...................................................................26 APPENDIX VII..................................................................28 APPENDIX VIII.................................................................29 APPENDIX IX...................................................................30 ALLIANZ LIFE FINANCIAL SERVICES, LLC CODE OF ETHICS AND INSIDER TRADING POLICY EFFECTIVE AUGUST 21, 2007 Allianz Life Financial Services, LLC (the "DISTRIBUTOR") is confident of the integrity and good faith of its officers, directors, and employees. There are, however, certain instances where Distributor personnel may possess knowledge regarding present or future transactions by a series of the Allianz Life Variable Insurance Products Trust (the "VIP Trust") or the Allianz Life Variable Insurance Products Fund of Funds Trust (the "FOF Trust") (collectively referred to as the "Trusts") or may have the ability to influence portfolio transactions made by the Allianz Life Advisers, LLC (the "Adviser") or by a sub-adviser for the Trusts. In these situations personal interests may conflict with those of the Trusts. Capitalized terms contained in this Code of Ethics and Insider Trading Policy (the "CODE") are defined in Appendix I hereto. In view of the above, the Distributor has adopted this Code to establish reporting requirements and enforcement procedures(1) designed to prohibit potential conflicts of interest and regulate personal securities trading by placing persons associated with the Distributor into three categories of persons, each subject to increasing levels of scrutiny. The three categories of persons, from least regulated to most regulated, are (i) Associated Persons, (ii) Access Persons and (iii) Advisory Management Persons (collectively referred to herein as "SUPERVISED PERSONS"). In certain instances, this Code will also apply to trades by family members of Supervised Persons and other third parties. o The first level of scrutiny applies to Associated Persons, defined as each officer, director, and employee of the Distributor and any person designated by the Chief Compliance Officer who is an employee of an affiliate of the Distributor, and who regularly works in the Distributor's principal business. o The second level of scrutiny applies to Access Persons, defined as any director, officer(2), general partner or employee of the Distributor who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the purchase or sale of Securities by a series of the Trusts, or whose functions relate to the making of any recommendations with respect to such purchases or sales. ___________________________________ (1) Section 17(j) of the Investment Company Act, Rule 17j-1 thereunder, and Section 204A of the Investment Advisers Act of 1940 serve as a basis for much of what is contained in this Code. (2) For purposes of this definition, the term "officer" shall typically exclude non-employee ministerial officers not actively involved in the Distributor's business, including a Secretary, Assistant Secretary, Assistant Treasurer, or Compliance Officer who, with respect to any Client that is a mutual fund, does not make any recommendation regarding the purchase or sale of a portfolio security, or participate in the determination of which recommendation will be made, and whose principal function or duties do not relate to the determination of which recommendation will be made, and who does not, in connection with his or her duties, obtain any information concerning recommendations of portfolio securities by the Adviser or subadvisers. SEE Securities Exchange Act Rule 16a-1(f). o The third level of scrutiny applies to Advisory Management Persons, defined as a person who is actively involved in sub-adviser oversight and who has or may have access to near contemporaneous Client portfolio and trading information. To assure that personal trading by Supervised Persons is adequately reviewed and monitored on an ongoing basis, this Code generally imposes the requirements and restrictions outlined below. Advisory Management Persons must comply with all requirements and restrictions included in this Code applicable to Access Persons and Associated Persons. Access Persons must comply with all requirements and restrictions included in this Code applicable to Associated Persons. ASSOCIATED PERSONS: o must comply with all applicable federal securities laws; o must review and sign an acknowledgement of receipt of this Code (see Appendix II) and an acknowledgement of receipt of any amendments to this Code; o must annually certify that they have complied with the requirements of this Code (see Appendix III); o are prohibited from accepting gifts of more than nominal value from persons doing business with the Distributor or the Trusts; and o are prohibited from trading in a security while in possession of material, non-public information. ACCESS PERSONS: o must comply with the requirements and restrictions imposed on Associated Persons; o must pre-clear all personal securities transactions with the Distributor's Chief Compliance Officer or a Reviewing Attorney, other than transactions in Exempt Securities and Exempt Transactions (see Appendix IV); o must have copies of trade confirmations and account statements sent to the Chief Compliance Officer (see Appendix V); o must file quarterly transaction reports with the Chief Compliance Officer (see Appendix VI); o must make initial and annual securities holdings reports to the Chief Compliance Officer (see Appendices VII and VIII); o are generally prohibited from trading contemporaneously with a Trust portfolio when In Receipt of Portfolio Information. o are generally prohibited from purchasing IPOs; 2 o are generally prohibited from purchasing private placements or limited offerings; o are prohibited from engaging in Short Term Trading; and o are prohibited from purchasing a Related Fund Share without a prior Second Tier Review. ADVISORY MANAGEMENT PERSONS: o must comply with the requirements and restrictions imposed on Associated Persons and Access Persons; o are generally prohibited from purchasing securities other than Exempt Securities or securities purchased in Exempt Transactions; and o must undergo a Second Tier Review prior to the purchase of any other securities. All personal securities transactions information obtained by the Distributor under this Code will be kept in strict confidence, except that such information will be made available, when specifically requested, to the United States Securities and Exchange Commission (the "SEC") or any other regulatory or oversight organization which has jurisdiction over the operation of the Distributor. In certain instances, Supervised Persons may also be supervised persons of the Adviser. In such event, approvals may be granted and documents may be maintained pursuant to the Adviser's Code of Ethics. The Chief Compliance Officer of the Distributor shall have full access to records pertaining to its Supervised Persons. 3 CODE OF ETHICS SECTION 1. PERSONAL TRADING, CONDUCT, AND REPORTING 1.1 STATEMENT OF GENERAL PRINCIPLES It is the policy of the Distributor that Supervised Persons should: (1) at all times place the interests of the Trusts first; (2) conduct all personal securities transactions in a manner that is consistent with this Code and avoid any actual or potential conflict of interest or any abuse of the individual's position of trust and responsibility; and (3) adhere to the fundamental standard that Distributor personnel should not take inappropriate advantage of their positions. Supervised Persons shall comply with all applicable federal securities laws. Supervised Persons shall not, in the connection with the purchase or sale by such person: 1. employ any device, scheme or artifice to defraud; 2. make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; 3. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit; or 4. engage in any manipulative practice. 1.2 DISCLOSURE AND REPORTING REQUIREMENTS 1. Pre-clearance Access Persons and Advisory Management Persons are required to pre-clear all transactions in Securities with the Chief Compliance Officer, including transactions in options and other derivative securities, other than transactions in Exempt Securities and Securities purchased in Exempt Transactions, in which the person has, or by reason of the transaction acquires, any direct or indirect Beneficial Ownership.(3) A pre-clearance form is attached as Appendix IV. You can e-mail your request to the Chief Compliance Officer by copying the entire form into an e-mail and completing the form. ________________________________ (3) Generally, a person should consider himself beneficial owner of securities held by his spouse, his minor children, a relative who shares his home, or other persons if by reason of any contract, understanding, relationship, agreement or other arrangement, he obtains from such securities benefits substantially equivalent to those of ownership. A person should also consider himself the beneficial owner of securities if he or she can vest or revest title in himself now or in the future. For a more complete definition of the term Beneficial Ownership see Appendix I. 4 2. Records of Securities Transactions Access Persons and Advisory Management Persons are required to direct their brokers, as well as banks and other financial institutions effecting securities transactions on their behalf, to provide the Chief Compliance Officer with duplicate copies of confirmations of all personal securities transactions and copies of periodic statements for all securities accounts on a timely basis. A form of letter requesting duplicate confirmations and account statements is attached as Appendix V. A written confirmation of any non-exempt Securities transactions that are transacted without the use of a broker must be delivered within ten days of the occurrence to the Chief Compliance Officer. Access Persons and Advisory Management Persons must report to the Chief Compliance Officer the opening of a new brokerage account within ten days and will also be required to file quarterly transaction reports, due no later than 30 days after the close of the calendar quarter. A form for this purpose is attached as Appendix VI. 3. Initial and Annual Disclosure of Personal Holdings Access Persons and Advisory Management Persons are required to disclose all personal securities holdings no later than ten days after becoming an Access Person or Advisory Management Person and thereafter on an annual basis within ten calendar days after year end. This report must be current as of a date not more than 45 days prior to the person becoming an Access Person or Advisory Management Person, in the case of initial reports, or, in the case of annual reports, not more than 45 days prior to the date the report is submitted. Exempt Securities are not required to be reported, however, Securities obtained in an Exempt Transaction are required to be reported. Forms for initial and annual reports are attached as Appendices VII and VIII. 4. Acknowledgement of Receipt of Code Supervised Persons are required to review and sign an acknowledgement of the Code. A form for this purpose is attached as Appendix II. 5. Annual Certification of Compliance with the Code Supervised Persons are also required to certify annually that they have read and understand this Code and any amendments to this Code. They must further certify that they have complied with the requirements of this Code and that they have disclosed or reported all personal securities transactions required to be disclosed or reported. A form for this disclosure is attached as Appendix III. 6. Reporting Violations of the Code Supervised Persons are required to report any violations of the Code promptly to the Chief Compliance 5 Officer. If the Chief Compliance Officer is involved in the violation, the violation shall be reported to an executive officer of the Distributor or a Reviewing Attorney. Reports may be submitted anonymously. The Chief Compliance Officer, executive officer of the Distributor or Reviewing Attorney will investigate all reports of violations promptly and appropriately. Retaliation against an individual who reports a violation is prohibited and constitutes a further violation of this Code. Examples of violations that should be reported include: noncompliance with applicable laws, rules, and regulations, fraud or illegal acts involving any aspect of the Distributor's business, material misstatement in regulatory filings, internal books and records, activity that is harmful to the Trusts and deviations from required controls and procedures that safeguard the Trusts and the Distributor. 1.3 SUBSTANTIVE RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES 1. Initial Public Offerings Acquisition of any initial public offering ("IPO") is strictly prohibited for all Access Persons and Advisory Management Persons. 2. Private Placements Access Persons and Advisory Management Persons generally are prohibited from investing in a private placement or limited offering. In limited situations, at the discretion of the Distributor, permission to purchase in a private placement or limited offering may be granted if approved by a prior Second Tier Review. 3. Blackout Periods Access Persons and Advisory Management Persons who are In Receipt of Portfolio Information are prohibited from executing a securities transaction on a day when the Distributor or a sub-adviser has a pending "buy" or "sell" order in the same security until that order is executed or withdrawn. This restriction does not prevent an Access Person or Advisory Management Person from effecting a trade where the trade is approved by a prior Second Tier Review and (i) the trade is "same way" to the series of a Trust and at least two (2) days after its trading is completed, or (ii) the trade is "opposite way" to a series of a Trust. 4. Short Term Trading Access Persons and Advisory Management Persons are prohibited from engaging in Short Term Trading except in exigent circumstances and upon receipt of approval by a prior Second Tier Review. 6 5. Special Rules Applicable Solely to Advisory Management Persons Advisory Management Persons are generally prohibited from purchasing Securities other than Exempt Securities or Securities purchased in Exempt Transactions. Any purchases of other Securities or Related Fund Shares must be approved by a prior Second Tier Review. 6. Approval by Persons Other than Chief Compliance Officer In the event that the Chief Compliance Officer is not available, or a trade is proposed to be made for the benefit of the Chief Compliance Officer and the Chief Compliance Officer is an Access Person or Advisory Management Person, pre-approval of a trade by an Access Person or an Advisory Management Person can be granted by an executive officer of the Distributor who is not involved in the trade or a Reviewing Attorney. Trades requiring the approval of more than one person may be approved by an executive officer of the Distributor who is not involved in the trade and a Reviewing Attorney. 1.4 TRADING WHILE IN POSSESSION OF MATERIAL, NON-PUBLIC INFORMATION Supervised Persons are prohibited from trading while in possession of material non-public information. This prohibition is discussed in Section 2 of this Code. 1.5 SANCTIONS Any prohibited trades may be reversed or any profits realized on prohibited trades may be disgorged. Other sanctions may be imposed as deemed appropriate by the Chief Compliance Officer. In egregious cases, the Supervised Person may be dismissed. 1.6 CONFIDENTIAL INFORMATION Confidential information and records of the Distributor must be kept confidential in a suitable manner and not shared with third parties or non-involved colleagues. Data secrecy must be protected. 1.7 GIFTS Supervised Persons are prohibited from receiving any gift or other thing of more than nominal value from any person or entity that does business with or on behalf of the Distributor. In interpreting this requirement, persons will be governed by the Allianz Life Insurance Company of North America ("ALLIANZ") conflict policy. 1.8 SERVICES AS DIRECTOR Access Persons and Advisory Management Persons are prohibited from serving on the board of directors or trustees of non-affiliated publicly traded companies without prior written authorization from the Distributor. 7 1.9 RESPONSIBILITIES OF THE CHIEF COMPLIANCE OFFICER 1. The Chief Compliance Officer shall establish and keep a list of Associated Persons, Access Persons and Advisory Management Persons. 2. The Chief Compliance Officer shall notify each Supervised Person of the reporting requirements of this Code and shall deliver a copy of the Code to each person. The Chief Compliance Officer will receive a signed acknowledgement of receipt of the Code from each such person in the form set out in Appendix II. 3. The Chief Compliance Officer shall obtain a written acknowledgement of receipt of any amendment to this Code. 4. On an annual basis, the Chief Compliance Officer shall obtain from Supervised Persons an annual certification of compliance with this Code as prescribed in Appendix III. The annual certification shall be filed as soon as practicable after calendar year end. 5. The Chief Compliance Officer shall obtain from each Access Person and each Advisory Management Person, upon commencement of employment and thereafter on an annual basis, reports in the form prescribed in Appendices VII and VIII. The annual report shall be obtained within ten calendar days after year-end. 6. The Chief Compliance Officer will review and approve personal securities transactions as set out in this Code. 7. The Chief Compliance Officer shall obtain from each Access Person and each Advisory Management Person, on a quarterly basis, reports in the form prescribed in Appendix VI. The quarterly report shall be obtained within 30 calendar days after quarter end. 8. The Chief Compliance Officer shall keep in an easily accessible place the records set forth in Section 1.11 (1)-(12) of this Code. 9. The Chief Compliance Officer shall document in writing decisions regarding the pre-clearance of all securities transactions for each Access Person and each Advisory Management Person. 10. The Chief Compliance Officer shall promptly and appropriately investigate any violation of this Code reported as set out in Section 1.2(6) of this Code. 11. The Chief Compliance Officer, on behalf of the Distributor, shall provide a written report to the Board of Trustees ("BOT") of the Trusts as set out in Section 1.12 of this Code. 8 1.10 RESPONSIBILITIES OF THE BOARD OF GOVERNORS The Board of Governors ("BOG") of the Distributor shall consider reports made to it by the Chief Compliance Officer and shall determine whether the policies established in this Code have been violated, and what sanctions, if any, should be imposed. The BOG shall review the operations of this Code at least annually or as dictated by changes in applicable securities regulations. 1.11 RECORDS The Distributor shall maintain the following records in an easily accessible place in the manner and to the extent set forth below, and will make them available for examination by representatives of the SEC: 1. a copy of this Code and any other code which is, or at any time within the past five (5) years has been, in effect; 2. a record of all persons who are or were within the last five years subject to this Code, or are or were responsible for reviewing reports under this Code; 3. a copy of each report, confirmation and account statement provided by a Supervised Person pursuant to this Code, for a period of not less than five (5) years from the end of the fiscal year in which it is made; 4. a record of each decision, and the reasons supporting the decision, to approve the acquisition of an IPO or limited offering, for not less than five (5) years following the end of the fiscal year in which the approval is granted; 5. a record of each decision, and the reasons supporting the decision, to approve acquisition by an Advisory Management Person of a Security that is not an Exempt Security that was not purchased in an Exempt Transaction, for not less than five (5) years following the end of the fiscal year in which the approval is granted; 6. a record of each decision, and the reasons supporting the decision, to approve Short Term Trading by an Access Person, for not less than five (5) years following the end of the fiscal year in which approval was granted; 7. a record of each decision, and the reasons supporting the decision, to approve the acquisition of a Related Fund Share by an Advisory Management Person, for not less than five (5) years following the end of the fiscal year in which the approval is granted; 8. a record of any violation of this Code and any action taken as a result of such violation, for a period of not less than five (5) years following the end of the fiscal year in which the violation occurs; 9 9. a copy of each annual compliance report provided by the Distributor to the BOT, as required by Section 1.12 of this Code, for a period of not less than five (5) years from the end of the fiscal year in which it is made; 10. Copies of the Distributor's organizational documents shall be maintained by the Chief Compliance Officer or by the Allianz Law Department. 1.12 REGULAR REPORTING TO FUND TRUSTEES The Distributor will report annually to the BOT of each fund for which the Distributor serves as distributor with respect to any issues arising pursuant to the Code since the last report, including information as to any material violations of the Code and any remedial action taken in response to a material violation of this Code. Additionally, the Distributor will certify that the Distributor has adopted reasonable procedures necessary to prevent persons from violating the Code. A form for reporting by the Distributor to the BOT is attached as Appendix IX. 1.13 AMENDMENTS TO THE CODE The Code may be amended from time to time and any material amendments or changes shall be subject to approval by the BOG of the Distributor. Additionally, such amendments will be provided to the BOT of each fund for which the Distributor serves as distributor within 6 months of such determination by the BOG. For example, the determination to exempt classes of transactions shall be deemed to be an amendment which shall be subject to approval by the BOG. INSIDER TRADING SECTION 2. INSIDER TRADING POLICY AND PROCEDURES 2.1 STATEMENT OF GENERAL PRINCIPLES The Distributor's policy prohibits Supervised Persons from acting upon or otherwise misusing non-public or inside information. It is illegal for a person who is in possession of material non-public information about any public company (commonly known as "inside information") to trade in the company's securities. It is also illegal for that person to recommend a trade in the company's securities or tell someone else the inside information who in turn may then trade in the company's securities (commonly known as "tipping"). Trading or tipping based on inside information may be subject to serious penalties, including substantial fines and imprisonment. The definition of "material information" is subjective. Generally it is information that would affect an investor's decision to buy, sell, or hold securities. Examples are: (i) a pending acquisition or divestiture, (ii) financial results that are better or worse than recent trends would lead someone to expect, (iii) an increase or decrease in dividends or (iv) a stock split. "Non-public information" is information that has not been effectively communicated to the marketplace. 10 2.2 POLICY STATEMENT ON INSIDER TRADING 1. Information on Insider Trading The Distributor's policy prohibits Supervised Persons from acting upon or otherwise misusing material non-public or inside information. This conduct is frequently referred to as insider trading. The term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material non-public information to trade in securities or to communications of material non-public information to others in breach of a fiduciary duty. While the law concerning insider trading is not static, it is generally understood that the law prohibits: (i) trading by an insider, while in possession of material non-public information, or (ii) trading by a non-insider, while in possession of material non-public information, where the information was disclosed to the non-insider in violation of an insider's duty to keep it confidential, or (iii) communicating material non-public information to others in breach of a fiduciary duty. This policy applies to Supervised Persons within and outside their duties at the Distributor. 2. What is Material Information? Trading on inside information is not a basis for liability unless the information is material. "Material information" generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company's securities. Although there is no precise, generally accepted definition of materiality, information is likely to be material if it relates to significant changes affecting such matters as: o dividend or earnings expectations; o write-downs or write-offs of assets; o additions to reserves for bad debts or contingent liabilities; o expansion or curtailment of company or major division operations; 11 o proposals or agreements involving a joint venture, merger, acquisition, divestiture, or leveraged buy-out; o new products or services; o exploratory, discovery or research developments; o criminal indictments, civil litigation or government investigations; o disputes with major suppliers or customers or significant changes in the relationships with such parties; o labor disputes including strikes or lockouts; o substantial changes in accounting methods; o major litigation developments; o major personnel changes; o debt service or liquidity problems; o bankruptcy or insolvency; o extraordinary management developments; o public offerings or private sales of debt or equity securities; o calls, redemptions or purchases of a company's own stock; o issuer tender offers; or o recapitalizations. Information provided by a company could be material because of its expected effect on a particular class of the company's securities, all of the company's securities, the securities of another company, or the securities of several companies. The resulting prohibition against the misuses of material information reaches all types of securities (whether stock or other equity interests, corporate debt, government or municipal obligations, or commercial paper) as well as any option related to that security (such as a put, call or index security). Material information does not have to relate to a company's business. For example, in CARPENTER V. U.S., 108 U.S. 316 (1987), the Supreme Court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a newspaper reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in a newspaper and whether those reports would be favorable or not. 12 3. What is Non-public Information? In order for issues concerning insider trading to arise, information must not only be material, it must be non-public. "Non-public" information is information which has not been made available to investors generally. Information received in circumstances indicating that it is not yet in general circulation or where the recipient knows or should know that the information could only have been provided by an insider is also deemed non-public information. At such time as material, non-public information has been effectively distributed to the investing public, it is no longer subject to insider trading restrictions. However, for non-public information to become public information, it must be disseminated through recognized channels of distribution designed to reach the securities marketplace. To show that material information is public, you should be able to point to some fact verifying that the information has become generally available, for example, disclosure in a national business and financial wire service, a national news service, a national newspaper, or a publicly disseminated disclosure document (a proxy statement or prospectus). The circulation of rumors or "talk on the street," even if accurate, widespread and reported in the media, does not constitute the requisite public disclosure. The information must not only be publicly disclosed, there must also be adequate time for the market as a whole to digest the information. Although timing may vary depending upon the circumstances, a good rule of thumb is that information is considered non-public until the third business day after public disclosure. Material non-public information is not made public by selective dissemination. Material information improperly disclosed only to institutional investors or to a fund analyst or a favored group of analysts retains its status as non-public information that must not be disclosed or otherwise misused. Similarly, partial disclosure does not constitute public dissemination. So long as any material component of the inside information has yet to be publicly disclosed, the information is deemed non-public and may not be misused. INFORMATION PROVIDED IN CONFIDENCE. Occasionally, Supervised Persons may become temporary insiders because of a fiduciary or commercial relationship. As an insider, the Distributor has a fiduciary responsibility not to breach the trust of the party that has communicated the material non-public information by misusing that information. This fiduciary duty arises because the Distributor has entered into or has been invited to enter into a commercial relationship with a third party and has been given access to confidential information solely for the corporate purposes of that person. This obligation remains whether or not the Distributor ultimately participates in the transaction. 13 INFORMATION DISCLOSED IN BREACH OF A DUTY. Even where there is no expectation of confidentiality, a person may become an insider upon receiving material, non-public information in circumstances where a person knows, or should know, that a corporate insider is disclosing information in breach of the fiduciary duty he or she owes the corporation and its shareholders. Whether the disclosure is an improper tip that renders the recipient a tippee depends on whether the corporate insider expects to benefit personally, either directly or indirectly, from the disclosure. In the context of an improper disclosure by a corporate insider, the requisite personal benefit may not be limited to a present or future monetary gain. Rather, a prohibited personal benefit could include a reputational benefit, an expectation of a quid pro quo from the recipient or the recipient's employer by a gift of the inside information. A person may, depending on the circumstances, also become an insider or tippee when he or she obtains apparently material, non-public information by happenstance, including information derived from social situations, business gatherings, overheard conversations, misplaced documents, and tips from insiders or other third parties. 4. Identifying Material Information Before trading for yourself or for accounts managed by the Distributor in the securities of a company about which you may have potential material, non-public information, ask yourself the following questions: (i) Is this information that an investor could consider important in making his or her investment decisions? Is this information that could substantially affect the market price of the securities if generally disclosed? (ii) To whom has this information been provided? Has the information been effectively communicated to the marketplace by being published in publications of general circulation? Given the potentially severe regulatory, civil and criminal sanctions to which you, the Distributor, and its personnel could be subject, any person associated with the Distributor uncertain as to whether the information he or she possesses is material non-public information should immediately take the following steps: (i) report the matter immediately to the Chief Compliance Officer; (ii) do not purchase or sell the securities on behalf of yourself or accounts managed by the Distributor; and 14 (iii) do not communicate the information inside or outside the Distributor, other than to the Chief Compliance Officer. After the Chief Compliance Officer has reviewed the issue, you will be instructed to continue the prohibitions against trading and communication or will be allowed to trade and communicate the information. 5. Penalties for Insider Trading Penalties for trading on or communicating material non-public information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include:o o civil injunctions; o treble damages; o disgorgement of profits; o jail sentences; o fines for the person who committed the violation of up to three times the amount of profit gained or loss avoided; o the profit gained or loss avoided, whether or not the person actually benefited; and o fines for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided. In addition, any violation of this policy statement can be expected to result in serious sanctions by the Distributor, including dismissal of the persons involved. 2.3 PROCEDURES TO IMPLEMENT THE POLICY AGAINST INSIDER TRADING The following trading restrictions and reporting requirements have been established to aid Supervised Persons in avoiding insider trading, and to aid the Distributor in preventing, detecting and imposing sanctions against insider trading. Every employee must follow these procedures or risk serious sanctions, including dismissal, substantial personal liability and criminal penalties. 1. No Supervised Person who possesses material non-public information relating to the Distributor or its affiliates, may buy or sell any securities of the Distributor or its affiliates or engage in any other action to take advantage of, or pass on to others, such material non-public information. 15 2. No Supervised Person who obtains material non-public information which relates to any other company or entity in circumstances in which such person is deemed to be an insider or is otherwise subject to restrictions under the federal securities laws may buy or sell securities of that company or otherwise take advantage of, or pass on to others, such material non-public information. 3. No Supervised Person shall engage in a securities transaction with respect to any securities of any other company, except in accordance with the specific procedures set forth in the Distributor's Code. 4. Because even inadvertent disclosure of material non-public information to others can lead to significant legal difficulties, Supervised Persons should not discuss any potentially material non-public information concerning the Distributor or its affiliates or other companies with other persons, except as specifically required in the performance of their duties. 2.4 CHINESE WALL PROCEDURES You should not discuss material non-public information with anyone, including other employees of the Distributor or its affiliates, except as required in the performance of your regular duties. In addition, care should be taken so that such information is secure. 2.5 RESOLVING ISSUES CONCERNING INSIDER TRADING The federal securities laws, including the laws governing insider trading, are complex. If you have any doubts or questions as to the materiality or non-public nature of information in your possession or as to any of the applicability or interpretation of any of the foregoing procedures or as to the propriety of any action, you should contact the Chief Compliance Officer. Until advised to the contrary by the Chief Compliance Officer, you should presume that the information is material and non-public and you should not trade in the securities or disclose this information to anyone. 16 APPENDIX I DEFINITIONS ACCESS PERSON Access Person is defined on page 1 of this Code. ADVISORY MANAGEMENT PERSON Advisory Management Person is defined on page 1 of this Code. ASSOCIATED PERSON Associated Person is defined on page 1 of this Code. BENEFICIAL OWNERSHIP The following section is designed to give you a practical guide with respect to Beneficial Ownership. However, for purposes of this Code, Beneficial Ownership shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) of the Exchange Act of 1934 (the "EXCHANGE ACT") in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder. You are considered to have Beneficial Ownership of Securities if you have or share a direct or indirect pecuniary interest in the Securities. You have a pecuniary interest in Securities if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Securities. Generally, the following are examples where you would be considered as having beneficial ownership of the securities: 1. Securities held by members of your immediate family sharing the same household. This presumption may be rebutted by convincing evidence that profits derived from transactions in these Securities will not provide you with any economic benefit. "Immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and includes any adoptive relationship. 2. Your interest as a general partner in Securities held by a general or limited partnership. 3. Your interest as a manager or member in the Securities held by a limited liability company. 17 4. Securities held by anyone else if you: o obtain benefits substantially similar to ownership of the securities; o can obtain ownership of the securities immediately or at some future time; or o can vote or dispose of the securities. You do not have an indirect pecuniary interest in Securities held by a corporation, partnership, limited liability company or other entity in which you hold an equity interest, unless you are a controlling equityholder or you have or share investment control over the Securities held by the entity. The following circumstances constitute Beneficial Ownership by you of Securities held by a trust: 1. Your ownership of Securities as a trustee where either you or members of your immediate family have a vested interest in the principal or income of the trust. 2. Your ownership of a vested beneficial interest in a trust. 3. Your status as a settlor of a trust, unless the consent of all of the beneficiaries is required in order for you to revoke the trust. CHIEF COMPLIANCE OFFICER The Chief Compliance Officer of the Distributor. EXEMPT SECURITIES The following are Exempt Securities: 1. Direct obligations of the Government of the United States. 2. Bankers' acceptances. 3. Bank certificates of deposit. 4. Commercial paper and high quality short-term debt instruments (defined as any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized statistical rating organization), including repurchase agreements. 5. Shares of open-end management investment companies that are not Related Fund Shares. 18 EXEMPT TRANSACTIONS The following are Exempt Transactions: 1. Any transactions in Securities in an account over which you do not have any direct or indirect interest, influence, or control. There is a presumption that you can exert some measure of influence or control over accounts held by members of your immediate family sharing the same household, but convincing evidence may rebut this presumption. 2. Purchases of Securities under automatic dividend reinvestment plans. 3. Security purchases effected upon the exercise of rights issued by the issuer pro rata to all holders of a class of its securities, to the extent they are issued with respect to Securities of which you have Beneficial Ownership. 4. Acquisitions or dispositions of Securities as the result of a stock dividend, stock split, reverse stock split, merger, consolidation, spin-off or other similar corporate distribution or reorganization applicable to all holders of a class of Securities of which you have Beneficial Ownership. 5. Subject to the restrictions on participation in private placements set forth below, acquisitions or dispositions of Securities of a private issuer. A private issuer is a corporation, partnership, limited liability company or other entity which has no outstanding publicly-traded Securities, and no outstanding Securities which are exercisable to purchase, convertible into or exchangeable for publicly-traded Securities. However, you will have Beneficial Ownership of publicly held Securities held by a private issuer whose equity Securities you hold, unless you are not a controlling equityholder and do not have or share investment control over the Securities held by the entity. 6. Any purchase or sale of fixed-income Securities issued by agencies or instrumentalities of, or unconditionally guaranteed by, the Government of the United States. 7. Such other classes of transactions as may be exempted from time to time by the Chief Compliance Officer based upon a determination that the transactions are unlikely to violate Rule 17j-1 under the Investment Company Act of 1940, as amended, or Rule 204A-1 under the Investment Company Act of 1940, as amended. The Chief Compliance Officer may exempt designated classes of transactions from any of the provisions of this Code. 8. Such other specific transactions as may be exempted from time to time by a Chief Compliance Officer. On a case-by-case basis, when no abuse is involved, the Chief Compliance Officer may exempt a specific transaction from any of the provisions of this Code, subject to any additional approval requirements that may be set out in this Code. In these instances, the Chief Compliance Officer will document the reason for the exemption. 19 IN RECEIPT OF PORTFOLIO INFORMATION An Access Person shall be considered "In Receipt of Portfolio Information" if he or she has obtained current portfolio trading information or projected trading information pertaining to a Client account from a sub-adviser or otherwise within the preceding 7 days. RELATED FUND SHARE A Related Fund Share is a share issued by an open-end management investment company as listed in APPENDIX X. REVIEWING ATTORNEY A "Reviewing Attorney" is a lawyer with the Law Department of Allianz who is an officer of Allianz. SECOND TIER REVIEW A Second Tier Review requires that the Supervised Person must pre-declare in writing to the Chief Compliance Officer or, in the absence of the Chief Compliance Officer, a Reviewing Attorney: (i) the purchase or sale of a specified quantity of a Security; (ii) on a specified date that is not earlier than two (2) business days after the date of the request; (iii) at a price that is within a specified range of prices. Prior to any such Second Tier Review being considered complete, the Second Tier Review must be approved in writing by the Chief Compliance Officer or, in the absence of the Chief Compliance Officer, a Reviewing Attorney. SECURITIES The following are Securities: Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, interest in an open-end management investment company including but not limited to open-end exchange traded funds, unit investment trusts including but not limited to unit investment trust exchange traded funds, collateral-trust certificate, reorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a security, or 20 any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any security. Any variable annuity or variable life insurance contract that offers Related Fund Shares as an investment option under such contract is also considered to be a Security for purposes of this Code. The following are not considered Securities for the purposes of this Code: Currency futures, commodities and futures and options traded on a commodities exchange. However, futures and options on any group or index of securities are considered Securities for purposes of this Code. SHORT TERM TRADING A Short Term Trade is any (1) purchase and sale or (2) sale and purchase of the same or a substantially similar security issued by the same issuer within thirty (30) days where such subsequent transaction results in an investment gain to the individual placing the transaction. SUPERVISED PERSONS Supervised Person is defined on page 3 of this Code. 21 APPENDIX II ALLIANZ LIFE FINANCIAL SERVICES, LLC ACKNOWLEDGEMENT CERTIFICATION FOR CODE OF ETHICS AND INSIDER TRADING POLICY I hereby certify that I have received, read and understand the attached Allianz Life Financial Services, LLC Code of Ethics and Insider Trading Policy and that I acknowledge that I am subject to it. Pursuant to such Code, I recognize that I must disclose or report all personal securities holdings and transactions required to be disclosed or reported thereunder if I am an Access Person or Advisory Management Person, and I must comply in all other respects with the requirements of the Code. I also agree to cooperate fully with any investigation or inquiry as to whether a possible violation of the foregoing Code has occurred. I understand that any failure to comply in all aspects with the foregoing and these policies and procedures may lead to sanctions including dismissal. I am submitting this acknowledgment as an: ___ Associated Person ___ Access Person ___ Advisory Management Person Date: ---------------------- -------------------------------------- Signature -------------------------------------- Print Name 22 APPENDIX III ALLIANZ LIFE FINANCIAL SERVICES, LLC ANNUAL CERTIFICATION FOR CODE OF ETHICS AND INSIDER TRADING POLICY I hereby certify that I have complied with the requirements of the Code of Ethics and Insider Trading Policy for the year ended December 31, ____. Pursuant to the Code, I have disclosed or reported all personal securities holdings and transactions required to be disclosed or reported thereunder if I am an Access Person or Advisory Management Person, and complied in all other respects with the requirements of the Code. I also agree to cooperate fully with any investigation or inquiry as to whether a possible violation of the Code has occurred. I am submitting this annual certification as an: ___ Associated Person ___ Access Person ___ Advisory Management Person Date: ---------------------- -------------------------------------- Signature -------------------------------------- Print Name 23 APPENDIX IV ALLIANZ LIFE FINANCIAL SERVICES, LLC TRADE PRECLEARANCE FORM For Access Persons and Advisory Management Persons PLEASE USE A SEPARATE FORM FOR EACH SECURITY Name of Access Person: ------------------------------------------------------- Broker: ---------------------------------------------------------------------- Account Number: -------------------------------------------------------------- Buy or Sell: ----------------------------------------------------------------- Quantity: -------------------------------------------------------------------- Ticker: ---------------------------------------------------------------------- Issue (Full Security Description): ------------------------------------------- Are you In Receipt of Portfolio Information (yes or no) _____ IF YES, SEE CODE SECTION 1.3.3. Is the Security an IPO (yes or no)? _____ IF YES, THIS TRANSACTION IS STRICTLY PROHIBITED AND WILL NOT BE APPROVED. Is the Security a private placement (yes or no)? _____ IF YES, SECOND TIER REVIEW IS REQUIRED, PLEASE PROVIDE THE SECOND TIER REVIEW INFORMATION OUTLINED BELOW. Have you purchased or sold the same security or a substantially similar security issued by the same issuer within the preceding thirty (30) days (yes or no)? _____ If yes, will today's transaction result in an investment gain (yes or no)? __ IF YES, SECOND TIER REVIEW IS REQUIRED AND EXIGENT CIRCUMSTANCES MAY HAVE TO BE DEMONSTRATED, PLEASE PROVIDE THE SECOND TIER REVIEW INFORMATION OUTLINED BELOW. If you are an ADVISORY MANAGEMENT PERSON, is the Security an Exempt Security or purchased in an Exempt Transaction (yes or no)? _____ IF NO, SECOND TIER REVIEW IS REQUIRED, PLEASE PROVIDE THE SECOND TIER REVIEW INFORMATION OUTLINED BELOW. If you are an ADVISORY MANAGEMENT PERSON and the Security you want to buy or sell is a mutual fund share, is the share a Related Fund Share (yes or no)? _____ IF YES, SECOND TIER REVIEW IS REQUIRED, PLEASE PROVIDE THE SECOND TIER REVIEW INFORMATION OUTLINED BELOW. 24 SECOND TIER REVIEW INFORMATION: Proposed date of Purchase/Sale: ----------------------------------------------- Price Range of Proposed Purchase/Sale: ---------------------------------------- Special Instructions (if any): ------------------------------------------------ APPROVALS ARE VALID UNTIL THE CLOSE OF BUSINESS ON THE DATE APPROVAL HAS BEEN GRANTED (THE "TRANSACTION DATE"). ACCORDINGLY, GTC (GOOD TILL CANCELED) ORDERS ARE PROHIBITED. A NEW PRECLEARANCE FORM IS REQUIRED IF A TRADE IS NOT EXECUTED BY THE CLOSE OF BUSINESS ON THE TRANSACTION DATE. IT IS EACH EMPLOYEE'S RESPONSIBILITY TO COMPLY WITH ALL PROVISIONS OF THE CODE. OBTAINING PRECLEARANCE SATISFIES THE PRECLEARANCE REQUIREMENTS OF THE CODE AND DOES NOT IMPLY COMPLIANCE WITH THE CODE'S OTHER PROVISIONS. BY SIGNING BELOW (OR BY EMAILING THIS REQUEST TO THE CHIEF COMPLIANCE OFFICER) THE EMPLOYEE CERTIFIES THE FOLLOWING: THE EMPLOYEE AGREES THAT THE ABOVE ORDER IS IN COMPLIANCE WITH THE CODE AND IS NOT BASED ON KNOWLEDGE OF AN ACTUAL CLIENT ORDER IN THE SECURITY THAT IS BEING PURCHASED OR SOLD, OR KNOWLEDGE THAT THE SECURITY IS BEING CONSIDERED FOR PURCHASE OR SALE IN ONE OR MORE SPECIFIC CLIENT ACCOUNTS, OR KNOWLEDGE OF A CHANGE OR PENDENCY OF A CHANGE OF AN INVESTMENT MANAGEMENT RECOMMENDATION. THE EMPLOYEE ALSO ACKNOWLEDGES THAT HE/SHE IS NOT IN POSSESSION OF MATERIAL, NON-PUBLIC INFORMATION PERTAINING TO THE SECURITY OR ISSUER OF THE SECURITY. SUPERVISED PERSON SIGNATURE: -------------------------------------------------- DATE: ------------------------------------- Approvals - -------------------------------------------------------------------------------- This area reserved for Compliance Use only - -------------------------------------------------------------------------------- Trade Has Been Date Approved Approved By __ Approved __ Not Approved - -------------------------------------------------------------------------------- Comments: --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 25 APPENDIX V OUTSIDE BROKERAGE ACCOUNT SAMPLE LETTER RE: ----------------------------------------------------------------------- Name ----------------------------------------------------------------------- Brokerage Account(s) Numbers To Whom It May Concern: This letter is to inform you that I am associated with Allianz Life Financial Services, LLC, a distributor of registered investment companies. With respect to the above-referenced account(s), I hereby request that you send duplicate confirmations and statements to the following address: Allianz Life Financial Services, LLC 5701 Golden Hills Drive Minneapolis, MN 55416 Attn: Chief Compliance Officer cc: Chief Compliance Officer, Allianz Life Financial Services, LLC 26 APPENDIX VI PERSONAL SECURITIES TRANSACTION REPORT For the Quarter Ended ___/___/____ ALLIANZ LIFE FINANCIAL SERVICES, LLC - ACCESS PERSONS AND ADVISORY MANAGEMENT PERSONS Were all transactions in the quarter reported on confirmations or account statements provided to the Distributor, or are they attached to this Form, and did the confirmations or account statements contain the information required by this Form (yes or no)? _____ If yes, trades are not required to be listed on this form. This report must be submitted to the Distributor's Chief Compliance Officer no later than 30 days after the close of the calendar quarter. Was a new brokerage, mutual fund or variable product account established in the quarter (yes or no)? _____ If yes, name broker: ---------------------------------------------------------- Name Signature Date - ------------------- -------------------------- -------------------------------
PRICE TRADE DATE BOUGHT/SOLD SECURITY NAME/TICKER SYMBOL OR CUSIP QUANTITY* BROKER & ACCOUNT NO. BUY/SELL - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ - ------------------- ------------- --------------------------------------- -------------- --------------------- ------------ * number of shares for equity securities; principal amount, interest rate and maturity date for debt securities
CHECK THIS BOX IF TRANSACTION STATEMENTS FOR ALL TRANSACTIONS ARE ATTACHED. _______________________________________________________________________________ Signature Date __________________ Print Name 27 APPENDIX VII ALLIANZ LIFE FINANCIAL SERVICES, LLC INITIAL PERSONAL SECURITIES HOLDINGS REPORT In accordance with the Code of Ethics, below is a list of all Securities in which I have Beneficial Ownership, and all accounts in which these securities are held. This includes not only securities held by brokers, but also mutual fund shares, variable annuity or life insurance contracts and Securities held at home, in safe deposit boxes, or by an issuer. This report is current as of a date not more than 45 days prior to my becoming an Access Person or Advisory Management Person. Name of Access Person or Advisory Management Person: -------------------------- Broker(s) at which Account(s) is (are) Maintained:
NAME ON ACCOUNT BROKER ACCOUNT # - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ----------------------------------
For each account, attached is the most recent account statement listing Securities in that account. By signing this document, I am certifying that I have caused duplicate confirms and duplicate statements to be sent to the Chief Compliance Officer for every account that trades in Securities other than Exempt Securities (as defined in the Code). Listed below are all Securities that are not reflected in an account statement.
- ---------------------------------------------------------- -------------------------------------------------------- Security Name/Ticker Symbol or CUSIP Quantity* Security Name/Ticker Symbol or CUSIP Quantity* - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- * number of shares for equity securities; principal amount, interest rate and maturity date for debt securities (ATTACH SEPARATE SHEET IF NECESSARY)
I certify that this form and the attached statements (if any) constitute all Securities in which I have Beneficial Ownership as defined in the Code. ________________________________________________________________________ Signature Date ___________________________________________ Print Name 28 APPENDIX VIII ALLIANZ LIFE FINANCIAL SERVICES, LLC ANNUAL PERSONAL SECURITIES HOLDINGS REPORT In accordance with the Code of Ethics, below is a list of all Securities in which I have Beneficial Ownership, and all accounts in which these securities are held. This includes not only securities held by brokers, but also mutual fund shares, variable annuity or life insurance contracts and Securities held at home, in safe deposit boxes, or by an issuer. This report is current as of a date not more than 45 days prior to the date I will submit this report. Name of Access Person or Advisory Management Person: -------------------------- Broker(s) at which Account(s) is (are) Maintained:
NAME ON ACCOUNT BROKER ACCOUNT # - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ---------------------------------- - ------------------------------------- ---------------------------------- ----------------------------------
By signing this document, I am certifying that I have caused duplicate confirms and duplicate statements to be sent to the Chief Compliance Officer for every account that trades in Securities other than Exempt Securities (as defined in the Code). Listed below are all Securities that are not reflected in an account statement.
- ---------------------------------------------------------- -------------------------------------------------------- Security Name/Ticker Symbol or CUSIP Quantity* Security Name/Ticker Symbol or CUSIP Quantity* - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- - ---------------------------------------------------------- -------------------------------------------------------- * number of shares for equity securities; principal amount, interest rate and maturity date for debt securities (ATTACH SEPARATE SHEET IF NECESSARY)
I certify that this form identifies all Securities in which I have Beneficial Ownership as defined in the Code. ________________________________________________________________________ Signature Date ___________________________________________ Print Name 29 APPENDIX IX ALLIANZ LIFE FINANCIAL SERVICES, LLC CODE OF ETHICS ANNUAL CERTIFICATION THE CODE Persons associated with Allianz Life Financial Services, LLC must abide by the conditions set forth in the Code of Ethics. Each Access Person and Advisory Management Person is required to submit initial and annual holdings reports listing all personal securities transactions in Securities other than Exempt Securities for all such accounts in which the Access Person or Advisory Management Person has any direct or indirect Beneficial Ownership to the Chief Compliance Officer. Access Persons and Advisory Management Persons must also file securities transaction reports on a quarterly basis with respect to purchases of covered securities in which Beneficial Ownership was acquired in the quarter (subject to certain limitations specified in the Code). The Distributor certifies that it has adopted procedures reasonably necessary to prevent Supervised Persons from violating the Code. ISSUES OR VIOLATIONS The undersigned hereby certifies that, except as set out below, no issues have arisen under the Code or the procedures adopted by Allianz Life Financial Services, LLC to implement the Code and there have been no material violations of the Code since the last certification to the Trustees, except as follows: Date: ----------------------------------------------------------------------- Chief Compliance Officer 30 APPENDIX X Allianz Life Financial Services, LLC RELATED FUND SHARES (As of 5/1/2007) Shares of the following mutual funds are considered Related Fund Shares under this Code of Ethics: AIM Basic Value Fund AIM International Growth Fund Columbia Technology Fund Davis New York Venture Fund Dreyfus Founders Equity Growth Fund Dreyfus Investment Portfolios Small Cap Stock Index Portfolio Dreyfus Premier Small Cap Value Fund Dreyfus Stock Index Fund Franklin Small Cap Value Fund Jennison 20/20 Focus Fund Jennison Growth Fund Legg Mason Growth Trust Legg Mason Value Trust Legg Mason Partners Large Cap Growth Fund Legg Mason Partners Small Cap Growth Fund Neuberger Berman Regency Fund Nicholas Applegate International Systematic Fund OCC Opportunity Fund OCC Renaissance Fund OCC Value Fund Oppenheimer Developing Markets Fund Oppenheimer Global Fund Oppenheimer International Growth Fund Oppenheimer Main Street Fund PIMCO Fundamental IndexPLUS TR Fund Van Kampen Aggressive Growth Fund Van Kampen Comstock Fund Van Kampen Strategic Growth Fund Van Kampen Equity and Income Fund Van Kampen Global Franchise Fund Van Kampen Growth and Income Fund Van Kampen Mid Cap Value Fund Vanguard International Explorer Fund 31 EX-99.P.5 11 file011.txt VIP TRUST COE ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST ALLIANZ VARIABLE INSURANCE PRODUCTS FUND OF FUNDS TRUST CODE OF ETHICS (Revised 8/29/2006) In an effort to prevent violations of the Investment Company Act of 1940 (the "1940 ACT") and the Rules and Regulations thereunder, this Code of Ethics (the "CODE") is adopted pursuant to Rule 17j-1 of the 1940 Act, as amended, by and on behalf of the Allianz Variable Insurance Products Trust and the Allianz Variable Insurance Products Fund of Funds Trust (each individually referred to as a "Trust" and collectively as the "Trusts"), and any additional Series of the Trusts that may be approved by the Board of Trustees. Capitalized terms used herein are defined in Section 1 of this Code. Rule 17j-1 requires registered investment companies to adopt a written Code containing provisions reasonably necessary to prevent any Access Person from engaging in certain activities prohibited by Rule 17j-1, and to use reasonable diligence and implement procedures reasonably necessary to prevent violations of such Code. The purpose of this Code is to establish policies consistent with Rule 17j-1 and with the following general principles: o Access Persons have the duty at all times to place the interests of clients and shareholders ahead of their own personal interests in any decision relating to their personal investments. o All securities transactions shall be conducted consistent with this Code and in such manner as to avoid any actual, potential or appearance of a conflict of interest, or any abuse of any Access Person's position of trust and responsibility. Access Persons shall not take inappropriate advantage of their position and must avoid any situation that might compromise, or call into question, their exercise of fully independent judgment in the interest of shareholders. 1. DEFINITIONS A. "Access Person" means any director or officer of a Trust. B. "Adviser Access Person" means any director, officer, general partner or employee of a Trusts' investment adviser who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the purchase or sale of Securities by a series of the Trust, or whose functions relate to the making of any recommendations with respect to such purchases or sales. C. "Beneficial Ownership" of a Security is to be determined in the same manner as it is for purposes of Section 16a-1(a)(2) of the 1934 Act. This means that a person should generally consider themselves the "Beneficial Owner" of a Security in which they have a direct or indirect financial interest. In addition, persons should consider themselves the "Beneficial Owner" of a Security held by their spouse, minor children, relatives who share their home, or other persons pursuant to a contract, arrangement, understanding, or relationship that provides the other person with sole or shared voting or investment power with respect to such Security. Although the following list is not exhaustive, under the 1934 Act and this Code, a person generally would be regarded to be the "Beneficial Owner" of the following Securities: (1) Securities held in the person's own name; (2) Securities held with another in joint tenancy, community property, or other joint ownership; (3) Securities held by a bank or broker as nominee or custodian on such person's behalf or pledged as collateral for a loan; (4) Securities held by members of the person's immediate family sharing the same household ("immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships); (5) Securities held by a relative not residing in the person's home if the person is a custodian, guardian or otherwise has or shares control over the purchase, sale, or voting of such Securities; (6) Securities held by a trust in which the person is a beneficiary and has or shares the power to make purchase or sale decisions; (7) Securities held by a trust for which the person serves as a trustee and in which the person has a pecuniary interest (including pecuniary interests by virtue of performance fees and by virtue of holdings by the person's immediate family); (8) Securities held by a general partnership or limited partnership in which the person is a general partner; (9) Securities owned by a corporation in which the person has a control position or in which the person has or shares investment control over the portfolio Securities (other than a registered investment company); (10) Securities in a portfolio giving the person certain performance-related fees; and (11) Securities held by another person or entity pursuant to any agreement, understanding, relationship or other arrangement giving the person any direct or indirect pecuniary interest. D. "Disinterested Trustee" means a trustee of the Trust who is not an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. 2 E. "Insider Trading" means the use of Material Non-Public Information to trade in a Security (whether or not a person is an Access Person) or the communication of Material Non-Public Information to others. Insider Trading generally includes: (1) trading in a Security by an Access Person, while in possession of Material Non-Public Information; (2) trading in a Security by a person who is not an Access Person, while in possession of Material Non-Public Information, where the information either was disclosed to such person in violation of an Access Person's duty to keep it confidential or was misappropriated; and (3) communicating Material Non-Public Information to any person, who then trades in a Security while in possession of such information. F. "Material Non-Public Information" means information that has not been effectively communicated to the marketplace, and for which there is a substantial likelihood that a reasonable investor would consider it important in making investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company's Securities. Examples of Material Non-Public Information include information regarding dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. G. "Principal Underwriter Access Person" means any director, officer, general partner or employee of a Trusts' principal underwriter who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the purchase or sale of Securities by a Series of the Trust. H. "Security" shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, interest in an open-end management investment company including but not limited to open-end exchange traded funds, unit investment trusts including but not limited to unit investment trust exchange traded funds, collateral-trust certificate, reorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any security. Any variable annuity or variable life insurance contract that offers shares issued by an open-end management company as defined as a Related Fund Share in the Code of Ethics of the Trusts' investment adviser is also considered a Security. 3 The following are not considered Securities for purposes of this Code: Currency futures, commodities and futures and options traded on a commodities exchange. However, futures and options on any group or index of securities are considered Securities for purposes of this Code. Please refer to the Code of Ethics of the Trusts' investment adviser for a list of Exempt Transactions and Exempt Securities. 2. SCOPE OF THE CODE A. The Code shall apply to each Access Person. B. The Code shall not apply to any Adviser Access Person or to any Principal Underwriter Access Person as such persons are subject to Codes of Ethics of the Adviser and Principal Underwriter, respectively.. C. To avoid any duplication of reports required pursuant to Rule 17j-1 under the 1940 Act and pursuant to Rule 204A-1 of the Advisers Act of 1940, as amended, the Chief Compliance Officer of the Trusts' investment adviser shall review reports submitted by Adviser Access Persons pursuant to the Allianz Life Advisers, LLC Code of Ethics and Insider Trading Policy in effect at the time of the submission of such reports. D. To avoid any duplication of reports required pursuant to Rule 17j-1 under the 1940 Act and pursuant to Rule 204A-1 of the Advisers Act of 1940, as amended, the Chief Compliance Officer of the Trusts shall review reports submitted by Principal Underwriter Access Persons pursuant to the BISYS Fund Services Code of Ethics and Insider Trading Policy in effect at the time of the submission of such reports. 3. PROHIBITED SECURITIES TRANSACTIONS A. No Access Person shall, in connection with the purchase or sale, directly or indirectly, by such person of a Security held or to be acquired by a Trust: (1) Employ any device, scheme or artifice to defraud the Trust; (2) Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (3) Engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the Trust; or (4) Engage in any manipulative practice with respect to the Trust. B. No Access Person shall purchase or sell, directly or indirectly, any Security in which he or she has or thereby acquires any Beneficial Ownership where such purchase or sale 4 constitutes Insider Trading, or take any other action that constitutes or may result in Insider Trading. C. No Access Person shall purchase or sell, directly or indirectly, any Security in which he or she has or thereby acquires any Beneficial Ownership and which to his or her actual knowledge at the time of such purchase or sale such Security is being purchased or sold by the Trust, or has been recommended to be purchased or sold by a Trust. D. Sections 2.B. and 2.C. shall not apply to the following: (1) Transactions for any account over which the Access Person has no direct or indirect influence or control; (2) Involuntary transactions by the Access Person or the Trust; (3) Purchases under an automatic dividend reinvestment plan; or (4) Purchases effected by the exercise of rights, issued by an issuer PRO-RATA to all holders of a class of its securities, to the extent such rights were acquired from such issuer. 4. REPORTS A. Subject to subsection B. below, each Access Person shall make the following reports required by Rule 17j-1(d) under the 1940 Act: (1) INITIAL AND ANNUAL SECURITIES HOLDINGS REPORTS. Access Persons are required to disclose all personal securities holdings other than exempt securities set forth in Section 1H no later than ten days after becoming an Access Person and thereafter on an annual basis within ten calendar days after year end. This report must be current as of a date not more than 45 days prior to the person becoming an Access Person, in the case of initial reports, or, in the case of annual reports, not more than 45 days prior to the date the report is submitted. Compliance with this reporting requirement will be satisfied by providing monthly statements of brokerage accounts provided the statements are current within 45 days. Reports for Securities not included in such brokerage statements must contain: a. the title, number of shares, and principal amount of each Security in which the Access Person has any Beneficial Ownership; b. the name of any broker, dealer, or bank with whom the Access Person maintains an account in which any Securities are held for the direct or indirect benefit of the Access Person; and c. the date the report is submitted by the Access Person. (2) QUARTERLY TRANSACTION REPORTS. Within 30 calendar days of the end of each quarter, Access Persons shall report to the Chief Compliance Officer of the Trusts all Securities transactions 5 other than the exempt Securities set forth in Section 1H in which the Access Person has, or by reason of such transactions acquires, any Beneficial Ownership. Quarterly transaction reports need not be furnished regarding automatic investment plans. In the event that no reportable transactions occurred during the quarter, Access Persons should note this on the report. Compliance with this reporting requirement will be satisfied by providing brokerage account statements current as of quarter end. Reports for Securities not included in such brokerage statements must contain: a. the date of each transaction, the title, the interest rate and maturity (if applicable), the number of shares and the principal amount of each Security; b. the nature of each transaction (i.e., purchase, sale, or any type of acquisition or disposition); c. the price of the Security at which each transaction was effected; d. the name of the broker, dealer or bank with or through which each transaction was effected; e. the name of any broker, dealer, or bank with whom the Access Person established an account in which any Securities are held for the direct or indirect benefit of the Access Person and the date on which the account was established; and f. the date the report is submitted by the Access Person. B. A Disinterested Trustee or a Trust officer who is not an affiliated person of its investment adviser or any subadviser to a Trust, within the meaning of Section 2(a)(3) of the 1940 Act ("Non-affiliated Officer") need not file initial or annual securities holdings reports under this Code, and need only report transactions in a Security if such Disinterested Trustee or Non-affiliated Officer knows at the time of such transaction or, in the ordinary course of fulfilling his or her official duties as trustee or officer, should have known during the 15 day period immediately preceding or after the date of the transaction, that such Security was or would be purchased or sold by any fund of the Trust or was or would be considered for purchase or sale by any fund of the Trust or its investment adviser or sub-adviser. The "should have known" standard implies no duty of inquiry, does not presume there should have been any deduction or extrapolation from discussions or memoranda dealing with tactics to be employed to meet any fund investment objective, or that any knowledge is to be imputed because of prior knowledge of the portfolio holdings of any fund, market considerations, or the investment policies, objectives and restrictions of any fund. 5. ENFORCEMENT A. The Chief Compliance Officer of the Trusts shall review reports filed under this Code to determine whether any violation may have occurred. Access Persons who discover a violation or apparent violation of this Code by any other person covered by this Code shall bring the matter to the attention of the Chief Compliance Officer of the Trusts. 6 B. Each violation of or issue arising under this Code shall be reported to the Board of Trustees of the Trusts at or before the next regular meeting of the Board. C. The Board of Trustees of the Trusts may impose such sanctions or penalties upon a violator of this Code as it deems appropriate under the circumstances. 6. RECORDKEEPING The Chief Compliance Officer of the Trusts shall maintain the appropriate records and reports related to this Code as required by Rule 17j-1(d) under the 1940 Act. 7 EX-99.P.6 12 file012.txt BLACKROCK COE CONFIDENTIAL ADVISORY EMPLOYEE INVESTMENT TRANSACTION POLICY For BLACKROCK INVESTMENT ADVISER COMPANIES Revised: February 1, 2005 September 30, 2006 April 26, 2007 Table of Contents I. PREAMBLE.................................................................1 - -- -------- A. GENERAL PRINCIPLES....................................................1 -- ------------------ B. THE GENERAL SCOPE OF THE POLICY'S APPLICATION TO PERSONAL INVESTMENT TRANSACTIONS..........................................................3 -- --------------------------------------------------------------------- C. THE ORGANIZATION OF THIS POLICY.......................................4 -- ------------------------------- D. QUESTIONS.............................................................4 -- --------- II. LIST OF APPROVED BROKERS.................................................5 - --- ------------------------ III. PERSONAL INVESTMENT TRANSACTIONS.........................................5 - ---- -------------------------------- A. IN GENERAL............................................................5 -- ---------- B. REPORTING OBLIGATIONS.................................................5 -- --------------------- C. PROHIBITED OR RESTRICTED INVESTMENT TRANSACTIONS.....................10 -- ------------------------------------------------ D. INVESTMENT TRANSACTIONS REQUIRING PRE-CLEARANCE......................10 -- ----------------------------------------------- E. BAN ON SHORT-TERM TRADING PROFITS....................................13 -- --------------------------------- F. BLACKOUT PERIODS.....................................................13 -- ---------------- IV. INSIDE INFORMATION AND SERVICE AS A DIRECTOR............................14 - --- -------------------------------------------- A. INSIDE INFORMATION...................................................14 -- ------------------ B. SERVICE AS A DIRECTOR................................................15 -- --------------------- V. EXEMPTIONS..............................................................15 - -- ---------- VI. COMPLIANCE..............................................................16 - --- ---------- A. CERTIFICATIONS.......................................................16 -- -------------- B. SUPERVISORY PROCEDURES...............................................17 -- ---------------------- VII. EFFECTIVE DATE..........................................................20 - ---- -------------- APPENDIX I...................................................................A-1 - ---------- ADVISORY EMPLOYEE INVESTMENT TRANSACTION POLICY FOR BLACKROCK INVESTMENT ADVISER COMPANIES I. PREAMBLE A. GENERAL PRINCIPLES This amended and revised Advisory Employee Investment Transaction Policy (the "Policy") is based on the principle that you, as an Advisory Employee under the control of BlackRock, Inc. ("BlackRock"), owes a fiduciary duty of undivided loyalty to the registered investment companies, institutional investment clients, personal trusts and estates, guardianships, employee benefit trusts, and other Advisory Clients which that Advisor serves.(1) Accordingly, you must avoid transactions, activities, and relationships that might interfere or appear to interfere with making decisions in the best interests of those Advisory Clients. At all times, you must observe the following GENERAL PRINCIPLES: 1. YOU MUST PLACE THE INTERESTS OF ADVISORY CLIENTS FIRST. As a fiduciary you must scrupulously avoid serving your own personal interests ahead of the interests of Advisory Clients. You must adhere to this general fiduciary principle as well as comply with the Policy's specific _________________________________ (1) This policy uses a number of CAPITALIZED TERMS, E.G., Advisor, Advisory Client, Advisory Employee, Beneficial Ownership, Non-Reportable Security, Fixed Income Securities, Fully Discretionary Account, Futures Contract, Immediate Family, Investment Transaction, Personal Account, Portfolio Employee, Portfolio Manager, Related Account, and Security. The first time a capitalized term is used, a definition is stated in the text or in a footnote. The full definitions of these capitalized terms are set forth in Appendix I. TO UNDERSTAND YOUR RESPONSIBILITIES UNDER THE POLICY, IT IS IMPORTANT THAT YOU REVIEW AND UNDERSTAND ALL OF THE DEFINITIONS OF CAPITALIZED TERMS IN APPENDIX I. As indicated in Appendix I: The term "ADVISER" means any entity under the control of BlackRock, whether now in existence or formed after the date hereof, that is registered as (i) an investment adviser under the Investment Advisers Act of 1940, as amended, or (ii) a broker-dealer under the Securities Exchange Act of 1934, as amended, other than any such investment adviser or broker-dealer that has adopted its own employee investment transaction policy. The term "ADVISORY CLIENT" means an investment company, whether or not registered with any regulatory authority, an institutional investment client, a personal trust or estate, a guardianship, an employee benefit trust, or another client with which the Adviser by which you are employed or with which you are associated has an investment management, advisory or sub-advisory contract or relationship. The term "ADVISORY EMPLOYEE" means an officer, director, or employee of an Advisor, or any other person identified as a "control person" on the Form ADV or the Form BD filed by the Adviser with the U.S. Securities and Exchange Commission, (1) who, in connection with his or her regular functions or duties, generates, participates in, or obtains information regarding that Adviser's purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose regular functions or duties relate to the making of any recommendations with respect to such purchases or sales; (3) who obtains information or exercises influence concerning investment recommendations made to an Advisory Client of that Adviser; (4) who has line oversight or management responsibilities over employees described in (1), (2) or (3), above; or (5) who has access to non-public information regarding any Advisory Clients' purchase or sale of securities or non-public information regarding the portfolio holdings of any fund for which an Adviser serves as an investment adviser or any fund whose investment adviser or principal underwriter controls, is controlled by, or is under common control with BlackRock. 1 provisions. Technical compliance with the Policy will not automatically insulate from scrutiny any Investment Transaction(2) that indicates an abuse of your fiduciary duties or that creates an appearance of such abuse. Your fiduciary obligation applies not only to your personal Investment Transactions but also to actions taken on behalf of Advisory Clients. In particular, you may not cause an Advisory Client to take action, or not to take action, for your personal benefit rather than for the benefit of the Advisory Client. For example, you would violate this Policy if you caused an Advisory Client to purchase a Security you owned for the purpose of increasing the value of that Security. If you are a Portfolio Employee(3), you would also violate this Policy if you _________________________________________ (2) For purposes of this Policy, the term "INVESTMENT TRANSACTION" means any transaction in a Security or Futures Contract in which you have, or by reason of the transaction will acquire, a Beneficial Ownership interest. The exercise of an option to acquire a Security or Futures Contract is an Investment Transactions in that Security or Futures Contract. As a GENERAL MATTER, the term "SECURITY" means any stock, note, bond, or share issued by an investment company (including both open-end and closed-end investment companies) advised or sub-advised by BlackRock or an affiliate of BlackRock ("BlackRock Funds"), debenture or other evidence of indebtedness (including any loan participation or assignment), limited partnership interest or investment contract OTHER THAN A NON-REPORTABLE SECURITY (as defined below). The term "Security" includes an OPTION on a Security, an index of Securities, a currency or a basket of currencies, including such an option traded on the Chicago Board of Options Exchange or on the New York, American, Pacific or Philadelphia Stock Exchanges as well as such an option traded in the over-the-counter market. The term "Security" does NOT include a physical commodity or a Futures Contract, but it may include an interest in a limited liability company (LLC) or in a private investment fund. The term "FUTURES CONTRACT" includes (a) a futures contract and an option on a futures contract traded on a U.S. or foreign board of trade, such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London International Financial Futures Exchange (a "Publicly-Traded Futures Contract"), as well as (b) a forward contract, a "swap," a "Cap," a "collar," a "floor" and an over-the-counter option (other than an option on a foreign currency, an option on a basket of currencies, an option on a Security or an option on an index of Securities, which fall within the definition of "Security")(a "Privately-Traded Futures Contract"). As a GENERAL MATTER, you are considered to have a "BENEFICIAL OWNERSHIP" interest in a Security or Futures Contract if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in that Security or Futures Contract. YOU ARE PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW). In addition, unless specifically excepted by the Chief Compliance Officer, or his designee, based on a showing that your interest or control is sufficiently attenuated to avoid the possibility of a conflict, you will be considered to have a Beneficial Ownership interest in a Security or a Futures Contract held by: (1) a JOINT ACCOUNT to which you are a party, (2) a PARTNERSHIP in which you are a general partner, (3) a LIMITED LIABILITY COMPANY in which you are a manager-member, (4) a TRUST in which you are a member or your Immediate Family has a pecuniary interest or (5) an INVESTMENT CLUB in which you are a member. See Appendix I for more complete definitions of the terms "Beneficial Ownership," "Futures Contract," and "Security." (3) The term "PORTFOLIO EMPLOYEE" means a Portfolio Manager or an Advisor Employee who provides information or advice to a Portfolio Manager with respect to the purchase or sale of securities, who helps execute a Portfolio Manager's decisions, or who directly supervises a Portfolio Manager. 2 made a personal investment in a Security that might be an appropriate investment for an Advisory Client without first considering the Security as an investment for the Advisory Client. 2. YOU MUST CONDUCT ALL OF YOUR PERSONAL INVESTMENT TRANSACTIONS IN FULL COMPLIANCE WITH THIS POLICY, THE BLACKROCK, INC. INSIDER TRADING POLICY, AND THE OTHER POLICIES OF BLACKROCK (including the policies that prohibit insider trading or that restrict trading in BLK, BKCC or AHR). BlackRock encourages you and your family to develop personal investment programs. However, those investment programs must remain within boundaries reasonably necessary to insure that appropriate safeguards exist to protect the interests of our Advisory Clients and to avoid even the APPEARANCE of unfairness or impropriety. Doubtful situations should be resolved in favor of our Advisory Clients and against your personal Investment Transactions. 3. YOU MUST ACT IN COMPLIANCE WITH THE U.S. FEDERAL SECURITIES LAWS. As an Advisory Employee of BlackRock, it is your duty to conduct all activities in a manner that is consistent with Federal Securities Laws, which include the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, as amended ("1940 Act"), the Investment Advisers Act of 1940, as amended ("Advisers Act"), Title V of Gramm-Leach-Bliley Act, any rules adopted by the SEC under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers and any rules adopted thereunder by the Securities and Exchange Commission or the Department of the Treasury. 4. YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR POSITION. The receipt of investment opportunities, gifts or gratuities from persons seeking to do business, directly or indirectly, with BlackRock, an affiliate, or an Advisory Client could call into question the independence of your business judgment. Doubtful situations should be resolved against your personal interests. 5. YOU MUST PROMPTLY REPORT ANY VIOLATIONS OF THIS POLICY TO THE CHIEF COMPLIANCE OFFICER OR HIS designees. You must report any violation of which you are aware by any person subject to this Policy. The Chief Compliance Officer and the Legal and Compliance Department will keep reports of violations and the identity of those reporting violations strictly confidential. You shall not be subject to any retaliation for reporting a violation in good faith. B. THE GENERAL SCOPE OF THE POLICY'S APPLICATION TO PERSONAL INVESTMENT TRANSACTIONS Rule 17J-1 under the 1940 Act and Rule 204A-1 under the Advisers Act require REPORTING of all personal Investment Transactions in Securities (other than certain "Non-Reportable Securities") by Advisory Employees, whether or not they are Securities that might be purchased or sold by or on behalf of an Advisory Client. This Policy implements that reporting requirement. _________________________________________ The term "PORTFOLIO MANAGER" means any employee of an Advisor who has the authority, whether sole or shared or only from time to time, to make investment decisions or to direct trades affecting an Advisory Client. 3 However, since a primary purpose of the Policy is to avoid conflicts of interest arising from personal Investment Transactions in Securities and other instruments that are held or might be acquired on behalf of Advisory Clients, this Policy only places RESTRICTIONS on personal Investment Transactions in such investments. This Policy also requires reporting and restricts personal Investment Transactions in certain Futures Contracts which, although they are not Securities, are instruments that Advisors buy and sell for Advisory Clients. Although this Policy applies to all officers, directors and other Advisory Employees of BlackRock, the Policy recognizes that Portfolio Managers, and the other Portfolio Employees who provide Portfolio Managers with advice and who execute their decisions, occupy more sensitive positions than other Advisory Employees, and that it is appropriate to subject their personal Investment Transactions to greater restrictions. As of the effective date of this amended and revised Policy, Sections III and IV of this Policy only apply to you if you are an Advisory Employee (which includes Portfolio Employees). You are deemed an Advisory Employee unless you have been positively identified by the Chief Compliance Officer or his designee as not being an Advisory Employee. In addition, there are certain non-U.S. employees who are subject to this Policy due to their involvement with U.S. registered investment advisers. C. THE ORGANIZATION OF THIS POLICY The remainder of this Policy is divided into four main topics. Section III concerns PERSONAL INVESTMENT TRANSACTIONS. Section IV describes restrictions that apply to Advisory Employees who receive INSIDE INFORMATION or seek to serve on a BOARD OF DIRECTORS OR SIMILAR GOVERNING BODY. Section V outlines the procedure for seeking case-by-case EXEMPTIONS from the Policy's requirements. Section VI summarizes the methods for ensuring COMPLIANCE under this Policy. In addition, the following APPENDICES are a part of this Policy: I. Definitions of Capitalized Terms II. Acknowledgement of Receipt of The Policy III. III-A. Request for Duplicate Broker Reports (For persons not associated with BlackRock Investments, Inc.) III-B. Request for Duplicate Broker Reports (For persons associated with BlackRock Investments, Inc.) IV. Fully Discretionary Account Form V. Third Party Mutual Funds Advised or Sub-Advised by BlackRock, Inc. Affiliated Advisers D. QUESTIONS Questions regarding this Policy should be addressed to the Chief Compliance Officer or his designees. If you have any question regarding the interpretation of this Policy or its application to a potential Investment Transaction, you should consult the Chief Compliance Officer (or his designees) BEFORE you execute that transaction. 4 II. LIST OF APPROVED BROKERS All BlackRock employees hired on or after October 2, 2006 will be required to maintain "Personal Accounts" and "Related Accounts" (either referred to as "Account(s)"), as defined below, at one of the following broker-dealers ("Approved Brokers"): o AG Edwards; o Charles Schwab; o E*Trade; o Fidelity; o Merrill Lynch; o Morgan Stanley; o Scottrade; o Smith Barney; o TD Ameritrade; or o UBS If any such employee maintains an Account at a broker-dealer other than an Approved Broker, he/she will need to close or transfer the Account to an Approved Broker. All BlackRock employees hired prior to October 2, 2006 will be required to close or transfer accounts not currently held at one of the Approved Brokers, to an Approved Broker within a specified period of time as determined by BlackRock's Compliance Committee. Non-U.S. employees are subject to the Approved Broker requirements of the personal trading policies in their local jurisdictions. III. PERSONAL INVESTMENT TRANSACTIONS A. IN GENERAL Subject to the limited exclusions described below, you are required to REPORT all Investment Transactions in Securities and Futures Contracts made by you, a member of your Immediate Family, a trust or an investment club in which you have an interest, or on behalf of any account in which you have an interest or which you direct.(4) In addition, Advisory Employees must provide PRIOR NOTIFICATION AND RECEIVE CLEARANCE of certain Investment Transactions in Securities and Futures Contracts that an Advisor holds or may acquire on behalf of an Advisory Client. (A purchase, sale or exercise of an option is a separate Investment Transaction for purposes of these requirements.) The details of these reporting and prior notification requirements are described below. B. REPORTING OBLIGATIONS I. USE OF APPROVED BROKERS ____________________________________________________________ (4) The term "IMMEDIATE FAMILY" means any of the following persons who RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your spouse, any child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including any adoptive relationships. 5 EXCEPT AS OTHERWISE PROVIDED, ALL PERSONAL ACCOUNTS AND RELATED ACCOUNTS MUST BE HELD WITH AN APPROVED BROKER. Where transactions are made directly with the issuer in a direct stock purchase plan or Dividend Reinvestment Plan ("DRIP"), or with the mutual fund company (with respect to open-end mutual funds), you must report to BlackRock the information regarding any account with a transfer agent or bank executing such transaction. This requirement also applies to any purchase or sale of a Security or Futures Contract in which you have, or by reason of the Investment Transaction will acquire, a Beneficial Ownership interest. Thus, as a general matter, any Securities or Futures Contract transactions by members of your Immediate Family will need to be reported if made through an Approved Broker, bank or transfer agent. II. MUTUAL FUND ACCOUNTS Ownership of Open-End Funds advised or sub-advised by BlackRock: All BlackRock employees are required to make any purchases of shares of the open-end BlackRock Funds (except for shares held in the BlackRock 401(k) Plan) directly through the Fund's transfer agent, PFPC Inc. ("PFPC") or Merrill Lynch Pierce Fenner & Smith ("MLPF&S"). Upon commencing employment, you must transfer any existing holdings of shares of open-end BlackRock Funds held in any broker-dealer, trust, custodial or other account into an account at PFPC or MLPF&S. Transactions in shares of open-end BlackRock Funds are not subject to the prior notification requirements as described in Section II.D.1 below. In addition, Advisory Employees are required to report Investment Transactions in, and accounts holding, third-party mutual funds ADVISED OR SUB-ADVISED by BlackRock. A list of such third-party mutual funds may be found on the BlackRock intranet site (Appendix V). Employees are not required to report Investment Transactions in mutual funds NOT advised or sub-advised by BlackRock, but employees are required to report the existence of the account. III. INITIAL REPORT Within 10 days of becoming an Advisory Employee, you must submit an Initial Holdings Certification ("the Certification") via BlackRock's Personal Trading Assistant ("PTA"), the information contained in the Certification must be current as of date no more than 45 days prior to commencing employment or becoming subject to this Policy, for each and every Personal Account and Related Account that holds or is likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest, as well as copies of confirmations for any and all Investment Transactions subsequent to the effective dates of those statements.(5) _________________________________________ (5) The term "PERSONAL ACCOUNT" means the following accounts that hold or are likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest: o any account in your individual name; o any joint or tenant-in-common account in which you have an interest or are a participant; o any account for which you act as trustee, executor, or custodian; and o any account over which you have investment discretion or have the power (whether or not exercised) to direct the acquisition or disposition of Securities (including BlackRock Funds) or Future Contracts (other than an Advisory Client's account that you manage or over which you have investment discretion), including the accounts of any individual or entity that is managed or controlled directly or indirectly by or through you, such as the account of an investment club to 6 This requirement includes accounts held directly with the issuer of the Security in the case of direct stock purchase plans and accounts held directly with open-end mutual funds. You should also enter into PTA the name of any broker-dealer, bank and/or futures commission merchant and the identifying account number for any Personal Account and Related Account that holds or is likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest for which you CANNOT supply the most recent account statement. In addition, you must also enter into PTA the following information for each Security or Futures Contract in which you have a Beneficial Ownership interest: 1. A description of the Security or Futures Contract, including its name or title; 2. The quantity (E.G., in terms of numbers of shares, units or contracts, and the principal amount of debt securities) of the Security or Futures Contract; 3. The custodian of the Security or Futures Contract; and 4. The exchange-ticker symbol or cusip, interest rate and maturity date and, with respect to transactions, the nature of the transaction (buy, sale or other type of acquisition or disposition), price and name of broker-dealer, bank or futures commission merchant effecting the transaction. IV. NEW ACCOUNTS Upon the opening of a new Personal Account or a Related Account, or any other account, that holds or is likely to hold a Security, Futures Contract, or Non-Reportable Security in which you have a Beneficial Ownership interest, you must enter into PTA the name of the Approved Broker for that account, the identifying account number for that Personal Account or Related Account, and the date that the account was established. V. TIMELY REPORTING OF INVESTMENT TRANSACTIONS You must cause each Approved Broker that maintains a Personal Account or a Related Account that holds a Security or a Futures Contract in which you have a Beneficial Ownership interest to provide to the Chief Compliance Officer (or his designee), on a timely basis, duplicate copies of confirmations or all Investment Transactions in that account and of periodic statements but in no event later than 30 days following the end of a calendar quarter for that account ("Duplicate Broker Reports"). Forms for that purpose are attached hereto as Appendix III-A and Appendix III-B. __________________________________________________________ which you belong. There is a presumption that you can control accounts held by members of your Immediate Family sharing the same household. This presumption may be rebutted only by convincing evidence. The term "RELATED ACCOUNT" means any account, other than a Personal Account, that holds a Security or Futures Contract in which you have a direct or indirect Beneficial Ownership interest (other than an account over which you have no investment discretion and cannot otherwise exercise control) and any account (other than an Advisory Client's account) of any individual or entity to whom you give advice or make recommendations with regard to the acquisition or disposition of Securities (including BlackRock Funds) or Futures Contracts (whether or not such advice is acted upon). 7 In addition, you must report, on a timely basis, but in no event later than 30 days, any Investment Transaction in a Security or Futures Contract in which you have or acquired a Beneficial Ownership interest that was made without the use of an Approved Broker. VI. RELATED ACCOUNTS The reporting obligations described above also apply to any Related Account (as defined in Appendix I) and to any Investment Transaction in a Related Account. It is important that you recognize that the definitions of "Personal Account," "Related Account" and "Beneficial Ownership" in Appendix I will most likely require you to provide, or arrange for, the broker-dealer, bank or futures commission merchant, copies of reports for any of these accounts used by or for a member of your Immediate Family or a trust in which you or a member of your Immediate Family has an interest, as well as for any other accounts in which you may have the opportunity, directly or indirectly, to profit or share in the profit derived from any Investment Transaction in that account, including the account of any investment club to which you belong. VII. ANNUAL HOLDINGS REPORT You must report to the Chief Compliance Officer, or his designee, on an annual basis, holdings of all Securities and Futures Contracts in which you have a Beneficial Ownership Interest. This requirement can generally be satisfied by causing each broker-dealer, bank or futures commission merchant that maintains a Personal Account and/or a Related Account, or any other account that holds a Security or Futures Contract in which you have a Beneficial Ownership interest, to provide to the Chief Compliance Officer (or his designee), on a timely basis, Duplicate Broker Reports in accordance with the requirements under Section III.B.4. above. If you have a Beneficial Ownership interest in a Security or Futures Contract that is not held in an account with an Approved Broker from whom the Chief Compliance Officer (or his designee) receives a periodic statement of your Personal Account and/or Related Accounts, you must disclose this information on the Annual Holdings Report filed via PTA in accordance with the requirements under Section VI.A.2 of this Policy. The information in the Annual Holdings Report must be current as of a date no more than 45 days before the report is submitted. You must supply, where indicated on the Annual Holdings Report, the following information for each Security or Futures Contract for which you had any Beneficial Ownership interest: 1. A description of the Security or Futures Contract, including its name or title; 2. The quantity (E.G., in terms of numbers of shares, units or contracts, and the principal amount of debt securities) of the Security or Futures Contract; 3. The custodian of the Security or Futures Contract; and 4. The exchange-ticker symbol or cusip, and for debt securities the interest rate and maturity date. The reporting requirements of this Section 7 do not apply to securities issued by an investment company sponsored by the Adviser that is exempt from registration under the 1940 Act, as amended, or securities of commingled investment vehicles sponsored by the Adviser that are held in BlackRock's 401(k) Plan. 8 VIII. EXEMPTIONS FROM INVESTMENT TRANSACTION REPORTING You need not report Investment Transactions in any account, including a Fully Discretionary Account,(6) over which neither you nor an Immediate Family Member has or had any direct or indirect influence or control. For example, Investment Transactions in the account of your spouse in an employee benefit plan would not have to be reported if neither you nor your spouse has any influence or control over those Investment Transactions. You also need not report Investment Transactions in Non-Reportable Securities nor need you furnish, or require a broker-dealer or futures commission merchant to furnish, confirmations of Investment Transactions in Non-Reportable Securities.(7) This includes, but is not limited to, Investment Transactions in U.S. Government securities, money market interests, or shares in registered open-end investment companies (I.E., mutual funds) not advised or sub-advised by BlackRock or its affiliates and shares of unit investment trusts that invest exclusively in open-end funds, none of which are advised or sub-advised by BlackRock or an affiliate of BlackRock. IX. CONSULTANTS Consultants may be required to comply with the Policy depending on the nature of the work they perform for BlackRock and the sensitivity of the information used by the consultants to perform their duties. The Chief Compliance Officer or his designee will determine whether a particular consultant is to be included under the Policy. _____________________________________ (6) The term "FULLY DISCRETIONARY ACCOUNT" means a Personal Account or Related Account managed or held by a broker-dealer, futures commission merchant, investment adviser or trustee as to which neither you nor an Immediate Family member: (a) exercise any investment discretion; (b) suggests or receives notice of transactions prior to their execution; and (c) otherwise has any direct or indirect influence or control. In addition, to qualify as a Fully Discretionary Account, the individual broker, registered representative or merchant responsible for that account must not be responsible for nor receive advance notice of any purchase or sale of a Security or Futures Contract on behalf of an Advisory Client. To qualify an account as a Fully Discretionary Account, the Chief Compliance Officer (or his designee) must receive and approve a written notice, in the form attached hereto as Appendix IV, that the account meets the foregoing qualifications as a Fully Discretionary Account. You are not permitted to invest in securities issued, sponsored or managed by BlackRock, Inc. or its investment advisory companies, its parent, subsidiaries or affiliates, any investment advisory company or broker-dealer affiliated with BlackRock, Inc., Anthracite Capital, Inc. ("Anthracite") or any closed-end or open-end BlackRock Funds, in a Fully Discretionary Account.) (7) The term "NON-REPORTABLE SECURITY" means any Security (as defined in Appendix I) not included within the definition of Security in SEC Rule 17j-1(a)(4) under the 1940 Act, as amended, or within the definition or Reportable Security in Rule 204A-1(e)(10) under the Advisers Act, as amended, including: 1. A direct obligation of the Government of the United States; 2. Shares of money market funds; 3. Shares of registered open-end investment companies, other than those for which BlackRock or an affiliate of BlackRock acts as investment adviser, sub-adviser or principal underwriter; 4. HIGH QUALITY SHORT-TERM DEBT INSTRUMENTS, including, but not limited to, bankers' acceptances, bank certificates of deposit, commercial paper and repurchase agreements; 5. Shares of authorized unit trusts, open-end investment companies ("OEICs"), other than those for which BlackRock or an affiliate of BlackRock acts as investment adviser or sub-adviser, and direct obligations of the Government of the United Kingdom; and 6. Shares of unit investment trusts that are invested exclusively in one or more registered open-end investment companies, none of which are advised by BlackRock or an affiliate of BlackRock. 9 C. PROHIBITED OR RESTRICTED INVESTMENT TRANSACTIONS 1. INITIAL PUBLIC OFFERINGS As an Advisory Employee, you may not acquire Beneficial Ownership of any Security in an initial public offering, except that, with the approval of the Compliance Committee and the General Counsel of BlackRock, you may acquire Beneficial Ownership of a Security in an initial public offering directed or sponsored by BlackRock. For purposes of this Policy, an initial public offering shall not include the purchase of a Security in an initial public offering by (i) a savings bank to its depositors, (ii) a mutual insurance company to its policyholders, or (iii) a building society to its depositors. 2. LIMITED OFFERINGS If you are a Portfolio Employee, you may not acquire Beneficial Ownership of any Security in a Limited Offering, or subsequently sell that interest, unless you have received the prior written approval of the Chief Compliance Officer (or his designee) by completing the Private Placement Questionnaire. Limited Offerings, which are also referred to as "private placements" are offerings that are exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 thereunder. Approval will not be given unless a determination is made that the investment opportunity should not be reserved for one or more Advisory Clients, and that the opportunity to invest has not been offered to you by virtue of your position with an Advisor. IF YOU HAVE ACQUIRED BENEFICIAL OWNERSHIP OF SECURITIES IN A LIMITED OFFERING, YOU MUST DISCLOSE THAT INVESTMENT TO THE CHIEF COMPLIANCE OFFICER WHEN YOU PLAY A PART IN ANY CONSIDERATION OF ANY INVESTMENT BY AN ADVISORY CLIENT IN THE ISSUER OF THE SECURITIES, AND ANY DECISION TO MAKE SUCH AN INVESTMENT MUST BE INDEPENDENTLY REVIEWED BY A PORTFOLIO MANAGER WHO DOES NOT HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITIES OF THE ISSUER. D. INVESTMENT TRANSACTIONS REQUIRING PRE-CLEARANCE You must submit a pre-clearance form via PTA and receive clearance of ANY Investment Transaction (including gifts of Securities) in Securities or Futures Contracts in a Personal Account or Related Account, or in which you otherwise have or will acquire a Beneficial Ownership interest, UNLESS that Investment Transaction, Security, or Futures Contract falls into one of the following categories that are identified as "excluded from prior notification and clearance" in Section III.D.2. The purpose of prior notification is to permit the Chief Compliance Officer (or his designee) to take reasonable steps to investigate whether that Investment Transaction is in accordance with this Policy. Satisfaction of the prior notification requirement does not, however, constitute approval or authorization of any Investment Transaction for which you have given prior notification. As a result, the primary responsibility for compliance with this Policy rests with you. 1. PRIOR NOTIFICATION AND CLEARANCE PROCEDURE 10 Prior notification must be given by completing and submitting a pre-clearance form via PTA. No Investment Transaction requiring prior notification and clearance may be executed prior to the "Approval" status being displayed on the transaction screen on PTA, or receipt of the Approval email from PTA. The time and date of that notice will be reflected on the Approval email sent by PTA to the Advisory Employee. Unless otherwise specified, an Investment Transaction requiring prior notification and clearance must be placed and executed by the end of trading in New York City or, in the case of Advisory Employees employed by BlackRock International, Ltd., by the end of trading in the United Kingdom on the day of notice from the Chief Compliance Officer (or his designee) that the prior notification process has been completed. If a proposed Investment Transaction is not executed (with the exception of a limit order) within the time specified, you must repeat the prior notification process before executing the transaction. A notice from PTA that the prior notification process has been competed is no longer effective if you discover, prior to executing your Investment Transaction, that the information on your prior pre-clearance form is no longer accurate, or if the Chief Compliance Officer (or his designee) revokes his or her notice for any other reason. The Chief Compliance Officer (or his designee) may undertake such investigation as he or she considers necessary to investigate whether an Investment Transaction for which prior notification has been sought complies with the terms of this Policy and is consistent with the general principles described at the beginning of this Policy. As part of that investigation, the Chief Compliance Officer (or his designee) will determine via PTA whether there is a pending BUY or SELL order in the same equity Security (except for orders of securities included in the S&P 100 Index or in the FTSE 100 Index), or a Related Security, on behalf of an Advisory Client.(8) If such an order exists, the pre-clearance request will receive a "Denied" message on the transaction screen on PTA. 2. TRANSACTIONS, SECURITIES AND FUTURES CONTRACTS EXCLUDED FROM PRIOR NOTIFICATION AND CLEARANCE Prior notification and clearance will not be required for the following Investment Transactions, Securities and Futures Contracts. They are exempt only from the Policy's prior notification requirement, and, unless otherwise indicated, remain subject to the Policy's other requirements, including its reporting requirements. A) TRANSACTIONS EXCLUDED FROM PRIOR NOTIFICATION AND CLEARANCE Prior notification and clearance is not required for any of the following Investment Transactions: 1) Any Investment Transaction in a Fully Discretionary Account that has been approved as such by the Chief Compliance Officer or his designee. (You are not permitted to invest in securities issued, sponsored or managed by BlackRock, Inc. or _____________________________________ (8) The term "RELATED SECURITY" means, as to any Security, any instrument related in value to that Security, including, but not limited to, any option or warrant to purchase or sell that Security, and any Security convertible into or exchangeable for that Security. 11 its investment advisory companies, subsidiaries or affiliates, any investment advisory company or broker-dealer affiliated with BLK, BKCC, AHR or any closed-end or open-end BlackRock Funds, in a Fully Discretionary Account. 2) Purchases of Securities under dividend reinvestment plans. 3) Purchases of Securities by an exercise of rights issued to the holders of a class of Securities PRO rata, to the extent those rights are issued with respect to Securities of which you have Beneficial Ownership. 4) Acquisitions or dispositions of Securities as the result of a stock dividend, stock split, reverse stock split, merger, consolidation, spin-off or other similar corporate distribution or reorganization applicable to all holders of a class of Securities of which you have Beneficial Ownership. 5) Purchases of common stock of BlackRock, Inc. under the BlackRock, Inc. Employee Stock Purchase Plan, or matching shares of BlackRock, Inc. in BlackRock's 401(k) Plan or similar transactions of employer stock purchased and sold through employer benefit plans in which the spouse of a BlackRock employee may participate. 6) Investment Transactions in 529 Plans or Direct Stock Purchase Plans that have been approved by the Chief Compliance Officer or his designee. 7) Automatic investments by direct debit into a personal equity plan ("PEP"), or similar type of plan in Non-Reportable Securities if the pre-notification process was completed for the first such investment. 8) Investment Transactions made by a person who serves on the Board of Directors of an Advisor and is not involved with the Advisory operations of such Advisor nor engages in the type of activities described under (1), (2) or (3), and who does not have access to non-public Advisory Client information as described under (5), under the term Advisory Employee as defined in Appendix I. 9) Investment Transactions in the following four (4) Exchange Traded Funds ("ETFs"): the Nasdaq-100 Index Tracking Stock ("QQQQ"), SPDR Trust ("SPY"), DIAMONDS Trust, Series I ("DIA"), and the iShares S&P 500 Index Fund ("IVV"). Any questions about whether an ETF not listed in this Section III.D.2. (a) is excluded from prior-notification and clearance should be directed to the Chief Compliance Officer or his designee. 10) Other purchases or sales which are non-volitional on the part of the employee (e.g., an in-the-money option that is automatically exercised by the broker; a security that is called away as the result of an exercise of an option; or a security that is sold by a broker without employee consultation to meet a margin call not met by the employee). B) SECURITIES EXCLUDED FROM PRIOR NOTIFICATION AND CLEARANCE Prior notification and clearance is not required for an Investment Transaction in securities issued by an open-end registered investment company (including open-end BlackRock Funds) or in Non-Reportable Securities, as defined in Appendix I, E.G., U.S. Government securities and "high quality short-term debt instruments." Prior notification and clearance is required for Investment Transactions in BlackRock Closed-End Funds. C) FUTURES CONTRACTS EXCLUDED FROM PRIOR NOTIFICATION AND CLEARANCE Prior notification and clearance is not required for an Investment Transaction in the following Futures Contracts: 12 1) Currency futures; 2) U.S. Treasury futures; 3) Eurodollar futures; 4) Physical commodity futures (E.G., contracts for future delivery of grain, livestock, fiber or metals); 5) Futures contracts to acquire Fixed Income Securities issued by a U.S. Government agency, a foreign government, or an international or supranational agency; 6) Futures contracts on the Standard and Poor's 500 Index, the Dow Jones Industrial Average or NASDAQ 100 Index; and 7) Futures contracts on the Financial Times Stock Exchange 100 ("FTSE") Index. E. BAN ON SHORT-TERM TRADING PROFITS You may not profit from the purchase or sale, or the sale and purchase, within 60 calendar days, of the same Securities and/or Related Security. Any such short-term trade must be reversed or unwound, or if that is not practical, the profits must be disgorged and distributed in a manner determined by the CCO. This short-term ban does NOT apply to Investment Transactions in Non-Reportable Securities (as defined in Appendix I) or in Futures Contracts. This ban also does NOT apply to a purchase or sale in connection with a Transaction Exempt from Prior Notification and Clearance (as described above in Section III.D.2.(a)), a transaction in a Fully Discretionary Account or a transaction excluded from the "blackout" periods pursuant to Section III.F.2 below. Finally, the short-term trading ban does NOT apply to a purchase or sale of shares of open-end BlackRock Funds or to any shares of BlackRock, Inc. However, trading in BlackRock, Inc. stock remains subject to the restrictions in BlackRock's Section 16 Policy and Insider Trading Policy. Trading in BlackRock open-end Funds is subject to the Policy Involving Certain Trading Activity in Shares of BlackRock Funds, and the restrictions and redemption fees set forth in each fund's prospectus. You are considered to profit from a short-term trade if Securities of which you have Beneficial Ownership (including Securities held by Immediate Family member) are sold for more than their purchase price, even though the Securities purchased and the Securities sold are held of record or beneficially by different persons or entities. F. BLACKOUT PERIODS Your ability to engage in certain Investment Transactions may be prohibited or restricted during the "blackout" periods described below: 1. Specific Blackout Periods a. You may not purchase or sell a Security, a Related Security, or Futures Contract at a time when you intend or know of another's intention to purchase or sell that same Security, a Related Security, or Futures Contract, on behalf of an Advisory Client or ANY Adviser (the "Specific Knowledge Blackout Period"). 13 b. In addition, if you are a PORTFOLIO EMPLOYEE, you may not purchase or sell a Security, a Related Security or a Futures Contract which you are considering or which you have considered and rejected for purchase or sale for an Advisory Client within the previous 15 CALENDAR DAYS (the "15-Day Blackout Period") unless the Chief Compliance Officer or his designee, after consultation with your supervisor, has approved your Investment Transaction.(9) c. Finally, if you are a PORTFOLIO MANAGER, you may not purchase or sell a Security, a Related Security, or Futures Contract within 7 CALENDAR DAYS before or after a transaction in that Security, a Related Security, or Futures Contract, by an Advisory Client for which you are responsible (the "7-Day Blackout Period"). For Portfolio Employees or Portfolio Managers, the Chief Compliance Officer (or his designee) will not give such notice until any applicable 15-Day Blackout Period or 7-Day Blackout Period has expired or any required approvals or exemptions have not been obtained. An Investment Transaction that violates one of these Blackout restrictions must be reversed or unwound, or if that is not practical, the profits must be disgorged and distributed in a manner determined by the Compliance Committee. 2. Exemptions from Blackout Restrictions The foregoing blackout period restrictions do NOT apply to Investment Transactions in: a. Non-Reportable Securities, as defined in Appendix I; b. Securities of a company included in the Standard & Poor's 100 (S&P 100) Index. (S&P 100 securities are subject to the Policy's prior notification and clearance requirements.); c. A Futures Contract Excluded from Prior Notification under this Policy (as described in Section III.D.2.(c)); d. A Fully Discretionary Account; e. Securities of a company included in the Financial Times Stock Exchange 100 Index (FTSE 100 securities are subject to the Policy's prior notification and clearance requirements); and f. Exchange Traded Funds Excluded from Prior Notification under this Policy (as described above in Section III.D). IV. INSIDE INFORMATION AND SERVICE AS A DIRECTOR A. INSIDE INFORMATION As an employee of BlackRock, Inc., you must comply with the BlackRock, Inc. Insider Trading Policy, Confidentiality Policy and Portfolio Information Distribution Guidelines. Copies of these Policies and Guidelines were furnished to all employees at the time of their ________________________________________ (9) SEC Rule 17j-1 places restrictions on the purchase or sale of any "security held or to be acquired" by a registered investment company. Rule 17j-1(a)(10) defines a "Security held or to be acquired" by a registered investment company as including any security which, within the most recent 15 days, "is being or has been considered by such company or its investment adviser for purchase by such company." 14 adoption and is furnished or made available to all new employees at the commencement of their employment. In addition, as an Advisory Employee, you must notify the General Counsel or Chief Compliance Officer (or their designees) of BlackRock if you receive or expect to receive material non-public information about an entity that issues securities. The General Counsel in cooperation with the Chief Compliance Officer will determine the restrictions, if any, that will apply to your communications and activities while in possession of that information. In general, those restrictions will include: 1. An undertaking not to trade, either on your own behalf or on behalf of an Advisory Client, in the securities of the entity about which you have material non-public information. 2. An undertaking not to disclose material non-public information to other Advisory Employees. 3. An undertaking not to participate in discussions with or decisions by other Advisory Employees relating to the entity about which you have material non-public information. The General Counsel, in cooperation with the Chief ComplianceOfficer,or their designees, will maintain a "Restricted list" of entities about which Advisory Employees may have material non-public information. This "restricted list" will be available to the Chief Compliance Officer (and his designees) which he conducts investigations or reviews related to the Prior Notification Procedure and Clearance described previously in Section III.D.1 or the Post-Trade Monitoring and Investigations process described below in Section V.B.3. B. SERVICE AS A DIRECTOR You may not serve on the board of directors or other governing board of any entity (other than an entity sponsored by BlackRock) unless you have received the prior written approval of the General Counsel of BlackRock or his designee. If permitted to serve on a governing board, an Advisory Employee will be ISOLATED from those Advisory Employees who make investment decisions regarding the securities of that entity, through an information barrier or other procedures determined by the General Counsel of BlackRock or his designee. In general, the information barrier or other procedures will include: 1. An undertaking not to trade or to cause a trade on behalf of an Advisory Client in the securities of the entity on whose board you serve; 2. An undertaking not to disclose material non-public information about that entity to other Advisory Employees; and 3. An undertaking not to participate in discussions with or decisions by other Advisory Employees relating to the entity on whose board you serve. V. EXEMPTIONS The Compliance Committee, in its discretion, may grant case-by-case exceptions to any of the foregoing requirements, restrictions or prohibitions, except that the Compliance Committee may not exempt any Investment Transaction in a Security (other than a Non-Reportable Security) or a Futures Contract from the Policy's reporting requirements. Exemptions from the Policy's prior notification and clearance requirements and from the Policy's restrictions on acquisitions in initial public offerings, short-term trading and trading during blackout periods will require a determination by the Compliance Committee that the exempted transaction 15 does not involve a realistic possibility of violating eh general principles described at the beginning of this Policy. An application for a case-by-case exemption, in accordance with this paragraph, should be made IN WRITING to the Chief Compliance Officer or his designee, who will promptly forward that written request to the members of the Compliance Committee. VI. COMPLIANCE A. CERTIFICATIONS 1. UPON RECEIPT OF THIS POLICY Upon commencement of your employment or the effective date of this Policy, whichever occurs later and upon any material amendments of this Policy, all Advisory Employees will be required to acknowledge receipt of their copy of this Policy by submitting a certification via BlackRock University or via New Employee Orientation. By that acknowledgment, you will also agree: a. To read the Policy, to make a reasonable effort to understand its provisions, and to ask the Chief Compliance Officer (or his designee) questions about those provisions you find confusing or difficult to understand. b. To comply with the Policy, including its general principles, its reporting requirements, its prohibitions, its prior notification requirements, its short-term trading and blackout restrictions. c. To advise the members of your Immediate Family about the existence of the Policy, its applicability to their personal Investment Transactions and your responsibility to assure that their personal Investment Transactions comply with the Policy. d. To cooperate fully with any investigation or inquiry by or on behalf of the Chief Compliance Officer (or his designees) or the Compliance Committee to determine your compliance with the provisions of the Policy. In addition, your acknowledgment will recognize that any failure to comply with the Policy and to honor the commitments made by your acknowledgment may result in the disciplinary action, including dismissal. The most current Policy is posted on the BlackRock web. 2. ANNUAL CERTIFICATION OF COMPLIANCE You are required to certify on an annual basis, via PTA, that you have complied with each provision of your initial acknowledgment (see above). In particular, your annual certification will require that you certify that you have read and that you understand the Policy, that you recognize that you are subject to its provisions, that you complied with the requirements of the Policy during the period to which it applies, and that you have disclosed, reported, or caused to be reported all Investment Transactions required to be disclosed or reported pursuant to the requirements of the Policy and that you have disclosed, reported or caused to be reported all Personal Accounts and Related Accounts, or any other accounts, that hold or are likely to hold a Security, Futures Contract or Non-Reportable Security in which you have a Beneficial 16 Ownership interest. In addition, you will be required to confirm the accuracy of the record of information on file with the Adviser with respect to such Personal Accounts and Related Accounts or other accounts. If you have a Beneficial Ownership interest in a Security or Futures Contract that is not reported to the Chief Compliance Officer, or his designee, on a periodic basis through Duplicate Broker Reports, you must add this holding to PTA, and certify it at the time you make your Annual Certification of Compliance. The information in the Annual Holdings Report must be current as of a date no more than 45 days before the report is submitted. B. SUPERVISORY PROCEDURES 1. THE COMPLIANCE COMMITTEE The Policy will be implemented, monitored and reviewed by the Compliance Committee. The Compliance Committee, by a simple majority of its members, may appoint new members of the Committee, may replace existing members of the Committee, and may fill vacancies on the Committee. Among other responsibilities, the Compliance Committee will consider requests for case-by-case exemptions (described above) and will conduct investigations (described below) of any actual or suspected violations of the Policy. The Compliance Committee will determine what remedial actions, if any, should be taken by an Advisor in response to a violation of the Policy. The Compliance Committee will implement any procedures reasonably necessary to prevent violations of the Policy. The designee of the Compliance Committee will also provide reports (described below) regarding significant violations of the Policy and the procedures to implement the Policy. The Compliance Committee may recommend changes to those procedures or to the Policy to the management of the Advisors. Finally, the Compliance Committee will designate one person to act as Chief Compliance Officer for all Advisors. 2. THE CHIEF COMPLIANCE OFFICER The Chief Compliance Officer designated by the Compliance Committee will be responsible for the day-to-day administration of the Policy for all Advisors, subject to the direction and control of the Compliance Committee. Based on information supplied by the management of each Advisor, the Chief Compliance Officer (or his designees) will forward a copy of the Policy to each Advisory Employee and will notify each person designated as a Portfolio Employee or Portfolio Manager. The Chief Compliance Officer will also be responsible for administration of the reporting and prior notification functions described in the Policy, and will maintain the reports required by those functions. In addition, the Chief Compliance Officer (or his designees) will attempt to answer any questions from an Advisory Employee regarding the interpretation or administration of the Policy. When necessary or desirable, the Chief Compliance Officer will consult with the Compliance Committee about such questions. The Chief Compliance Officer may designate one or more Assistant Compliance Officers to whom the Chief Compliance Officer may delegate any of the duties described in this paragraph or in the succeeding paragraphs, and who shall be empowered to act on the Chief Compliance Officer's behalf when the Chief Compliance Officer is absent or Compliance personnel will submit pre-clearance requests via PTA, but will not be allowed to pre-approve their own transactions. 3. POST-TRADE MONITORING AND INVESTIGATIONS 17 The Chief Compliance Officer (or his designees) will review PTA and other information supplied for each Advisory Employee so that the Chief Compliance Officer can detect and prevent potential violations of the Policy. This information may also be disclosed to the Advisor's auditors, attorneys and regulators. If, based on his or her review of information supplied for an Advisory Employee, or based on other information, the Chief Compliance Officer suspects that the Policy may have been violated, the Chief Compliance Officer (or his designees) will perform such investigations and make such inquiries as he or she considers necessary. You should expect that, as a matter of course, the Chief Compliance Officer will make inquiries regarding any personal Investment Transaction in a Security or Futures Contract that occurs on the same day as a transaction in the same Security or Futures Contract on behalf of an Advisory Client. If the Chief Compliance Officer reaches a preliminary conclusion that an Advisory Employee may have violated this Policy, the Chief Compliance Officer will report that preliminary conclusion in a timely manner to the Compliance Committee and will furnish to the Committee all information that relates to the Chief Compliance Officer's preliminary conclusion. The Chief Compliance Officer may also report his preliminary conclusion and the information relating to that preliminary conclusion to the Advisor's auditors, attorneys and regulators. Promptly after receiving the Chief Compliance Officer's report of a possible violation of the Policy, the Compliance Committee, with the aid and assistance of the Chief Compliance Officer, will conduct an appropriate investigation to determine whether the Policy has been violated and will determine what remedial action should be taken by the Advisor in response to any such violation(s). For purposes of these determinations, a majority of the Compliance Committee will constitute a quorum and action taken by a simple majority of that quorum will constitute action by the Committee. 4. REMEDIAL ACTIONS The remedial actions that may be recommended by the Compliance Committee may include, but are not limited to, disgorgement of profits, imposition of a fine, censure, demotion, suspension or dismissal. As part of any sanction, e.g., for violation of the Policy's restrictions on short-term trading or trading during blackout periods, you may be required to reverse or unwind a transaction and to forfeit any profit or to absorb any loss from the transaction. If an Investment Transaction may not be reversed or unwound, you may be required to disgorge any profits associated with the transaction, which profits will be distributed in a manner prescribed by the Compliance Committee in the exercise of its discretion. Profits derived from Investment Transactions in violation of this Policy may not be offset by any losses from Investment Transactions in violation of this Policy. Finally, evidence suggesting violations of criminal laws will be reported to the appropriate authorities, as required by applicable law. In determining what, if any, remedial action is appropriate in response to a violation of the Policy, the Compliance Committee will consider, among other factors, the gravity of your violation, the frequency of your violations, whether any violation caused harm or the potential of harm to any Advisory Client, whether you knew or should have known that your Investment Transaction 18 violated the Policy, whether you engaged in an Investment Transaction with a view to making a profit on the anticipated market action of a transaction by an Advisory Client, your efforts to cooperate with the Chief Compliance Officer's investigation, and your efforts to correct any conduct that led to a violation. In rare instances, the Compliance Committee may find that, for equitable reasons, no remedial action should be taken. 5. REPORTS OF MATERIAL VIOLATIONS In a timely manner, and not less frequently than annually, the designee of the Compliance Committee will report to the Management Committee of BlackRock, and to the directors or trustees of each investment company that is an Advisory Client, any known material violation of the Policy by an advisory employee to that investment company and sanctions imposed in response to the material violation. Evidence suggesting violations of criminal laws will be reported to the appropriate authorities, as required by applicable law. 6. REPORTS OF MATERIAL CHANGES TO THE POLICY Within a reasonable period of time of making any material change to the Policy, but in no event longer than six months after making a material change, the designee of the Compliance Committee will report to the Management Committee of BlackRock, and to the directors/trustees of each investment company that is an Advisory Client, the nature of such changes. 7. ANNUAL REPORTS The designee of the Compliance Committee will furnish an annual report to the Management Committee of BlackRock, and to the directors or trustees of each investment company that is an Advisory Client, that, at a minimum, will: (i) Summarize existing procedures and restrictions concerning personal investing by Advisory Employees and any changes in those procedures and restrictions that were made during the previous year; (ii) Certify that the Advisor has adopted and implemented such procedures as are reasonably necessary to prevent Advisory Employees from violating this Policy; (iii) Describe any issues arising under the Policy since the last report, including, but not limited to, information about any material violations of the Policy or procedures and the sanctions imposed in response to those violations; and (iv) Describe any changes in existing procedures or restrictions that the Compliance Committee recommends based upon its experience under the Policy, evolving industry practices, or developments in applicable laws or regulations. 8. RECORDS The Chief Compliance Officer or his designees shall maintain records in the manner and to the extent set forth below, these records shall be available for examination by representatives of the Securities and Exchange Commission. 19 (i) As long as this Policy is in effect, a copy of it shall be preserved in an easily accessible place; (ii) The following records must be maintained in an easily accessible place for five years after the end of the fiscal year in which the event took place; a. A copy of any other Advisory Employee Investment Transaction Policy which has been in effect; b. The names of any Compliance Officers that were responsible for reviewing Duplicate Broker Reports and other transaction and holding information; c. The names of any Compliance Officers that were responsible for maintaining the records set forth in this Section. d. A record of any decision, and the reasons supporting the decision, to approve the acquisition by an Advisory Employee of a Beneficial Ownership in any Security in an initial public offering or limited offering; e. A record of any violation of this Policy, and of any action taken as a result of such violation; f. A list of all Advisory Employees who have been, subject to this Policy; g. A record of each holdings report made by an Advisory Employee; and h. A record of all written Acknowledgements by Advisory Employees of receipt of the Policy. (iii) The following records must be maintained for five years after the end of the fiscal year in which the event took place, the first two years in an appropriate and easily accessible office of the Advisor: a. A copy of each Duplicate Broker Report and other transaction and holding information submitted to the Compliance Officer responsible for reviewing Reports; and b. A copy of each annual written report submitted by the Compliance Committee to the management committee of BlackRock and to the directors or trustees of each investment company that is an Advisory Client. VII. EFFECTIVE DATE The provisions of this Policy were effective on October 1, 1998, as amended March 1, 2000, February 1, 2005, September 30, 2006 and April 26, 2007. 20 A-6 APPENDIX I DEFINITIONS OF CAPITALIZED TERMS The following definitions apply to the capitalized terms used in the Policy: ADVISER The term "Adviser" means any entity under the control of BlackRock, whether now in existence or formed after the date hereof, that is registered as (i) an investment Adviser under the Investment Advisers Act of 1940, as amended, or (ii) a broker-dealer under the Securities Exchange Act of 1934, as amended, other than any such investment Adviser or broker-dealer that has adopted its own employee investment transaction policy. ADVISORY CLIENT The term "Advisory Client" means an investment company, whether or not registered with any regulatory authority, an institutional investment client, a personal trust or estate, a guardianship, an employee benefit trust, or another client with which the Adviser by which you are employed or with which you are associated has an investment management, advisory or sub-advisory contract or relationship. ADVISORY EMPLOYEE The term "Advisory Employee" means an officer, director, or employee of an Adviser, or any other person identified as a "control person" on the Form ADV or the Form BD filed by the Adviser with the U.S. Securities and Exchange Commission, (1) who, in connection with his or her regular functions or duties, generates, participates in, or obtains information regarding that Adviser's purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose regular functions or duties relate to the making of any recommendations with respect to such purchases or sales; (3) who obtains information or exercises influence concerning investment recommendations made to an Advisory Client of that Adviser; (4) who has line oversight or management responsibilities over employees described in (1), (2) or (3) above; or (5) who has access to non-public information regarding any Advisory Clients' purchase or sale of securities, or non-public information regarding the portfolio holdings of any fund for which an Adviser serves as investment adviser or any fund whose investment adviser or principal underwriter controls, is controlled by, or is under common control with BlackRock. BENEFICIAL OWNERSHIP As a GENERAL MATTER, you are considered to have a "Beneficial Ownership" interest in a Security or Futures Contract if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in that Security or Futures Contract. YOU ARE PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW). In addition, unless specifically excepted by the Chief Compliance Officer or his designee based on a showing that your interest or control is sufficiently attenuated to avoid the possibility of a conflict, you will be considered to have a Beneficial Ownership interest in a Security or Futures Contract held by: (1) a JOINT ACCOUNT to which you are a party, (2) a PARTNERSHIP in which you are a general partner, (3) a A-1 LIMITED LIABILITY COMPANY in which you are a manager-member, (4) a TRUST in which you or a member of your Immediate Family has a pecuniary interest, or (5) an investment club in which you are a member. Although you may have a Beneficial Ownership interest in a Security or Futures Contract held in a Fully Discretionary Account (as defined below), the application of this Policy to such a Security or Futures Contract may be modified by the special exemptions provided for Fully Discretionary Accounts. As a TECHNICAL MATTER, the term "Beneficial Ownership" for purposes of this Policy will be interpreted in the same manner as it would be under SEC Rule 16a-1(a)(2) in determining whether a person has beneficial ownership of a security for purposes of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. BLACKROCK The term "BlackRock" means BlackRock, Inc. CHIEF COMPLIANCE OFFICER The term "Chief Compliance Officer" means the person designated by the Compliance Committee as responsible for the day-to-day administration of the Policy in accordance with Section V(B)(2) of the Policy. COMPLIANCE COMMITTEE The term "Compliance Committee" means the committee of persons who have responsibility for implementing, monitoring and reviewing the Policy, in accordance with Section V(B)(1) of the Policy. DUPLICATE BROKER REPORTS The term "Duplicate Broker Reports" means duplicate copies of confirmations of transactions in your Personal or Related Accounts and of periodic statements for those accounts. FIXED INCOME SECURITIES For purposes of this Policy, the term "Fixed Income Securities" means fixed income Securities issued by agencies or instrumentalities of, or unconditionally guaranteed by, the Government of the United States, corporate debt Securities, mortgage-backed and other asset-backed Securities, fixed income Securities issued by state or local governments or the political subdivisions thereof, structured notes and loan participations, foreign government debt Securities, and debt Securities of international agencies or supranational agencies. For purposes of this Policy, the term "Fixed Income Securities" will not be interpreted to include U.S. Government Securities or any other Exempt Security (as defined above). FULLY DISCRETIONARY ACCOUNT The term "Fully Discretionary Account" means a Personal Account or Related Account managed or held by a broker-dealer, futures commission merchant, investment Adviser or trustee as to which neither you nor an Immediate Family Member (as defined below): (a) exercises any investment discretion; A-2 (b) suggests or receives notice of transactions prior to their execution; and (c) otherwise has any direct or indirect influence or control. In addition, to qualify as a Fully Discretionary Account, the individual broker, registered representative or merchant responsible for that account must not be responsible for nor receive advance notice of any purchase or sale of a Security or Futures Contract on behalf of an Advisory Client. To qualify an account as a Fully Discretionary Account, the Chief Compliance Officer (or his designee) must receive and approve a written notice, in the form attached hereto as Appendix IV, that the account meets the foregoing qualifications as a Fully Discretionary Account. You are not permitted to invest in securities issued, sponsored or managed by BlackRock, Inc. or its investment advisory companies, subsidiaries or affiliates, including any investment advisory company or broker-dealer affiliated with BlackRock, Inc. (BLK), BlackRock Kelso Capital Corp. (BKCC), Anthracite Capital, Inc. (AHR) or any closed-end or open-end BlackRock Funds, in a Fully Discretionary Account. FUTURES CONTRACT The term "Futures Contract" includes (a) a futures contract and an option on a futures contract traded on a U.S. or foreign board of trade, such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London International Financial Futures Exchange (a "Publicly-Traded Futures Contract"), as well as (b) a forward contract, a "swap", a "cap", a "collar", a "floor" and an over-the-counter option (other than an option on a foreign currency, an option on a basket of currencies, an option on a Security or an option on an index of Securities, which fall within the definition of "Security") (a "Privately-Traded Futures Contract"). You should consult with the Chief Compliance Officer (or his designee) if you have any doubt about whether a particular Investment Transaction you contemplate involves a Futures Contract. For purposes of this definition, a Publicly-Traded Futures Contract is defined by its expiration month, i.e., a Publicly-Traded Futures Contract on a U.S. Treasury Bond that expires in June is treated as a separate Publicly-Traded Futures Contract, when compared to a Publicly-Traded Futures Contract on a U.S. Treasury Bond that expires in July. IMMEDIATE FAMILY The term "Immediate Family" means any of the following persons who RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your spouse, any child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including any adoptive relationships. INVESTMENT TRANSACTION For purposes of this Policy, the term "Investment Transaction" means any transaction in a Security or Futures Contract in which you have, or by reason of the transaction will acquire, a Beneficial Ownership interest. The exercise of an option to acquire a Security or Futures Contract is an Investment Transaction in that Security or Futures Contract. A-3 LIMITED OFFERING The term "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 thereunder. NON-REPORTABLE SECURITY The term "Non-Reportable Security" means any Security (as defined below) not included within the definition of Security in SEC Rule 17j-1(a)(4) under the Investment Company Act of 1940, as amended, or within the definition of Reportable Security in Rule 204A-1(e)(10) under the Investment Advisers Act of 1940, as amended, including: 1. A direct obligation of the Government of the United States; 2. Shares of money market funds; 3. Shares of registered open-end investment companies other than those for which BlackRock or an affiliate of BlackRock acts as investment adviser or sub-adviser; 4. HIGH QUALITY SHORT-TERM DEBT INSTRUMENTS, including, but not limited to, bankers' acceptances, bank certificates of deposit, commercial paper and repurchase agreements. For these purposes, a "HIGH QUALITY SHORT-TERM DEBT INSTRUMENT" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality; 5. Shares of authorized unit trusts, open-ended investment companies (OEIC's), other than those for which BlackRock or an affiliate of BlackRock acts as investment adviser or sub-adviser, and direct obligations of the Government of the United Kingdom; and 6. Shares of unit investment trusts that are invested exclusively in one or more registered open-end investment companies, none of which are advised by BlackRock or an affiliate of BlackRock. PERSONAL ACCOUNT The term "Personal Account" means the following accounts that hold or are likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest: o any account in your individual name; o any joint or tenant-in-common account in which you have an interest or are a participant; o any account for which you act as trustee, executor, or custodian; and o any account over which you have investment discretion or have the power (whether or not exercised) to direct the acquisition or disposition of Securities (including BlackRock Funds) or Future Contracts (other than an Advisory Client's account that you manage or over which you have investment discretion), including the accounts of any individual or entity that is managed or controlled directly or indirectly by or through you, such as the account of an investment club to which you belong. There is a presumption that you can control accounts held by members of your Immediate Family sharing the same household. This presumption may be rebutted only by convincing evidence. A-4 POLICY The term "Policy" means this Advisory Employee Investment Transaction Policy. PORTFOLIO EMPLOYEE The term "Portfolio Employee" means a Portfolio Manager or an Advisory Employee who provides information or advice to a Portfolio Manager with respect to the purchase or sale of securities, who helps execute a Portfolio Manager's decisions, or who directly supervises a Portfolio Manager. PORTFOLIO MANAGER The term "Portfolio Manager" means any employee of an Adviser who has the authority, whether sole or shared or only from time to time, to make investment decisions or to direct trades affecting an Advisory Client. RELATED ACCOUNT The term "Related Account" means any account, other than a Personal Account, that holds a Security or Futures Contract in which you have a direct or indirect Beneficial Ownership interest (other than an account over which you have no investment discretion and cannot otherwise exercise control) and any account (other than an Advisory Client's account) of any individual or entity to whom you give advice or make recommendations with regard to the acquisition or disposition of Securities (including BlackRock Funds) or Future Contracts (whether or not such advice is acted upon). RELATED SECURITY The term "Related Security" means, as to any Security, any instrument related in value to that Security, including, but not limited to, any option or warrant to purchase or sell that Security, and any Security convertible into or exchangeable for that Security. For example, the purchase and exercise of an option to acquire a Security is subject to the same restrictions that would apply to the purchase of the Security itself. SECURITY As a GENERAL MATTER, the term "Security" means any stock, note, bond, share issued by an investment company (both open-end and closed-end investment companies) in which BlackRock or an affiliate of BlackRock serves as investment adviser, sub-adviser or principal underwriter ("BlackRock Funds"), debenture or other evidence of indebtedness (including any loan participation or assignment), limited partnership interest, or investment contract, OTHER THAN A NON-REPORTABLE SECURITY (as defined above). The term "Security" includes an OPTION on a Security, an index of Securities, a currency or a basket of currencies, including such an option traded on the Chicago Board of Options Exchange or on the New York, American, Pacific or Philadelphia Stock Exchanges as well as such an option traded in the over-the-counter market. The term "Security" does not include a physical commodity or a Futures Contract. The term "Security" may include an interest in a limited liability company (LLC) or in a private investment fund. A-5 As a TECHNICAL MATTER, the term "Security" has the meaning set forth in Section 2(a)(36) of the Investment Company Act of 1940, which defines a Security to mean: Any note, stock, treasury stock, bond debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, warrant or right to subscribe to or purchase any of the foregoing, EXCEPT THAT the term "Security" does not include any Security that is a Non-Reportable Security (as defined above), a Futures Contract (as defined above), or a physical commodity (such as foreign exchange or a precious metal). EX-99.P.8 13 file013.txt CLEARBRIDGE COE CODE OF ETHICS OF CLEARBRIDGE ADVISORS(1) SCOPE AND PURPOSE Set forth below is the Code of Ethics (the "Code") for ClearBridge Advisors, LLC, ClearBridge Asset Management, Inc. and Smith Barney Fund Management, LLC (collectively, "ClearBridge"), as required by Rule 204A-1 under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and Rule 17j-1 under the Investment Company Act of 1940, as amended (the "Investment Company Act This Code is based on the principle that ClearBridge and its employees owe a fiduciary duty to ClearBridge's clients, and that all persons covered by this code must therefore avoid activities, interests and relationships that might (i) present a conflict of interest or the appearance of a conflict of interest, or (ii) otherwise interfere with ClearBridge's ability to make decisions in the best interests of any of its clients. This Code of Ethics applies to all officers, directors and employees (full and part time) of ClearBridge and certain employees of Legg Mason & Co., LLC and Legg Mason Technology Services, Inc. who directly support ClearBridge and who have been informed that they are so designated ("Access Persons"). STATEMENT OF POLICIES (A) STANDARDS OF BUSINESS CONDUCT All Access Persons must comply with the following standards of business conduct: CLIENTS COME FIRST. At all times, Access Persons are required to place the interests of clients before their own and not to take inappropriate advantage of their position with ClearBridge. An Access Person may not induce or cause a client to take action, or not to take action, for the Access Person's personal benefit, rather than for the benefit of the client. DO NOT TAKE ADVANTAGE. Access Persons may not use their knowledge of open, executed, or pending portfolio transactions to profit by the market effect of such transactions, nor may they use their knowledge of transactions or portfolio holdings of investment companies managed by ClearBridge to engage in short term or other abusive trading. _________________________________ (1) This Code of Ethics pertains to ClearBridge Advisors, LLC, ClearBridge Asset Management, Inc. and Smith Barney Fund Management LLC (collectively, "ClearBridge"). AVOID CONFLICTS OF INTEREST. Conflicts of interest may arise in situations where client relationships may tempt preferential treatment, E.G., where account size or fee structure would make it more beneficial for the adviser to allocate certain trades to a client. Conflicts of interest may also arise in connection with securities transactions by employees of the adviser, especially those employees who are aware of actual transactions or client holdings or transactions under consideration for clients. Compliance policies and procedures have been adopted by ClearBridge in order to meet all legal obligations to our clients, particularly those arising under the federal securities laws and ERISA. Procedures have been instituted to mitigate or obviate actual or potential conflicts of interest. The Compliance Department's role is to ensure that appropriate procedures are adopted by the business and to monitor to ascertain that such procedures are followed. Any questions relating to this Code or other policies or procedures should be addressed to the Compliance Department. (B) CONFIDENTIALITY Access Persons are expected to honor the confidential nature of company and client affairs. Confidential information shall not be communicated outside of ClearBridge or to other affiliated companies of Legg Mason, in compliance with the Information Barrier Policy, and shall only be communicated within ClearBridge on a "need to know" basis. Access Persons must also avoid making unnecessary disclosure of ANY internal information concerning ClearBridge, Legg Mason, or their affiliates and their business relationships. For information relating to "material non-public information" and "insider trading," please see ClearBridge's Policy on Material Non-Public Information on the intranet site. (C) REQUIREMENTS (i) All Access Persons who are subject to this Code are required to comply with all federal securities laws applicable to ClearBridge's business. (ii) All Access Persons are required to comply with the Personal Securities Transactions Policy incorporated herein. (D) DUTY TO REPORT AND NON-RETALIATION POLICY Should an employee become aware of any conduct which the employee believes may constitute a violation of this Code, the law, or any ClearBridge policy, the employee must promptly report such conduct to the Chief Compliance Officer or his/her designee. All information about potential or suspected violations reported to the Chief Compliance Officer will be investigated and the identity of the reporting person will be kept confidential. 2 ClearBridge's policy prohibits any retaliatory action against a reporting person, including discharge, demotion, suspension, threats or harassment. ADMINISTRATION OF THE CODE The Human Resources Department is responsible for ensuring that a copy of the Code is delivered to all persons at the commencement of their employment with ClearBridge. As a condition of continuing employment, each employee is required to acknowledge, in writing (See Exhibit A), receipt of a copy of the Code and that he or she understands his/her obligations and responsibilities hereunder within 10 days of becoming an Access Person subject to this Code. Each Access Person is also obligated to acknowledge receipt of any amendments to the Code. On an annual basis, each Access Person must certify that s/he has complied with the Code. Monitoring for compliance with the Code shall be conducted by the Compliance Department. Any violation of this Code by employees will be considered serious and may result in disciplinary action, which may include the unwinding of trades, disgorgement of profits, monetary fine or censure and suspension or termination of employment. Any violation of this Code will be reported by the Compliance Department to the person's supervisor, and, as appropriate, to ClearBridge's Executive Committee and/or to the Chief Compliance Officers of any funds managed by ClearBridge. QUESTIONS All questions about an individual's responsibilities and obligations under the Code of Ethics should be referred to ClearBridge's Chief Compliance Officer or his/her designee. OUTSIDE DIRECTORSHIPS Personnel are prohibited from serving on the board of directors of any publicly listed or traded company (other than Legg Mason, Inc. or its proprietary registered investment companies) or of any company whose securities are held in any client portfolio, except with the prior authorization (See Exhibit B) of (i) the Chief Executive Officer of ClearBridge or, in his/her absence, the Executive Committee, and (ii) the General Counsel of Legg Mason, Inc, or his/her designee, based upon a determination that the board service would be consistent with the best interests of ClearBridge's clients. If permission to serve as a director is given, the company will be placed on the Restricted List. Transactions in that company's securities for client and personal securities accounts will only be authorized when certification has been obtained from that company's Secretary or similar officer that its directors are not in possession of material price sensitive information with respect to its securities. 3 PERSONAL SECURITIES TRANSACTIONS POLICY POLICY STATEMENT While employees are neither prohibited from holding individual securities nor engaging in individual securities transactions, by promulgating this Policy, ClearBridge is not endorsing or encouraging such activity. ClearBridge recognizes that in its role as an investment adviser, its responsibility is to its clients and their investments. Clients always come first. ClearBridge believes that its primary obligation is that any potential investment first be considered from the perspective of its appropriateness for any client portfolios. Only after it is determined that it is not appropriate for any client should an employee consider it for a personal account. SUMMARY All Access Persons are subject to the restrictions contained in this Personal Securities Transactions Policy (the "Policy") with respect to their securities transactions. The following serves as a summary of the most common restrictions. Please refer to specific sections that follow this summary for more detail, including definitions of persons covered by this Policy, accounts covered by this Policy ("Covered Accounts"), securities covered by this Policy ("Covered Securities"), reports required by this Policy ("Reports") and the procedures for compliance with this Policy. o All purchases or sales of EQUITY securities and securities CONVERTIBLE into equity securities (generally, stocks, convertible bonds and their equivalents) by employees, and certain of their family members, must be PRECLEARED, except as noted below. o All employees must execute their transactions in Covered Securities through approved broker/dealers ("Approved Brokers"). Currently, the following brokers are approved: E*Trade, TD Ameritrade, Merrill Lynch, Smith Barney, CIS, A.G. Edwards, Charles Schwab and Fidelity. Permission to use a non-approved broker will only be granted in exigent circumstances (See Exhibit C). o Portfolio Managers and Portfolio Manager Associates are prohibited from purchasing or selling a Covered Security within seven calendar days before or after an account managed by them has traded in the same (or a related) security, unless a DE MINIMIS exception applies. This includes a change in a model utilized in an "SMA" or "wrap" program. o All other Investment Personnel (as defined below) are prohibited from transacting in a Covered Security on any day a client is trading in such security, unless a DE MINIMIS exception applies. o All other Access Persons are prohibited from transacting in a Covered Security on any day a client is trading in such security, unless a DE MINIMIS exception applies. 4 o DE MINIMIS Exception: There is a DE MINIMIS exception pertaining to transactions of up to 500 shares IN ANY 7 CALENDAR DAY PERIOD of a large cap US equity ($10 billion or greater in market cap) or the equivalent number of shares of non-US large cap companies trading in the US as American Depository Receipts or American Depository Shares ("ADRs"). o Employees are prohibited from profiting from the purchase and sale or sale and purchase of a Covered Security, or a related security, within 60 calendar days. o Investment Personnel are prohibited from buying securities, directly or indirectly, in an initial public offering. Any other Access Person wishing to buy securities, directly or indirectly, in an initial public offering must receive prior permission from one of the co-Chief Investment Officers and the Chief Compliance Officer. o Any employee wishing to buy securities, directly or indirectly, in a private placement must receive prior permission from the Chief Compliance Officer and his/her immediate supervisor (See Exhibit D). o All employees must report all trades in Reportable Funds, as defined, below. o Funds managed by ClearBridge ("Managed Funds"): o Shares must be held in an Approved Brokerage Account (except if in the Citigroup or Legg Mason 401(k) plans) o Shares are subject to a 60 day holding period, as explained below DEFINITIONS ACCESS PERSON means all employees, directors or officers of ClearBridge and any employee of Legg Mason & Co., LLC ("LM & Co.") and Legg Mason Technology Services, Inc. ("LMTS") whose duties primarily involve directly supporting ClearBridge's business AND who have been notified that they are subject to this Code and such other persons as the Chief Compliance Officer shall designate. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS CODE DOES NOT COVER ANY INDIVIDUAL COVERED UNDER THE LEGG MASON & CO., LLC CODE OF ETHICS (THE "LEGG MASON ACCESS PERSONS"), INCLUDING, WITHOUT LIMITATION: (1) THE LEGG MASON REPRESENTATIVES ON THE CLEARBRIDGE BOARD OF DIRECTORS; AND (2) ANY OTHER EMPLOYEE OF LEGG MASON AND CO., LLC WHO MAY BE CONSIDERED AN "ACCESS PERSON" TO CLEARBRIDGE (AS SUCH TERM IS DEFINED IN RULE 204A-1 UNDER THE ADVISERS ACT), UNLESS SUCH PERSON HAS BEEN DESIGNATED AS AN ACCESS PERSON SUBJECT TO THIS CODE BY THE CHIEF COMPLIANCE OFFICER. 5 CLEARBRIDGE HEREBY DELEGATES TO THE LEGG MASON LEGAL AND COMPLIANCE DEPARTMENT RESPONSIBILITY FOR MONITORING THE LEGG MASON ACCESS PERSONS' COMPLIANCE WITH THE LEGG MASON & CO., LLC CODE OF ETHICS AND FOR ENFORCING THE PROVISIONS OF THE LEGG MASON CODE OF ETHICS AGAINST SUCH PERSONS. INVESTMENT PERSONNEL means any Access Person who is a portfolio manager, portfolio manager associate, analyst or trader and any other person so designated by the Chief Compliance Officer. COVERED SECURITIES means stocks, notes, bonds, closed-end funds, off shore funds, hedge funds, exchange traded funds ("ETFs"), debentures, and other evidences of indebtedness, including senior debt, subordinated debt, investment contracts, commodity contracts and futures. The same limitations of this Code pertain to transactions in a security related to a Covered Security, such as an option to purchase or sell a Covered Security and any security convertible into or exchangeable for a Covered Security. COVERED ACCOUNTS means an account in which Covered Securities are owned by you or an account in which you have a Beneficial Interest, as defined below. A Covered Account includes all accounts that could hold Covered Securities in which the Access Person has a Beneficial Interest regardless of what, if any, securities are maintained in such accounts (thus, even if an account does not hold Covered Securities, if it has the capability of holding Covered Securities, the account must be disclosed). Funds held directly with fund companies do not need to be disclosed if no Managed Funds (as defined below) or Reportable Funds (as defined below) are held in such accounts. Qualified Tuition Programs ("Section 529 plans" or "College Savings Plans") are not subject to this Policy. SECURITIES AND TRANSACTIONS NOT COVERED BY THIS POLICY ARE: o shares in any open-end US registered investment company (mutual fund), which is NOT managed, advised or sub-advised by ClearBridge or a Legg Mason affiliate o shares issued by money market funds, including Reportable Funds o shares issued by unit investment trusts that are invested exclusively in one or more open-end funds other than reportable Funds o securities which are direct obligations of the U.S. Government (I.E., Treasuries) 6 o bankers' acceptances, bank certificates of deposit, commercial paper, repurchase agreements and other high quality short-term debt instruments(2) IF A SECURITY IS NOT COVERED BY THIS POLICY, YOU MAY PURCHASE OR SELL IT WITHOUT OBTAINING PRECLEARANCE AND YOU DO NOT HAVE TO REPORT IT. APPROVED BROKER means one of the following broker/dealers: E*Trade, TD Ameritrade, Merrill Lynch, Smith Barney, [CIS], A.G. Edwards, Charles Schwab and Fidelity. MANAGED FUNDS means US registered investment companies advised or subadvised by ClearBridge. They can include proprietary as well as non-proprietary funds. Managed Funds must be held in an account maintained at an Approved Broker. REPORTABLE FUNDS means US registered investment companies advised or subadvised by any advisory affiliate of ClearBridge. They can include proprietary and non-proprietary funds. BENEFICIAL INTEREST means the opportunity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to share at any time in any profit derived from a transaction in a Covered Security. You are deemed to have a Beneficial Interest in the following: (1) any Security owned individually by you; (2) any Security owned jointly by you with others (for example, joint accounts, spousal accounts, partnerships, trusts and controlling interests in corporations); and (3) any Security in which a member of your Immediate Family has a Beneficial Interest if the Security is held in an account over which you have decision making authority (for example, you act as trustee, executor, or guardian). You are deemed to have a Beneficial Interest in accounts held by your spouse (including his/her IRA accounts), minor children and other members of your immediate family (children, stepchildren, grandchildren, parents, step parents, grandparents, siblings, in-laws and adoptive relationships) who share your household. In addition, you are deemed to have a Beneficial Interest in accounts maintained by your domestic partner (an unrelated adult with whom you share your _____________________________________ (2) High quality short-term debt instruments means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality. 7 home and contribute to each other's support). This presumption may be rebutted by convincing evidence that the profits derived from transactions in the Covered Securities will not provide you with any economic benefit. You have a Beneficial Interest in the following: o Your interest as a general partner in Covered Securities held by a general or limited partnership; o Your interest as a manager-member in the Covered Securities held by a limited liability company; o Your interest as a member of an "investment club" or an organization that is formed for the purpose of investing a pool of monies in Covered Securities; o Your ownership of Covered Securities as trustee where either you or members of your immediate family have a vested interest in the principal of income of the trust; o Your ownership of a vested interest in a trust; o Your status as a settler or a trust, unless the consent of all of the beneficiaries is required in order for you to revoke the trust. You do not have a Beneficial Interest in Covered Securities held by a corporation, partnership, limited liability company or other entity in which you hold an equity interest UNLESS you are a controlling equity holder or you have or share investment control over the Covered Securities held by the entity. IF YOU ARE IN ANY DOUBT AS TO WHETHER AN ACCOUNT FALLS WITHIN THE DEFINITION OF COVERED ACCOUNT OR WHETHER YOU WOULD BE DEEMED TO HAVE A BENEFICIAL INTEREST IN AN ACCOUNT, PLEASE SEE COMPLIANCE. BLACK OUT PERIODS o PORTFOLIO MANAGERS - In order to prevent buying or selling securities in competition with orders for clients, or from taking advantage of knowledge of securities being considered for purchase or sale for clients(3), Portfolio Managers and the Portfolio Manager Associate working directly with the Portfolio Manager on his portfolios will not be able to execute a trade in a Covered Security within seven calendar days before or after an account managed by said Portfolio Manager has traded in the same (or a related) security. The blackout period also pertains to situations when the Portfolio Manager changes a model utilized in an "SMA" or "wrap" program. _________________________________ (3) A security is "being considered for purchase or sale" when a recommendation to purchase or sell a security has been made or communicated and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. 8 o INVESTMENT PERSONNEL are precluded from executing a trade in a Covered Security on the same day that there is a client order for the same (or a related) security, unless a DE MINIMIS exception applies. o ALL OTHER ACCESS PERSONS are precluded from executing a trade in a Covered Security on the same day that there is a client order for the same (or a related) security, unless a DE MINIMIS exception applies. o DE MINIMIS exception: Transactions involving share in certain companies traded on US stock exchanges or the NASDAQ will be approved regardless of whether there are outstanding client orders. The exception applies to transactions involving no more than 500 shares, DURING ANY 7 CALENDAR DAY PERIOD, per issuer (or the equivalent number of shares represented by ADRs) in securities of companies with market capitalizations of $10 billion or more. In the case of options, an employee may purchase or sell up to 5 option contracts to control up to 500 shares in the underlying security of such large cap company. o Pre-clearance is required for all DE MINIMIS transactions. HOLDING PERIODS TRADES BY EMPLOYEES IN MANAGED FUNDS ARE SUBJECT TO A 60 CALENDAR DAY HOLDING PERIOD. SECURITIES MAY NOT BE SOLD OR BOUGHT BACK WITHIN 60 CALENDAR DAYS AFTER THE ORIGINAL TRANSACTION WITHOUT THE PERMISSION OF THE CHIEF COMPLIANCE OFFICER. ACCESS PERSONS CANNOT PURCHASE OR SELL THE SAME COVERED SECURITY WITHIN 60 CALENDAR DAYS IF SUCH TRANSACTIONS WILL RESULT IN A PROFIT. THE SHORT TERM TRADING PROHIBITION DOES NOT PERTAIN TO INDIVIDUAL STOCK OPTIONS THAT ARE PART OF A HEDGED POSITION WHERE THE UNDERLYING STOCK HAS BEEN HELD FOR MORE THAN 60 CALENDAR DAYS AND THE ENTIRE POSITION (INCLUDING THE UNDERLYING SECURITY) IS CLOSED OUT. PRECLEARANCE o Preclearance is obtained through the Personal Trading Assistant found under "Legal & Compliance" in the LM Exchange. There is a link to the LM Exchange from the ClearBridge intranet site. 9 o Preclearance is valid until close of business on the business day during which preclearance was obtained. If the transaction has not been executed within that timeframe, a new preclearance must be obtained. o IF YOU WISH TO PURCHASE AN INITIAL PUBLIC OFFERING(4), YOU MUST OBTAIN PERMISSION FROM ONE OF THE CO-CIOS AND THE CHIEF COMPLIANCE OFFICER. PORTFOLIO MANAGERS CANNOT PARTICIPATE IN IPOS FOR THEIR PERSONAL ACCOUNTS. o IF YOU WISH TO PURCHASE SECURITIES IN A PRIVATE PLACEMENT,(5) YOU MUST OBTAIN PERMISSION FROM THE CHIEF COMPLIANCE OFFICER AND YOUR SUPERVISOR. ____________________________________ (4) An IPO is an offering of securities registered under the Securities Act, the issuer of which, immediately before the registration, was not subject to reporting requirements under the federal securities laws. (5) A private placement is an offering of securities that are not registered under the Securities Act because the offering qualified for an exemption from the registration provisions. 10 THE FOLLOWING TRANSACTIONS DO NOT REQUIRE PRE-CLEARANCE: o Transactions in a Covered Account over which the employee has no direct or indirect influence or control such as where investment discretion is delegated in writing to an independent fiduciary. Fully discretionary accounts managed by either an internal or external registered investment adviser are permitted and may be custodied away from an Approved Broker if (i) the employee receives permission from the Chief Compliance Officer or his/her designee; and (ii) there is no communication between the manager and the employee with regard to investment decisions prior to execution. THE EMPLOYEE MUST DESIGNATE THAT COPIES OF PERIODIC (MONTHLY OR QUARTERLY) STATEMENTS THAT CONTAIN TRANSACTION INFORMATION AS DETAILED UNDER REPORTING REQUIREMENTS BE SENT TO THE COMPLIANCE DEPARTMENT; o Transactions in estate or trust accounts of which an employee or related person has a beneficial ownership, but no power to affect investment decisions. There must be no communication between the account(s) and the employee with regard to investment decisions prior to execution. THE EMPLOYEE MUST DIRECT THE TRUSTEE/BANK TO FURNISH COPIES OF STATEMENTS THAT CONTAIN TRANSACTION INFORMATION AS DETAILED UNDER REPORTING REQUIREMENTS TO THE COMPLIANCE DEPARTMENT; o Transactions which are non-volitional on the part of the employee (I.E., the receipt of securities pursuant to a stock dividend or merger, a gift or inheritance). However, the sale of securities acquired in a non-volitional manner is treated as any other transaction and subject to pre-clearance. o Sales pursuant to a bona fide tender offer. o Purchases of the stock of a company pursuant to an automatic investment plan which is a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan. Payroll deduction contributions to 401(k) plans are deemed to be pursuant to automatic investment plans. (PRECLEARANCE AND REPORTING OF PARTICULAR INSTANCES OF DIVIDEND REINVESTMENT IS NOT REQUIRED; ANNUAL REPORTING OF HOLDINGS IS REQUIRED). o The receipt or exercise of rights issued by a company on a pro rata basis to all holders of a class of security and the sale of such rights. However, if you purchase the rights from a third-party, the transaction must be pre-cleared. Likewise, the sale of such rights must be pre-cleared. o Purchases and sales of Legg Mason's publicly traded securities or the receipt or exercise of an employee stock option under any of Legg Mason's employee stock plans. NOTE: ALL EMPLOYEES ARE SUBJECT TO THE LEGG MASON, INC. POLICIES AND PROCEDURES REGARDING ACQUISITIONS AND DISPOSITION OF LEGG MASON SECURITIES, WHICH IS AN EXHIBIT TO THIS CODE. 11 o Purchases of an employer's securities done under a BONA FIDE employee benefit plan or the receipt or exercise of options in an employer's securities done under a BONA FIDE employee stock option plan of a company not affiliated with Legg Mason by an employee of that company who is a member of an Access Person's immediate family do not require preclearance. However, sales of the employer's stock, whether part of the employee benefit or stock option plans, do require preclearance and reporting. Furthermore, employee benefit plans that allow the employee to buy or sell Covered Securities other than those of the employer are subject to the requirements of the Code, including preclearance, reporting and holding periods. o Any transaction involving non-financial commodities, futures (including currency futures and futures on securities comprising part of a broad-based, publicly traded market based index of stocks) and options on futures. o Any acquisition or disposition of a security in connection with an option-related transaction that has been previously approved. For example, if you received clearance to buy a call and then decide to exercise it, you are not required to obtain preclearance in order to exercise the call. o Transactions involving options on broad-based indices, including, but not limited to, the S&P 500, the S&P 100, NASDAQ 100, Russell 2000, Russell 1000, Russell 3000, Nikkei 300, NYSE Composite and the Wilshire Small Cap. o Access Persons desiring to make a BONA FIDE(6) gift or charitable contribution of Covered Securities or who receive a BONA FIDE gift of Covered Securities, including an inheritance, do not need to preclear the transactions. However, such gift or contribution must be reported in the next quarterly report (See "Reporting Requirements"). o Any fixed income investment other than fixed income securities convertible into equity securities. o Transactions in Managed Funds. _______________________________________________ (6) A BONA FIDE gift or contribution is one where the donor does not receive anything of monetary value in return. 12 REPORTING REQUIREMENTS All personnel are required to report the establishment of any new Covered Accounts established during the quarter to Compliance, even if the Covered Account is with an Approved Broker. The Approved Brokers provide the Compliance Department with a daily report of all transactions executed by personnel. If you have received permission to maintain a Covered Account at other than an Approved Broker, including spousal accounts for which you received a waiver from the requirement to preclear, you must arrange for the broker to provide Compliance with the following information. Reports of Each Transaction in a Covered Security o No later than at the opening of business on the business day following the day of execution of a trade for a Covered Account, Compliance must be provided with the following information: name of security exchange ticker symbol or CUSIP nature of transaction (purchase, sale, etc.) number of shares/units or principal amount price of transaction date of trade name of broker the date the Access Person submits the report Quarterly Reports If you have engaged in a transaction that did not require preclearance but did require reporting, please confirm that Compliance has received the required information, as follows: o No later than 30 days after the end of each calendar quarter, each employee who maintains a Covered Account at other than an Approved Broker will provide Compliance with a report of all transactions in Covered Securities in the quarter, including the name of the Covered Security, the exchange ticker symbol or CUSIP, the number of shares and principal amount, whether it was a buy or sell, the price and the name of the broker through whom effected. Annual Reports o Within 45 days after the end of the calendar year, each employee must report all his/her holdings in Covered Securities as at December 31, including the title, exchange ticker symbol or CUSIP, number of shares and 13 principal amount of each Covered Security the employee owns (as defined above) and the names of all Covered Accounts. This includes holdings in Managed and Reportable Funds held in the Legg Mason and Citigroup 401(k) plans. The report will be made through certification on the Personal Trading Assistant. Any holdings that do not appear should be provided to Compliance for entry in the system prior to certification. Any employee failing to certify within the required time period will not be allowed to engage in any personal securities transactions. OTHER REPORTS Initial Employment No later than 10 days after initial employment with ClearBridge, or notification of coverage under this Code, each employee must provide Compliance with a list of each Covered Security s/he owns (as defined above). The information provided, which must be current as of a date no more that 45 days prior to the date such person became an employee (or subject to this Code), must include the title of the security, the exchange ticker symbol or CUSIP, the number of shares owned (for equities) and principal amount (for debt securities), The employee must also provide information, which must include the name of the broker, dealer or bank with whom the employee maintains an account in which any securities are held for the direct or indirect benefit of the employee. This information will be entered into the Personal Trading Assistant by Compliance and must be certified to, electronically, by the employee before the employee can effectuate any transactions. If the employee does not maintain a Covered Account with an Approved Broker, s/he will be given a reasonable amount of time to transfer the Covered Account(s) to an Approved Broker. Reportable Funds No later than 30 days after the end of each calendar quarter, TRANSACTIONS IN REPORTABLE FUNDS (OTHER THAN THOSE MANAGED BY CLEARBRIDGE) MUST BE REPORTED, INCLUDING TRANSACTIONS IN THE LEGG MASON 401(K). ONLY EXCHANGES MUST BE REPORTED; PAYROLL DEDUCTIONS AND CHANGES TO FUTURE INVESTMENT OF PAYROLL DEDUCTIONS DO NOT NEED TO BE REPORTED. The information on personal securities transactions received and recorded will be deemed to satisfy the obligations contained in Rule 204A-1 under the Advisers Act and Rule 17j-1 under the Investment Company Act. Such reports may, where appropriate, contain a statement to the effect that the reporting of the transaction is not to be construed as an admission that the person has any direct or indirect beneficial interest or ownership in the security. 14 ADMINISTRATION OF THE CODE At least annually, the Chief Compliance Officer, on behalf of ClearBridge, will furnish to the boards or to the Chief Compliance Officer of any US registered investment companies to which ClearBridge acts as adviser or subadviser, a written report that: (i) Describes any issues arising under the Code or this Policy since the last report to the board, including, but not limited to, information about material violations of the Code or this Policy and sanctions imposed in response to the material violations; and (ii) Certifies that the ClearBridge has adopted procedures reasonably necessary to prevent Access Persons from violating the Code or this Policy. Adopted: February 14, 2007* Amended: April 1, 2007 Amended: June 1, 2007 *Amending and Restating the Code of Ethics adopted January 28, 2005, as amended. 15 EXHIBIT A CLEARBRIDGE ADVISORS, LLC CLEARBRIDGE ASSET MANAGEMENT, INC. SMITH BARNEY FUND MANAGEMENT, INC. ACKNOWLEDGEMENT OF CODE OF ETHICS FORM I acknowledge that I have received and read the Code of Ethics for ClearBridge dated June 1, 2007. I understand the provisions of the Code of Ethics as described therein and agree to abide by them. Employee Name (Print): ---------------------------------------------- Signature: ---------------------------------------------- Date: ---------------------------------------------- --------------------------------------------------- ------------------------- TAX I.D./SOCIAL SECURITY NUMBER: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- DATE OF HIRE: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- JOB FUNCTION & TITLE: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- SUPERVISOR: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- LOCATION: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- FLOOR AND/OR ZONE: --------------------------------------------------- ------------------------- --------------------------------------------------- ------------------------- TELEPHONE NUMBER: --------------------------------------------------- ------------------------- This Acknowledgment form must be completed and returned within 10 days of employment to: ClearBridge Compliance 399 Park Avenue, 4th Floor New York NY, 10022 Please Fax to: (877) 406-7343 ORIGINAL SIGNATURE MUST BE SENT, however a fax copy may be sent to (877) 406-7343 in order to meet the ten (10) day deadline. EXHIBIT B CLEARBRIDGE ADVISORS, LLC CLEARBRIDGE ASSET MANAGEMENT, INC. SMITH BARNEY FUND MANAGEMENT, INC. OUTSIDE DIRECTORSHIP FORM Employees must obtain prior written approval from the CEO and Legg Mason Legal and Compliance to serve as a director of any publicly held company or any company whose securities are held by clients. EMPLOYEES SERVING AS OUTSIDE DIRECTORS ARE NOT ENTITLED TO INDEMNIFICATION OR INSURANCE COVERAGE BY CLEARBRIDGE OR ITS AFFILIATES UNLESS SERVICE ON THE BOARD IS AT THE SPECIFIC WRITTEN REQUEST OF CLEARBRIDGE OR ITS AFFILIATES. COMPLETE ONE COPY OF THIS FORM FOR EACH APPLICABLE ENTITY
- -------------------------------------------------------------------------------------------- ---------------------------------- Print Name Social Security Number - -------------------------------------------------------------------------------------------- ---------------------------------- - -------------------------------------------------------------------------------------------- ---------------------------------- Title Office Telephone Number - ---------------------------------------------------------- -------------------------------------------------------------------- Department Name Location - ---------------------------------------------------------- -------------------------------------------------------------------- 1. Name of Entity Date - ---------------------------------------------------------------------------------------------------------- -------------------- - ------------------------------------------------------------------------------------------------------------------------------- 2. Main Activity of the Entity - ------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------- --------------------------- ------------------------ ---------------------------- 3. Your Title or Function Date Association/Term Date Term Expires Annual Compensation Begins $ - --------------------------------------------- --------------------------- ------------------------ ---------------------------- - ----------------------------------------------------------------- -------- -------- ------------------------------------------- 4. Is the Directorship requested by ClearBridge or its No Yes Attach copy of Request Letter and other affiliates? details. - ----------------------------------------------------------------- -------- -------- ------------------------------------------- - ----------------------------------------------------------------- -------- -------- ------------------------------------------- 5. Do you know of any significant adverse information about No Yes Attach detail and documents. the entity or any actual or potential conflict of interest between the entity and ClearBridge or its affiliates? - ----------------------------------------------------------------- -------- -------- ------------------------------------------- - ----------------------------------------------------------------- ----------------- -------------------- ---------------------- 6. For PUBLIC COMPANIES attach the most recent "10-K"; 10-K Attached Ann. Rpt Attached Prospectus Attached "10-Q"; Latest Annual Report; "8-K's"; and Prospectus For NON-PUBLIC ENTITIES attach Audit Financial Statements 10-Q Attached 8-K's Attached Fin. Stmts. Attached - ----------------------------------------------------------------- ----------------- -------------------- ---------------------- - ----------------------------------------------------------------- -------- -------- ------------------------------------------- 7. Does the entity or any principal have an account or No Yes If yes, specify Account No.or describe other business relationship with ClearBridge or its affiliates? relationship - ----------------------------------------------------------------- -------- -------- ------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- 8. Additional Remarks - ------------------------------------------------------------------------------------------------------------------------------- EMPLOYEE REPRESENTATIONS: o I will not use any material non-public information gleaned through my directorship for my own benefit nor share any such information with others. - -------------------------------- ---------------------------------- ----------------------- ------------------- --------------- EMPLOYEE SIGNATURE Employee's Signature Date - -------------------------------- ---------------------------------- ----------------------- ------------------- --------------- - -------------------------------- ---------------------------------- ----------------------- ------------------- --------------- CHIEF EXECUTIVE OFFICER Print Name Signature Date - -------------------------------- ---------------------------------- ----------------------- ------------------- --------------- ----------------------- GENERAL COUNSEL OF LEGG MASON, Print Name Signature Date INC. - -------------------------------- ---------------------------------- ----------------------- ------------------- ---------------
UPON COMPLETION OF THIS FORM, FAX TO COMPLIANCE AT 877-406-7343, THEN FORWARD VIA INTER-OFFICE MAIL TO: CLEARBRIDGE COMPLIANCE, 399 PARK AVENUE, 4TH FLOOR, NEW YORK NY, 10022 EXHIBIT C CLEARBRIDGE ADVISORS, LLC CLEARBRIDGE ASSET MANAGEMENT, INC. SMITH BARNEY FUND MANAGEMENT, INC. OUTSIDE BROKERAGE ACCOUNT APPROVAL REQUEST FORM Employee Name: _______________________________ Tax Identification/Social Security Number: __________________ The following information is provided in order to obtain Compliance approval to open and/or maintain a brokerage account outside the approved list of brokers: Outside Brokerage Firm Name: ------------------------------ ------------------------------ Brokerage Firm Address: (Where letter should be sent) ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ Account Number: ------------------------------ ------------------------------ Full Account Title: ------------------------------ Please indicate the reason why you are requesting to open and/or maintain a brokerage account outside of the approved list of brokers: |_| The account is a fully discretionary account managed by an investment adviser, registered with the SEC. |_| The account is a joint account with my spouse who works for the brokerage firm where the account will be maintained. |_| The account is my spouse's individual account who works for a regulated entity. |_| Estate or trust accounts of which an employee or related person has a BENEFICIAL OWNERSHIP, but no power to affect investment decisions. There must be no communication between the account(s) and the employee with regard to investment decisions prior to execution. |_| Other: _____________________________________________________________. A copy of any relevant statement(s) and this completed form MUST BE PROVIDED to: ClearBridge Compliance 399 Park Avenue, 4th Floor New York, NY 10022 Please Fax to: (877) 406-7343 - --------------------- ---------------------------- Employee Signature Chief Compliance Officer Signature EXHIBIT D CLEARBRIDGE ADVISORS, LLC CLEARBRIDGE ASSET MANAGEMENT, INC. SMITH BARNEY FUND MANAGEMENT, INC. OUTSIDE INVESTMENT APPROVAL REQUEST FORM ClearBridge policy requires employees to obtain the PRIOR WRITTEN APPROVAL of the Chief Compliance Officer and your immediate supervisor BEFORE making an outside investment. Examples of "outside investments" include, but are not limited to, Private Placements and any investments in securities that cannot be made through an Approved Brokerage account. If the investment is a private placement, you must provide a copy of the prospectus, offering statement or other similar document. Employees must not make an outside investment if such investment may present a potential conflict of interest. Approval of such investment reflects a determination that it does not pose a conflict of interest with clients.
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- PRINT Name Social Security Number Date - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Title/Position Office Telephone Number - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Department Name Location - ----------------------------------------------------------------------------------------------------------------------- Name of Investment Anticipated Date Amount of of Investment investment $ - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Type of Investment Private Placement Other investment which cannot be made through an approved brokerage account. (specify) - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Is your participation exclusively as a If No, Please explain passive investor? Yes No any other involvement. - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Additional Remarks: - -----------------------------------------------------------------------------------------------------------------------
EMPLOYEE REPRESENTATIONS: o I CERTIFY THAT THIS INVESTMENT DOES NOT TAKE AN INVESTMENT OPPORTUNITY FROM A CLIENT. SEND THE COMPLETED FORM AND ALL RELEVANT DOCUMENTS TO: ClearBridge Compliance, 399 Park Avenue, 4th Floor, New York NY, 10022 Please Fax to (877) 406-7343
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- EMPLOYEE SIGNATURE Employee's Signature Date - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- SUPERVISOR APPROVAL Print Name of Supervisor Title of Supervisor Signature of Supervisor Date - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- CHIEF COMPLIANCE Print Name of CCO Signature of CCO Date OFFICER APPROVAL - -----------------------------------------------------------------------------------------------------------------------
EXHIBIT E CLEARBRIDGE ADVISORS, LLC CLEARBRIDGE ASSET MANAGEMENT, INC. SMITH BARNEY FUND MANAGEMENT, INC. INITIAL REPORT OF SECURITIES HOLDINGS FORM THIS REPORT MUST BE SIGNED, DATED AND RETURNED WITHIN 10 DAYS OF EMPLOYMENT AND THE HOLDINGS REPORT MUST BE CURRENT AS OF A DATE NOT MORE THAN 45 DAYS PRIOR TO THE EMPLOYEE BECOMING A COVERED PERSON. THIS REPORT MUST BE SUBMITTED TO THE CLEARBRIDGE ADVISORS (CBA) COMPLIANCE DEPARTMENT, 399 PARK AVENUE, 4TH FLOOR, NEW YORK NY, 10022. PLEASE FAX TO (877) 406-7343 - -------------------------------------------------------------------------------- EMPLOYEE NAME: ______________________ DATE OF EMPLOYMENT: ________________ - -------------------------------------------------------------------------------- BROKERAGE ACCOUNTS: |_| I do not have a BENEFICIAL OWNERSHIP of any account(s) with any financial services firm. Please refer to Exhibit "A" for definition of BENEFICIAL OWNERSHIP. |_| I maintain or have a BENEFICIAL OWNERSHIP in the following account(s) with the financial services firm(s) listed below (attach additional information if necessary-E.G., a brokerage statement). Please include the information required below for any broker, dealer or bank where an account is maintained which holds securities for your direct or indirect benefit as of the date you began your employment. - ------------------------------------------------- --------------- -------------- ACCOUNT TITLE ACCOUNT NUMBER NAME OF FINANCIAL SERVICE(S) FIRM AND ADDRESS - ------------------------------------------------- --------------- -------------- - ------------------------------------------------- --------------- -------------- - ------------------------------------------------- --------------- -------------- - ------------------------------------------------- --------------- -------------- - ------------------------------------------------- --------------- -------------- SECURITIES HOLDINGS: Complete the following (or attach a copy of your most recent statement(s)) listing all of the securities holdings in which you have a BENEFICIAL OWNERSHIP, with the exception of non-proprietary U.S. registered open-ended mutual funds for which CBA does not serve as adviser or sub-adviser and U.S Government securities if: o You own securities that are held by financial services firm(s) as described above. If you submit a copy of a statement, it must include all of the information set forth below. Please be sure to include any additional securities purchased since the date of the brokerage statement that is attached. USE ADDITIONAL SHEETS IF NECESSARY. o Your securities are not held with a financial service(s) firm (e.g., stock and dividend reinvestment programs and private placements, shares held in certificate form by you or for you or shares held at a transfer agent).
- ----------------------- ------------------- ---------------- ------------------ ------------------------------------ TITLE OF SECURITY TICKER SYMBOL NUMBER OF PRINCIPAL FINANCIAL SERVICES FIRM OR CUSIP NO. SHARES AMOUNT - ----------------------- ------------------- ---------------- ------------------ ------------------------------------ - ----------------------- ------------------- ---------------- ------------------ ------------------------------------ - ----------------------- ------------------- ---------------- ------------------ ------------------------------------ - ----------------------- ------------------- ---------------- ------------------ ------------------------------------ - ----------------------- ------------------- ---------------- ------------------ ------------------------------------ |_| I have no securities holdings to report.
Signature: _____________________________ Date of Signature: _____________ EX-99.P.12 14 file014.txt FRANKLIN COE 5-1-07 FRANKLIN TEMPLETON INVESTMENTS CODE OF ETHICS (pursuant to Rule 17j-1 of the Investment Company Act of 1940 and Rule 204A-1 of the Investment Advisers Act of 1940) AND INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES Revised May 2007 TABLE OF CONTENTS
CODE OF ETHICS....................................................................................................3 PART 1 - STATEMENT OF PRINCIPLES..................................................................................3 PART 2 - PURPOSE OF THE CODE AND CONSEQUENCES OF NON-COMPLIANCE...................................................5 PART 3 - COMPLIANCE REQUIREMENTS..................................................................................6 PART 4 - REPORTING REQUIREMENTS FOR CODE OF ETHICS PERSONS (EXCLUDING INDEPENDENT DIRECTORS OF THE FUNDS AND OF FRI)...............................................16 PART 5 - PRE-CLEARANCE REQUIREMENTS APPLICABLE TO ACCESS PERSONS (EXCLUDING INDEPENDENT DIRECTORS OF THE FUNDS) AND PORTFOLIO PERSONS 19 PART 6 - REQUIREMENTS FOR INDEPENDENT DIRECTORS OF THE FUNDS.....................................................23 PART 7 - PENALTIES FOR VIOLATIONS OF THE CODE....................................................................25 PART 8 - A REMINDER ABOUT THE FRANKLIN TEMPLETON INVESTMENTS INSIDER TRADING POLICY..............................27 PART 9 - FOREIGN COUNTRY SUPPLEMENTS (CANADA)....................................................................28 APPENDIX A:COMPLIANCE PROCEDURES AND DEFINITIONS.................................................................30 I. RESPONSIBILITIES OF EACH DESIGNATED COMPLIANCE OFFICER.........................................31 II. DEFINITIONS OF IMPORTANT TERMS.................................................................38 APPENDIX B:ACKNOWLEDGEMENT FORM AND SCHEDULES....................................................................41 ACKNOWLEDGMENT FORM..............................................................................................42 SCHEDULE A: LEGAL AND COMPLIANCE OFFICERS CODE OF ETHICS ADMINISTRATION DEPT. CONTACT INFO.......................43 SCHEDULE B: QUARTERLY TRANSACTIONS REPORT........................................................................44 SCHEDULE C: INITIAL & ANNUAL DISCLOSURE OF BROKERAGE ACCOUNTS, SECURITIES HOLDINGS AND DISCRETIONARY AUTHORITY...45 SCHEDULE D: NOTIFICATION OF SECURITIES ACCOUNT...................................................................47 SCHEDULE E: NOTIFICATION OF DIRECT OR INDIRECT BENEFICIAL INTEREST...............................................48 SCHEDULE F: CHECKLIST FOR INVESTMENTS IN PARTNERSHIPS AND SECURITIES ISSUED IN LIMITED OFFERINGS (PRIVATE PLACEMENTS) 49 SCHEDULE G: REQUEST FOR APPROVAL TO SERVE AS A DIRECTOR..........................................................51 APPENDIX C: INVESTMENT ADVISOR AND BROKER-DEALER AND OTHER SUBSIDIARIES OF FRANKLIN RESOURCES, INC. - APRIL 2006...............................................................52 APPENDIX D: FRANKLIN RESOURCES, INC. CODE OF ETHICS AND BUSINESS CONDUCT.........................................53 INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES.................................................................64 A. LEGAL REQUIREMENT..............................................................................64 B. WHO IS AN INSIDER?.............................................................................64 C. WHAT IS MATERIAL INFORMATION?..................................................................64 D. WHAT IS NON-PUBLIC INFORMATION?................................................................65 18570-5 1 E. BASIS FOR LIABILITY............................................................................65 F. PENALTIES FOR INSIDER TRADING..................................................................65 G. INSIDER TRADING PROCEDURES.....................................................................66 H. GENERAL ACCESS CONTROL PROCEDURES..............................................................67 FAIR DISCLOSURE POLICIES AND PROCEDURES..........................................................................68 A. WHAT IS REGULATION FD?.........................................................................68 B. FTI'S CORPORATE POLICY FOR REGULATION FD.......................................................68 C. GENERAL PROVISIONS OF REGULATION FD............................................................68 D. PERSONS TO WHOM SELECTIVE DISCLOSURE MAY NOT BE MADE:..........................................69 E. EXCLUSIONS FROM REGULATION FD..................................................................69 F. METHODS OF PUBLIC DISCLOSURE:..................................................................70 G. TRAINING.......................................................................................70 H. REPORTING CONSEQUENCES.........................................................................70 I. QUESTIONS......................................................................................70 J. FREQUENTLY ASKED QUESTIONS.....................................................................70 K. SUPPLEMENTAL INFORMATION - SECS DIVISION OF CORPORATE FINANCE..................................72 APPENDIX E. CHINESE WALL POLICY............................................................................77
18570-5 2 CODE OF ETHICS The Code of Ethics (the "Code") and Insider Trading Compliance Policy and Procedures (the "Insider Trading Policy"), including any supplemental memoranda is applicable to all officers, directors, employees and certain designated temporary employees (collectively, "Code of Ethics Persons") of Franklin Resources, Inc. ("FRI"), all of its subsidiaries, and the funds in the Franklin Templeton Group of Funds (the "Funds") (collectively, "Franklin Templeton Investments"). The subsidiaries listed in Appendix C of the Code, together with Franklin Resources, Inc. and the Funds, have adopted the Code and Insider Trading Policy. The Code summarizes the values, principles and business practices that guide Franklin Templeton Investments' business conduct, provides a set of basic principles for Code of Ethics Persons regarding the conduct expected of them and also establishes certain reporting requirements applicable to Supervised and Access Persons (defined below). It is the responsibility of all Code of Ethics Persons to maintain an environment that fosters fairness, respect and integrity. Code of Ethics Persons are expected to seek the advice of a supervisor or the Code of Ethics Administration Department with any questions on the Code and/or the Insider Trading Policy. In addition to this Code, the policies and procedures prescribed under the Code of Ethics and Business Conduct adopted by Franklin Resources, Inc. are additional requirements that apply to certain Code of Ethics Persons. Please see Appendix D for the full text of the Code of Ethics and Business Conduct. Executive Officers, Directors and certain other designated employees of FRI will also be subject to additional requirements with respect to the trading of the securities of FRI (i.e. BEN shares). PART 1 - Statement of Principles All Code of Ethics Persons are required to conduct themselves in a lawful, honest and ethical manner in their business practices. Franklin Templeton Investments' policy is that the interests of its Funds' shareholders and clients are paramount and come before the interests of any Code Of Ethics Person. 18570-5 3 The personal investing activities of Code of Ethics Persons must be conducted in a manner to avoid actual or potential conflicts of interest with Fund shareholders and other clients of any Franklin Templeton adviser. Code of Ethics Persons shall use their positions with Franklin Templeton Investments and any investment opportunities they learn of because of their positions with Franklin Templeton Investments in a manner consistent with applicable Federal Securities Laws and their fiduciary duties to use such opportunities and information for the benefit of the Funds' shareholders and clients. Information concerning the identity of security holdings and financial circumstances of Funds and other clients is confidential and all Code of Ethics Persons must vigilantly safeguard this sensitive information. Lastly, Code of Ethics Persons shall not, in connection with the purchase or sale of a security, including any option to purchase or sell, and any security convertible into or exchangeable for, any security that is "held or to be acquired" by a Fund: A. employ any device, scheme or artifice to defraud a Fund; B. make to a Fund any untrue statement of a material fact or omit to state to a Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; C. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon a Fund; or D. engage in any manipulative practice with respect to a Fund. A security is "held or to be acquired" if within the most recent 15 days it (i) is or has been held by a Fund, or (ii) is being or has been considered by a Fund or its investment adviser for purchase by the Fund. 18570-5 4 PART 2 - Purpose of the Code and Consequences of Non-compliance It is important that you read and understand the Code because its purpose is to help all of us comply with the law and to preserve and protect the outstanding reputation of Franklin Templeton Investments. Any violation of the Code or Insider Trading Policy including engaging in a prohibited transaction or failure to file required reports may result in disciplinary action, up to and including termination of employment and/or referral to appropriate governmental agencies. All Code of Ethics Persons must report violations of the Code and the Insider Trading Policy whether committed by themselves or by others promptly to their supervisor or the Code of Ethics Administration Department. If you have any questions or concerns about compliance with the Code or Insider Trading Policy you are encouraged to speak with your supervisor or the Code of Ethics Administration Department. In addition, you may call the Compliance and Ethics Hotline at 1-800-636-6592. Calls to the Compliance and Ethics Hotline may be made anonymously. Franklin Templeton Investments will treat the information set forth in a report of any suspected violation of the Code or Insider Trading Policy in a confidential manner and will conduct a prompt and appropriate evaluation and investigation of any matter reported. Code of Ethics Persons are expected to cooperate in investigations of reported violations. To facilitate employee reporting of violations of the Code or Insider Trading Policy, Franklin Templeton Investments will not allow retaliation against anyone who has made a report in good faith. 18570-5 5 PART 3 - Compliance Requirements 3.1 Who Is Covered by the Code and How Does It Work? The Statement of Principles contained in the Code and the policies and procedures prescribed under the Code of Ethics and Business Conduct contained in Appendix D must be observed by all Code of Ethics Persons. All officers, directors, employees and certain designated temporary employees of Franklin Templeton Investments are Code of Ethics Persons. However, depending on which of the categories described below that you are placed, there are different types of restrictions and reporting requirements placed on your personal investing activities. The category in which you will be placed generally depends on your job function, although unique circumstances may result in your placement in a different category. If you have any questions regarding which category you are a member of and the attendant responsibilities, please contact the Code of Ethics Administration Department. (1) Supervised Persons: Supervised persons are a U.S. registered investment adviser's partners, officers, directors (or other persons occupying a similar status or performing similar functions), and employees, as well as any other person who provides advice on behalf of the adviser and are subject to the supervision and control of the adviser. (2) Access Persons: Access Persons are those persons who: have access to nonpublic information regarding Funds' or clients' securities transactions; or are involved in making securities recommendations to Funds or clients; or have access to recommendations that are nonpublic; or have access to nonpublic information regarding the portfolio holdings of Reportable Funds. Examples of "access to nonpublic information" include having access to trading systems, portfolio accounting systems, research databases or settlement information. Thus, Access Persons are those people who are in a position to exploit information about Funds' or clients' securities transactions or holdings. Administrative, technical and clerical personnel may be deemed Access Persons if their functions or duties give them access to such nonpublic information. The following are some of the departments, which would typically (but not exclusively) include Access Persons. Please note however that whether you are an Access Person is based on an analysis of the types of information that you have access to and the determination will be made on a case-by-case basis: o fund accounting; o futures associates; o global compliance; o portfolio administration; o private client group/high net worth; and o anyone else designated by the Director of Global Compliance and/or the Chief Compliance Officer. 18570-5 6 In addition, you are an Access Person if you are any of the following: o an officer or director of the Funds; o an officer or director of an investment advisor or broker-dealer subsidiary of Franklin Templeton Investments; or o a person that controls those entities Note: Under this definition, an independent director of FRI would not be considered an Access Person. (3) Portfolio Persons: Portfolio Persons are a subset of Access Persons and are those employees of Franklin Templeton Investments, who, in connection with his or her regular functions or duties, makes or participates in the decision to purchase or sell a security by a Fund or any other client or if his or her functions relate to the making of any recommendations about those purchases or sales. Portfolio Persons include: o portfolio managers; o research analysts; o traders; o employees serving in equivalent capacities (including Futures Associates); o employees supervising the activities of Portfolio Persons; and o anyone else designated by the Director of Global Compliance and/or the Chief Compliance Officer. (4) Non-Access Persons: If you are an employee or temporary employee of Franklin Templeton Investments AND you do not fit into any of the above categories, you are a Non-Access Person. Because you do not receive nonpublic information about Fund/Client portfolios, you are subject only to the prohibited transaction provisions described in 3.4 of the Code, the Statement of Principles and the Insider Trading Policy and the policies and procedures prescribed under the FRI Code of Ethics and Business Conduct. The independent directors of FRI are Non-Access Persons. You will be notified about which of the category(ies) you are considered to be a member of at the time you become affiliated with Franklin Templeton Investments and also if you become a member of a different category. As described further below, the Code prohibits certain types of transactions and requires pre-clearance and reporting of others. Non-Access Persons and Supervised Persons do not have to pre-clear their security transactions, and, in most cases, do not have to report their transactions. Independent Directors of the Funds also need not pre-clear or report on any securities transactions unless they knew, or should have known that, during the 15-day period before or after the transaction, the security was purchased or sold or considered for purchase or sale by a Fund. However, personal investing activities of all Code of Ethics Persons are to be conducted in compliance with the prohibited transactions provisions contained in Section 3.4, the 18570-5 7 Statement of Principles, the Insider Trading Policy, the FRI Code of Ethics and Business Conduct Code and all other applicable policies and procedures. 3.2 What Accounts and Transactions Are Covered? The Code covers: 1. Securities accounts/transactions in which you have direct or indirect beneficial ownership. You are considered to have "beneficial ownership" of a security if you, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, have or share a direct or indirect economic interest in a security. There is a presumption that you have an economic interest in securities held or acquired by members of your immediate family sharing the same household. Thus, a transaction by or for the account of your spouse, or other immediate family member living in your home would be treated as though the transaction were your own. 2. Transactions for an account in which you have an economic interest (other than the account of an unrelated client for which advisory fees are received) and have or share investment control. For example, if you invest in a corporation that invests in securities and you have or share control over its investments, that corporation's securities transactions would generally be treated as though they were your own. 3. Securities in which you do not have an economic interest (that are held by a partnership, corporation, trust or similar entity) however, you either have control of such entity, or have or share control over its investments. For example, if you were the trustee of a trust or foundation but you did not have an economic interest in the entity (i.e., you are not the trustor (settlor) or beneficiary) the securities transactions would be treated as though they were your own if you had voting or investment control of the trust's assets or you had or shared control over its investments. Accordingly, each time the words "you" or "your" are used in this document, they apply not only to your personal transactions and accounts, but to all the types of accounts and transactions described 18570-5 8 above. If you have any questions as to whether a particular account or transaction is covered by the Code, please contact the Code of Ethics Administration Department 650-312-3693 (ext. 23693) for guidance. 3.3 What Securities Are Exempt From the Code of Ethics? You do not need to pre-clear or report transactions in the following types of securities: (1) direct obligations of the U.S. government (i.e. securities issued or guaranteed by the U.S. government such as Treasury bills, notes and bonds including U.S. savings bonds and derivatives thereof); (2) money market instruments - banker's acceptances, bank certificates of deposits, commercial paper, repurchase agreements and other high quality short-term debt instruments; (3) shares of money market funds; (4) shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are Reportable Funds. (5) shares issued by U.S. registered open-end funds (I.E. mutual funds) other than Reportable Funds" Transactions in the types of securities listed above are also exempt from: (i) the prohibited transaction provisions contained in Section 3.4; (ii) the additional requirements applicable to Portfolio Persons; and (iii) the applicable reporting requirements contained in Part 4. 3.4 Prohibited Transactions and Transactions Requiring Pre-approval for Code of Ethics Persons A. "Intent" Is Important The transactions described below comprise a non-exclusive listing of those transactions that have been determined by the courts and the SEC to be prohibited by law. These types of transactions are a violation of the Statement of Principles and are prohibited. It should be noted that pre-clearance, which is a cornerstone of our compliance efforts, cannot detect inappropriate or illegal transactions, which are by their definition dependent upon intent. Therefore, personnel of the Code of Ethics Administration Department can assist you with compliance with the Code however, they cannot guarantee any particular transaction complies with the Code or any applicable law. The fact that your proposed transaction receives pre-clearance may not provide a full and complete defense to an accusation of a violation of the Code or of any laws. For example, if you executed a transaction for which you received pre-clearance, or if the transaction was exempt from pre-clearance (e.g., a transaction for 500 shares or less), that would not preclude a subsequent finding that front- 18570-5 9 running or scalping occurred because such activity is dependent upon your intent. In other words, your intent may not be able to be detected or determined when a particular transaction request is analyzed for pre-clearance, but can only be determined after a review of all the facts. In the final analysis, adherence to the principles of the Code remains the responsibility of each person effecting personal securities transactions. B. Code Of Ethics Persons - Prohibitions and Requirements 1. Front running: Trading Ahead of a Fund or Client You shall not front-run any trade of a Fund or client. The term "front run" means knowingly trading before a contemplated transaction by a Fund or client of any Franklin Templeton adviser, whether or not your trade and the Fund's or client's trade take place in the same market. Front running is prohibited whether or not you realize a profit from such a transaction. Thus, you may not: (a) purchase a security if you intend, or know of Franklin Templeton Investments' intention, to purchase that security or a related security on behalf of a Fund or client, or (b) sell a security if you intend, or know of Franklin Templeton Investments' intention, to sell that security or a related security on behalf of a Fund or client. 2. Scalping You shall not purchase a security (or its economic equivalent) with the intention of recommending that the security be purchased for a Fund or client, or sell short a security (or its economic equivalent) with the intention of recommending that the security be sold for a Fund or client. Scalping is prohibited whether or not you realize a profit from such a transaction. 3. Trading Parallel to a Fund or Client You shall not either buy a security if you know that the same or a related security is being bought contemporaneously by a Fund or client, or sell a security if you know that the same or a related security is being sold contemporaneously by a Fund or client. Refer to Section I.A., "Pre-clearance Standards," of Appendix A of the Code for more details regarding the pre-clearance of personal securities transactions. 18570-5 10 4. Trading Against a Fund or Client You shall not: (a) buy a security if you know that a Fund or client is selling the same or a related security; or has sold the security or (b) sell a security if you know that a Fund or client is buying the same or a related security, or has bought the security. Refer to Section I.A., "Pre-clearance Standards," of Appendix A of the Code for more details regarding the pre-clearance of personal securities transactions. 5. Using Proprietary Information for Personal Transactions You shall not buy or sell a security based on Proprietary Information (1) without disclosing such information and receiving written authorization from the Code of Ethics Administration Department. If you wish to purchase or sell a security about which you obtained such information, you must provide a written report of all of the information you obtained regarding the security to the Appropriate Analyst(s)(2). You may then receive permission to purchase or sell such security if the Appropriate Analyst(s) confirms to the Code of Ethics Administration Department that there is no intention to engage in a transaction regarding the security within the next seven (7) calendar days on behalf of an Associated Client(3) and you subsequently pre-clear a request to purchase or sell such security. - -------------------------------------- (1) Proprietary Information: Information that is obtained or developed during the ordinary course of employment with Franklin Templeton Investments, whether by you or someone else, and is not available to persons outside of Franklin Templeton Investments. Examples of such Proprietary Information include, among other things, internal research reports, research materials supplied to Franklin Templeton Investments by vendors and broker-dealers not generally available to the public, minutes of departmental/research meetings and conference calls, and communications with company officers (including confidentiality agreements). Examples of non-Proprietary Information include information found in mass media publications (e.g., The Wall Street Journal, Forbes, and Fortune), certain specialized publications available to the public (e.g., Morningstar, Value Line, Standard and Poors), and research reports available to the general public. (2) Appropriate Analyst: Any securities analyst or portfolio manager, other than you, making recommendations or investing funds on behalf of any Associated Client, who may be reasonably expected to recommend or consider the purchase or sale of the security in question. (3) Associated Client: A Fund or client whose trading information would be available to the Access Person during the course of his or her regular functions or duties. 18570-5 11 6. Certain Transactions in Securities of Franklin Resources, Inc., and Affiliated Closed-end Funds You shall not effect a short sale of the securities, including "short sales against the box" of Franklin Resources, Inc., or any of the Franklin Templeton Group of closed-end funds, or any other security issued by Franklin Templeton Investments. This prohibition would also apply to effecting economically equivalent transactions, including, but not limited to purchasing and selling call or put options and swap transactions or other derivatives. Officers and directors of Franklin Templeton Investments who are covered by Section 16 of the Securities Exchange Act of 1934, are reminded that their obligations under Section 16 are in addition to their obligations under this Code and other additional requirements with respect to pre-clearance and Rule 144 affiliate policies and procedures. 7. Short Term Trading or "Market Timing" in the Funds. Franklin Templeton Investments seeks to discourage short-term or excessive trading, often referred to as "market timing." Code of Ethics Persons must be familiar with the "Market Timing Trading Policy" described in the prospectus of each Fund in which they invest and must not engage in trading activity that might violate the purpose or intent of that policy. Accordingly, all directors, officers and employees of Franklin Templeton Investments must comply with the purpose and intent of each fund's Market Timing Trading Policy and must not engage in any short-term or excessive trading in Funds. The Trade Control Team of each Fund's transfer agent will monitor trading activity by directors, officers and employees and will report to the Code of Ethics Administration Department, trading patterns or behaviors that may constitute short-term or excessive trading. Given the importance of this issue, if the Code of Ethics Administration Department determines that you engaged in this type of activity, you will be subject to discipline, up to and including termination of employment and a permanent suspension of your ability to purchase shares of any Funds. This policy applies to Franklin Templeton funds including those Funds purchased through a 401(k) plan and to funds that are sub-advised by an investment adviser subsidiary of Franklin Resources, Inc., but does not apply to purchases and sales of Franklin Templeton money fund shares. 18570-5 12 8. Service as a Director Code of Ethics Persons (excluding Independent Directors of FRI) may not serve as a director, trustee, or in a similar capacity for any public or private company (excluding not-for-profit companies, charitable groups, and eleemosynary organizations) unless you receive approval from the CEO of Franklin Resources, Inc. and it is determined that your service is consistent with the interests of the Funds and clients of Franklin Templeton Investments. You must notify the Code of Ethics Administration Department, of your interest in serving as a director, including your reasons for electing to take on the directorship by completing Schedule G. The Code of Ethics Administration Department will process the request through the Franklin Resources, Inc. CEO. If approved by the CEO of Franklin Resources, Inc. procedures applicable to serving as an outside director will be furnished to you by the Code of Ethics Administration Department. FRI Independent Directors are subject to the FRI Corporate Governance Guidelines with respect to service on another company's board. C. Access Persons (excluding Independent Directors of the Funds) and Portfolio Persons - Additional Prohibitions and Requirements 1. Securities Sold in a Public Offering Access Persons shall not buy securities in any initial public offering, or a secondary offering by an issuer except for offerings of securities made by closed-end funds that are either advised or sub-advised by a Franklin Templeton Investments adviser. Although exceptions are rarely granted, they will be considered on a case-by-case basis and only in accordance with procedures contained in section I.B. of Appendix A. 2. Interests in Partnerships and Securities Issued in Limited Offering (Private Placements) Access Persons shall not invest in limited partnerships (including interests in limited liability companies, business trusts or other forms of "hedge funds") or other securities in a Limited Offering (private placement) without pre-approval from the Code of Ethics Administration Department. In order to seek consideration for pre-approval you must: (a) complete the Limited Offering (Private Placement) Checklist (Schedule F) (b) provide supporting documentation (e.g., a copy of the offering memorandum); and (c) obtain approval of the appropriate Chief Investment Officer; and 18570-5 13 (d) submit all documents to the Code of Ethics Administration Department. Approvals for such investments will be determined by the Director of Global Compliance or the Chief Compliance Officer. Under no circumstances will approval be granted for investments in "hedge funds" that are permitted to invest in registered open-end investment companies ("mutual funds") or registered closed-end investment companies. D. Portfolio Persons - Additional Prohibitions and Requirements 1. Short Sales of Securities Portfolio Persons shall not sell short any security held by Associated Clients, including "short sales against the box." This prohibition also applies to effecting economically equivalent transactions, including, but not limited to, sales of uncovered call options, purchases of put options while not owning the underlying security and short sales of bonds that are convertible into equity positions. 2. Short Swing Trading Portfolio Persons shall not profit from the purchase and sale or sale and purchase within sixty (60) calendar days of any security in all his/her personal accounts taken in aggregate , including derivatives. Portfolio Persons are responsible for transactions that may occur in margin and option accounts and all such transactions must comply with this restriction.(4) This restriction does not apply to: (a) trading within a sixty (60) calendar day period if you do not realize a profit and you do not violate any other provisions of this Code; and (b) profiting on the purchase and sale or sale and purchase within sixty (60) calendar days of the following securities: |X| securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof; |X| high quality short-term instruments ("money market instruments") including but not limited to (i) bankers' acceptances, (ii) U.S. bank certificates of deposit; (iii) commercial paper; and (iv) repurchase agreements; - ---------------------------------------------------------- (4) This restriction applies equally to transactions occurring in margin and option accounts, which may not be due to direct actions by the Portfolio Person. For example, a stock held less than sixty (60) days that is sold to meet a margin call or the underlying stock of a covered call option held less than sixty (60) days that is called away, would be a violation of this restriction if these transactions resulted in a profit for the Portfolio Person. 18570-5 14 |X| shares of any registered open-end investment companies including Exchange Traded Funds (ETF), Holding Company Depository Receipts (Hldrs) and shares of Franklin Templeton Funds subject to the short term trading (market timing) policies described in each Fund's prospectus. |X| Calculation of profits during the sixty (60) calendar day holding period generally will be based on "last-in, first-out" ("LIFO"). Portfolio Persons may elect to calculate their sixty (60) calendar day profits on either a LIFO or FIFO ("first-in, first-out") basis only if there has not been any activity in such security by their Associated Clients during the previous sixty (60) calendar days. 3. Disclosure of Interest in a Security and Method of Disclosure As a Portfolio Person, you must promptly disclose your direct or indirect beneficial interest in a security whenever you learn that the security is under consideration for purchase or sale by an Associated Client and you; (a) Have or share investment control of the Associated Client; (b) Make any recommendation or participate in the determination of which recommendations shall be made on behalf of the Associated Client; or (c) Have functions or duties that relate to the determination of which recommendation shall be made to the Associated Client. In such instances, you must initially disclose that beneficial interest orally to the primary portfolio manager (or other Appropriate Analyst) of the Associated Client(s) or the appropriate Chief Investment Officer. Following that oral disclosure, you must send a written acknowledgment of that interest on Schedule E (or on a form containing substantially similar information) that has been signed by the primary portfolio manager, with a copy to the Code of Ethics Administration Department. 18570-5 15 PART 4 - Reporting Requirements for Code of Ethics Persons (excluding Independent Directors of the Funds and of FRI) References to Access Persons in this Part 4 do not apply to the Independent Directors of the Funds and of FRI. Reporting requirements applicable to Independent Directors of the Funds are separately described in Part 6. 4.1 Reporting of Beneficial Ownership and Securities Transactions Compliance with the following personal securities transaction reporting procedures is essential to meeting our responsibilities with respect to the Funds and other clients as well as complying with regulatory requirements. You are expected to comply with both the letter and spirit of these requirements by completing and filing all reports required under the Code in a timely manner. If you have any questions about which reporting requirements apply to you, please contact the Code of Ethics Administration Department. 4.2 Initial Reports A. Acknowledgement Form (Supervised Persons, Access Persons and Portfolio Persons) All Supervised Persons, Access Persons and Portfolio Persons must complete and return an executed Acknowledgement Form to the Code of Ethics Administration Department no later than ten (10) calendar days after the date the person is notified by a member of the Code of Ethics Administration Department. B. Schedule C - Initial & Annual Disclosure of Brokerage Accounts, Securities Holdings and Discretionary Authority (Access Persons and Portfolio Persons) In addition, all Access Persons and Portfolio Persons must also file Schedule C (Initial & Annual Disclosure of Brokerage Accounts, Securities Holdings and Discretionary Authority) with the Code of Ethics Administration Department no later than ten (10) calendar days after becoming an Access or Portfolio Person. The submitted information must be current as of a date not more than forty-five (45) days prior to becoming an Access or Portfolio Person. 18570-5 16 4.3 Quarterly Transaction Reports A. Access Persons and Portfolio Persons You must report all securities transactions except for those (1) in any account over which you had no direct or indirect influence or control; (2) effected pursuant to an Automatic Investment Plan (however, any transaction that overrides the preset schedule or allocations of the automatic investment plan must be included in a quarterly transaction report); (3) that would duplicate information contained in broker confirmations or statements provided no later than thirty (30) days after the end of each calendar quarter. You must provide the Code of Ethics Administration Department no later than thirty (30) calendar days after the end of each calendar quarter, with either; (i) copies of all broker's confirmations and statements (which may be sent under separate cover by the broker) showing all your securities transactions and holdings in such securities, or (ii) a completed Schedule B (Transactions Report). Please use Schedule B only when your securities transactions do not generate a statement or do not take place in a brokerage account. Brokerage statements and confirmations submitted must include all transactions in securities in which you have, or by reason of the transaction acquire any direct or indirect beneficial ownership, including transactions in a discretionary account and transactions for any account in which you have any economic interest and have or share investment control. Please remember that you must report all securities acquired by gift, inheritance, vesting,(5) stock splits, merger or reorganization of the issuer of the security. Failure to timely report transactions is a violation of Rule 17j-1, Rule 204A-1, as well as the Code, and will be reported to the Director of Global Compliance and/or the Fund's Board of Directors and may also result in disciplinary action, up to and including, termination. 4.4 Annual Reports A. Securities Accounts and Securities Holdings Reports (Access Persons and Portfolio Persons) You must file a report of all personal securities accounts and securities holdings on Schedule C (Initial, Annual Disclosure of Brokerage Accounts, Securities Holdings and Discretionary Authority), with the Code of Ethics Administration Department, annually by February 1st. You must report the name and - ---------------------------------------------- (5) You are not required to separately report the vesting of shares or options of Franklin Resources, Inc., received pursuant to a deferred compensation plan as such information is already maintained. 18570-5 17 description of each securities account in which you have a direct or indirect beneficial interest, including securities accounts of your immediate family residing in the same household. You must provide information on any account that is covered under Section 3.2 of the Code. This report should include all of your securities holdings, including any security acquired by a transaction, gift, inheritance, vesting, merger or reorganization of the issuer of the security, in which you have any direct or indirect beneficial ownership, including securities holdings in a discretionary account. Your securities holding information must be current as of a date no more than forty-five (45) days before the report is submitted. You may attach copies of year-end brokerage statements to Schedule C in lieu of listing each of your security positions on the Schedule. B. Acknowledgement Form (Supervised Persons, Access Persons and Portfolio Persons) Supervised Persons, Access Persons and Portfolio Persons will be asked to certify by February 1st annually that they have complied with and will comply with the Code and Insider Trading Policy by filing the Acknowledgment Form with the Code of Ethics Administration Department. 4.5 Brokerage Accounts and Confirmations of Securities Transactions (Access Persons and Portfolio Persons) Before or at a time contemporaneous with opening a brokerage account with a registered broker-dealer, or a bank, or placing an initial order for the purchase or sale of securities with that broker-dealer or bank, you must: (1) notify the Code of Ethics Administration Department, in writing, by completing Schedule D (Notification of Securities Account) or by providing substantially similar information; and (2) notify the institution with which you open the account, in writing, of your association with Franklin Templeton Investments. The Code of Ethics Administration Department will request, in writing, that the institution send duplicate copies of confirmations and statements for all transactions effected in the account simultaneously with their mailing of such confirmation and statement to you. If you have an existing account on the effective date of this Code or upon becoming an Access or Portfolio Person, you must comply within ten (10) days with conditions (1) and (2) above. 18570-5 18 PART 5 - Pre-clearance Requirements Applicable to Access Persons (excluding Independent Directors of the Funds) and Portfolio Persons References to Access Persons in this Part 5 do not apply to the Independent Directors of the Funds. Pre-clearance requirements applicable to Independent Directors of the Funds are separately described in Part 6. Prior Approval (Pre-Clearance) of Securities Transactions A. Length of Approval You shall not buy or sell any security without first contacting a member of the Code of Ethics Administration Department either electronically or by phone and obtaining his or her approval, unless your proposed transaction is covered by paragraph B below. Approval for a proposed transaction will remain valid until the close of the business day following the day pre-clearance is granted but may be extended in special circumstances, shortened or rescinded, as explained in the section entitled Pre-clearance Standards in Appendix A. B. Securities Not Requiring Pre-clearance You do not need to request pre-clearance for the types of securities or transactions listed below. However, all other provisions of the Code apply, including, but not limited to: (i) the prohibited transaction provisions contained in Part 3.4 such as front-running; (ii) the additional compliance requirements applicable to Portfolio Persons contained in Part 4, (iii) the applicable reporting requirements contained in Part 4; and (iv) insider trading prohibitions described in the Insider Trading Policy. If you have any questions, contact the Code of Ethics Administration Department before engaging in the transaction. If you have any doubt whether you have or might acquire direct or indirect beneficial ownership or have or share investment control over an account or entity in a particular transaction, or whether a transaction involves a security covered by the Code, you should consult with the Code of Ethics Administration Department before engaging in the transaction. You need not pre-clear the following types of transactions or securities: 18570-5 19 (1) Franklin Resources, Inc., and Closed-End Funds of Franklin Templeton Group of Funds . Purchases and sales of securities of Franklin Resources, Inc. and closed-end funds of Franklin Templeton Group of Funds as these securities cannot be purchased on behalf of our advisory clients.(6) (2) Shares of open-end investment companies (including Reportable Funds) (3) Small Quantities (Not applicable to option transactions). o Transactions of 500 shares or less of any security regardless of where it is traded in any 30-day period; or o Transactions of 1000 shares or less of the top 50 securities by volume during the previous calendar quarter on the NYSE or NASDAQ NMS(does not include Small Cap or OTC) in any 30-day period. You can find this list at http://intranet/leglcomp/codeofethics/top50.xls. o Transactions in municipal bonds with a face value of $100,000 or less in any 30-day period. o Option Transactions and Municipal Bond Transactions: The small quantities rule is not applicable to option and municipal bond transactions. All option and municipal bond transactions must be pre-cleared except for employer stock options as noted in Employer Stock Option Programs below. Please note that you may not execute any transaction, regardless of quantity, if you learn that the Funds or clients are active in the security. It will be presumed that you have knowledge of Fund or client activity in the security if, among other things, you are denied approval to go forward with a transaction request. (4) Dividend Reinvestment Plans: Transactions made pursuant to dividend reinvestment plans ("DRIPs") do not require pre-clearance regardless of quantity or Fund activity. (5) Government Obligations. Transactions in securities issued or guaranteed by the governments of the United States, Canada, the United Kingdom, France, Germany, Switzerland, Italy and Japan, or their agencies or instrumentalities, or derivatives thereof. (6) Payroll Deduction Plans. Securities purchased by an Access Person's spouse pursuant to a payroll deduction program, provided the Access Person has previously notified the Code of Ethics Administration Department in writing that their spouse will be participating in the payroll deduction program. (7) Employer Stock Option Programs. Transactions involving the exercise and/or purchase by an Access Person or an Access Person's spouse of securities pursuant to a program sponsored by a company employing the Access Person or Access Person's spouse. (8) Pro Rata Distributions. Purchases effected by the exercise of rights issued pro rata to all holders of a class of securities or the sale of rights so received. - ---------------------------------------------------- (6) Officers, directors and certain other designated employees of FRI and its affiliated closed-end funds may be subject to additional ownership reporting and pre-clearance requirements with respect to BEN shares and shares of affiliated closed-end shares as well as certain Rule 144 affiliated policies and procedures.. Contact the Code of Ethics Administration Department for additional information. See also the attached Insider Trading Policy. 18570-5 20 (9) Tender Offers. Transactions in securities pursuant to a bona fide tender offer made for any and all such securities to all similarly situated shareholders in conjunction with mergers, acquisitions, reorganizations and/or similar corporate actions. However, tenders pursuant to offers for less than all outstanding securities of a class of securities of an issuer must be pre-cleared. (10) Securities Prohibited for Purchase by the Funds and other Clients. Transactions in any securities that are prohibited investments for all Funds and clients advised by the entity employing the Access Person. (11) No Investment Control. Transactions effected for an account or entity over which you do not have or share investment control (i.e., an account where someone else exercises complete investment control). (12) No Beneficial Ownership. Transactions in which you do not acquire or dispose of direct or indirect beneficial ownership (i.e., an account where in you have no financial interest). (13) ETFs and Holdrs. Transactions in Exchange-Traded Funds and Holding Company Depository Receipts. (14) Variable Rate Demand Obligation/Note transactions. C. Discretionary Accounts You need not pre-clear transactions in any discretionary account for which a registered broker-dealer, a registered investment adviser, or other investment manager acting in a similar fiduciary capacity, exercises sole investment discretion, if the following conditions are met:(7) (1) The terms of each account relationship ("Agreement") must be in writing and filed with the Code of Ethics Administration Department prior to any transactions. (2) Any amendment to each Agreement must be filed with the Code of Ethics Administration Department prior to its effective date. (3) The Access Person certifies to the Code of Ethics Administration Department at the time such account relationship commences, and annually thereafter, as contained in Schedule C of the Code that such Access Person does not have direct or indirect influence or control over the account, other than the right to terminate the account. - --------------------------------------------------- (7) Please note that these conditions apply to any discretionary account in existence prior to the effective date of this Code or prior to your becoming an Access Person. Also, the conditions apply to transactions in any discretionary account, including pre-existing accounts, in which you have any direct or indirect beneficial ownership, even if it is not in your name. 18570-5 21 (4) Additionally, any discretionary account that you open or maintain with a registered broker-dealer, a registered investment adviser, or other investment manager acting in a similar fiduciary capacity must provide duplicate copies of confirmations and statements for all transactions effected in the account simultaneously with their delivery to you. If your discretionary account acquires securities that are not reported to the Code of Ethics Administration Department by a duplicate confirmation, such transaction must be reported to the Code of Ethics Administration Department on Schedule B (Quarterly Transactions Report) no later than thirty (30) days after the end of the calendar quarter after you are notified of the acquisition.(8) However, if prior to making any request you advised the discretionary account manager to enter into or refrain from a specific transaction or class of transactions, you must first consult with the Code of Ethics Administration Department and obtain approval prior to making such request. - --------------------------------------------------- (8) Any pre-existing agreement must be promptly amended to comply with this condition. The required reports may be made in the form of an account statement if they are filed by the applicable deadline. 18570-5 22 PART 6 - Requirements for Independent Directors of the Funds 6.1 Pre-clearance Requirements Independent Directors of the Funds shall pre-clear or report on any securities transactions if they knew or should have known that during the 15-day period before or after the transaction the security was purchased or sold or considered for purchase or sale by the Fund. Such pre-clearance and reporting requirements shall not apply to securities transactions conducted in an account where an Independent Director has granted full investment discretion to a brokerage firm, bank or investment advisor or conducted in a trust account in which the trustee has full investment discretion. 6.2 Reporting Requirements A. Initial Reports 1. Acknowledgement Form Independent Directors of the Funds must complete and return an executed Acknowledgement Form to the Code of Ethics Administration Department no later than ten (10) calendar days after the date the person becomes an Independent Director of the Fund. 2. Disclosure of Securities Holdings, Brokerage Accounts and Discretionary Authority Independent Directors of the Funds are not required to disclose any securities holdings, brokerage accounts, including brokerage accounts where he/she has granted discretionary authority to a brokerage firm, bank or investment adviser. B. Quarterly Transaction Reports Independent Directors of the Funds are not required to file any quarterly transaction reports unless he/she knew or should have known that, during the 15-day period before or after a transaction, the security was purchased or sold, or considered for purchase or sale, by a Fund or by Franklin Templeton Investments on behalf of a Fund. 18570-5 23 C. Annual Reports Independent Directors of the Funds will be asked to certify by February 1st annually that they have complied with and will comply with the Code and Insider Trading Policy by filing the Acknowledgment Form with the Code of Ethics Administration Department. 18570-5 24 PART 7 - Penalties for Violations of the Code The Code is designed to assure compliance with applicable laws and to maintain shareholder confidence in Franklin Templeton Investments. In adopting this Code, it is the intention of the Boards of Directors/Trustees of the subsidiaries listed in Appendix C of this Code, together with Franklin Resources, Inc., and the Funds, to attempt to achieve 100% compliance with all requirements of the Code but recognize that this may not be possible. Certain incidental failures to comply with the Code are not necessarily a violation of the law or the Code. Such violations of the Code not resulting in a violation of law or the Code will be referred to the Director of Global Compliance and/or the Chief Compliance Officer and/or the relevant management personnel, and disciplinary action commensurate with the violation, if warranted, will be imposed. Additionally, if you violate any of the enumerated prohibited transactions contained in Parts 3 and 4 of the Code, you will be expected to give up any profits realized from these transactions to Franklin Resources, Inc. for the benefit of the affected Funds or other clients. If Franklin Resources, Inc. cannot determine which Funds or clients were affected the proceeds will be donated to a charity chosen either by you or by Franklin Resources, Inc. Please refer to the following page for guidance on the types of sanctions that would likely be imposed for violations of the Code. Failure to disgorge profits when requested or even a pattern of violations that individually do not violate the law or the Code, but which taken together demonstrate a lack of respect for the Code, may result in more significant disciplinary action, up to and including termination of employment. A violation of the Code resulting in a violation of the law will be severely sanctioned, with disciplinary action potentially including, but not limited to, referral of the matter to the board of directors of the affected Fund, senior management of the appropriate investment adviser, principal underwriter or other Franklin subsidiary and/or the board of directors of Franklin Resources, Inc., termination of employment and referral of the matter to the appropriate regulatory agency for civil and/or criminal investigation. 18570-5 25 Code of Ethics Sanction Guidelines Please be aware that these guidelines represent only a representative sampling of the possible sanctions that may be taken against you in the event of a violation of the Code.
--------------------------------------------------------------------- ----------------------------------------- Violation Sanction Imposed --------------------------------------------------------------------- ----------------------------------------- o Failure to pre-clear but otherwise would have been Reminder Memo approved (i.e., no conflict with the fund's transactions). --------------------------------------------------------------------- ----------------------------------------- --------------------------------------------------------------------- ----------------------------------------- o Failure to pre-clear but otherwise would have been 30 Day Personal Securities Trading approved (i.e., no conflict with the fund's transactions) Suspension twice within twelve (12) calendar months o Failure to pre-clear and the transaction would have been disapproved --------------------------------------------------------------------- ----------------------------------------- --------------------------------------------------------------------- ----------------------------------------- o Failure to pre-clear but otherwise would have been Greater Than 30 Day Personal Securities approved (i.e., no conflict with the fund's transactions) Trading Suspension (e.g., 60 or 90 Days) three times or more within twelve (12) calendar months o Failure to pre-clear and the transaction would have been disapproved twice or more within twelve (12) calendar months --------------------------------------------------------------------- ----------------------------------------- --------------------------------------------------------------------- ----------------------------------------- o Profiting from short-swing trades (profiting on purchase & Profits are donated to The United Way sale or sale & purchase within sixty (60) days) (or charity of employee's choice) --------------------------------------------------------------------- ----------------------------------------- --------------------------------------------------------------------- ----------------------------------------- o Repeated violations of the Code of Ethics even if each Fines levied after discussion with the individual violation might be considered de minimis General Counsel and appropriate CIO. --------------------------------------------------------------------- ----------------------------------------- o Failure to return initial or annual disclosure forms Sanction may include but not limited to o Failure to timely report transactions a reminder memo, suspension of personal trading, monetary sanctions, reporting to the Board of Directors, placed on unpaid administrative leave or termination of employment --------------------------------------------------------------------- ----------------------------------------- o Insider Trading Violation and/or violation of the Code of Subject to review by the appropriate Ethics and Business Conduct contained in Appendix D supervisor in consultation with the Franklin Resources Inc., General Counsel for consideration of appropriate disciplinary action up to and including termination of employment and reporting to the appropriate regulatory agency. --------------------------------------------------------------------- -----------------------------------------
18570-5 26 PART 8 - A Reminder about the Franklin Templeton Investments Insider Trading Policy The Insider Trading Policy (see the attached Insider Trading Compliance Policy and Procedures) deals with the problem of insider trading in securities that could result in harm to a Fund, a client, or members of the public. It applies to all Code of Ethics Persons. The guidelines and requirements described in the Insider Trading Policy go hand-in-hand with the Code. If you have any questions or concerns about compliance with the Code and the Insider Trading Policy you are encouraged to speak with the Code of Ethics Administration Department. 18570-5 27 PART 9 - Foreign Country Supplements (Canada) The Investment Funds Institute of Canada ("IFIC") has implemented a Model Code of Ethics for Personal Investing (the "IFIC Code") to be adopted by all IFIC members. Certain provisions in the IFIC Code differ from the provisions of Franklin Templeton Investments Code of Ethics (the "FTI Code"). This Supplementary Statement of Requirements for Canadian Employees (the "Canadian Supplement") describes certain further specific requirements that govern the activities of Franklin Templeton Investments Corp. ("FTIC"). It is important to note that the Canadian Supplement does not replace the FTI Code but adds certain restrictions on trading activities, which must be read in conjunction with the Code. All capitalized terms in this Canadian Supplement, unless defined in this Canadian Supplement, have the meaning set forth in the FTI Code. Initial Public and Secondary Offerings Access Persons cannot buy securities in any initial public offering, or a secondary offering by an issuer. Public offerings of securities made by Franklin Templeton Investments, including open-end and closed-end mutual funds, real estate investment trusts and securities of Franklin Resources, Inc, are excluded from this prohibition. Interests in Partnerships and Securities issued in Private Placements Access Persons and Portfolio Persons cannot acquire limited partnership interests or other securities in private placements unless they obtain approval of the appropriate Chief Investment Officer and Director of Global Compliance after he or she consults with an executive officer of Franklin Resources, Inc. Purchases of limited partnership interests or other securities in private placements will not be approved, unless in addition to the requirements for the approval of other trades and such other requirements as the executive officer of Franklin Resources, Inc. may require, the Director of Global Compliance is satisfied that the issuer is a "private company" as defined in the Securities Act (Ontario) and the Access Person has no reason to believe that the issuer will make a public offering of its securities in the foreseeable future. Additional Requirements to Obtain Approval for Personal Trades Prior to an Access Person obtaining approval for a personal trade he or she must advise the Code of Ethics Administration Department that he or she: o Does not possess material non-public information relating to the security; o Is not aware of any proposed trade or investment program relating to that security by any of the Franklin Templeton Group of Funds; o Believes that the proposed trade has not been offered because of the Access Person's position in Franklin Templeton Investments and is available to any market participant on the same terms; o Believes that the proposed trade does not contravene any of the prohibited activities set out in Section 3.4 of the FTI Code, and in the case of Portfolio Persons does not violate any of the additional requirements set out in Part 3.4D of the FTI Code; and o Will provide any other information requested by the Code of Ethics Administration Department concerning the proposed personal trade. An Access Person may contact the Code of Ethics Administration Department by fax, phone or e-mail to obtain his or her approval. Note: the method of obtaining approval is presently set out in Part 5 of the FTI Code and provides that an Access Person may contact the Code of Ethics Administration Department by e-mail or phone. The additional requirement described above makes it clear that an Access Person may continue to contact the Code of Ethics Administration Department in the same manner as before. The Access Person will have deemed to have confirmed compliance with the above requirements prior to obtaining approval from the Code of Ethics Administration Department. 18570-5 28 Appointment of Independent Review Person FTIC shall appoint an independent review person who will be responsible for approval of all personal trading rules and other provisions of the FTI Code with respect to FTIC and for monitoring the administration of the FTI Code from time to time with respect to FTIC employees. The Code of Ethics Administration Department Manager will provide a written report to the Independent Review Person, at least annually, summarizing: o Compliance with the FTI Code for the period under review o Violations of the FTI Code for the period under review o Sanctions imposed by Franklin Templeton Investments for the period under review o Changes in procedures recommended by the FTI Code o Any other information requested by the Independent Review Person 18570-5 29 APPENDIX A: COMPLIANCE PROCEDURES AND DEFINITIONS This appendix sets forth the responsibilities and obligations of the Compliance Officers of each entity that has adopted the Code, the Code of Ethics Administration Department, and the Legal Department, under the Code and Insider Trading Policy. 18570-5 30 I. Responsibilities of Each Designated Compliance Officer A. Pre-clearance Standards 1. General Principles The Director of Global Compliance, the Chief Compliance Officer and/or the Code of Ethics Administration Department, shall permit an Access Person to go forward with a proposed security(9) transaction only if he or she determines that, considering all of the facts and circumstances known to them, the transaction does not violate Federal Securities Laws, or this Code and there is no likelihood of harm to a Fund or client. 2. Associated Clients Unless there are special circumstances that make it appropriate to disapprove a personal securities transaction request, the Code of Ethics Administration Department shall consider only those securities transactions of the "Associated Clients" of the Access Person, including open and executed orders and recommendations, in determining whether to approve such a request. "Associated Clients" are those Funds or clients whose securities holdings and/or trading information would be available to the Access Person during the course of his or her regular functions or duties. As of November 2004, there are five groups of Associated Clients: (i) the Franklin Mutual Series Funds and clients advised by Franklin Mutual Advisers, LLC ("Mutual Clients"); (ii) the Franklin Group of Funds and the clients advised by the various Franklin investment advisers ("Franklin Clients"); (iii) the Templeton Group of Funds and the clients advised by the various Templeton investment advisers ("Templeton Clients"); (iv) the Bissett Group of Funds and the clients advised by Franklin Templeton Investments Corp.; and (v) the Fiduciary Group of funds and the clients advised by the various Fiduciary investment advisers. Other Associated Clients will be added to this list as they are established. Thus, for example, persons who have access to the trading information of Mutual Clients generally will be pre-cleared solely against the securities transactions of the Mutual Clients, including open and executed orders and recommendations. Similarly, persons who have access to the trading information of Franklin Clients, Templeton Clients, Bissett clients, or Fiduciary clients, generally will be pre-cleared solely against the securities transactions of Franklin Clients, Templeton Clients, Bissett clients or Fiduciary clients respectively. - ----------------------------------------------- (9) Security includes any option to purchase or sell, and any security that is exchangeable for or convertible into, any security that is held or to be acquired by a fund. 18570-5 31 Certain officers of Franklin Templeton Investments, as well as certain employees in the Legal, Global Compliance, Fund Accounting, Investment Operations and other personnel who generally have access to trading information of the Funds and clients of Franklin Templeton Investments during the course of their regular functions and duties, will have their personal securities transactions pre-cleared against executed transactions, open orders and recommendations of all Associated Clients. 3. Specific Standards (a) Securities Transactions by Funds or clients No clearance shall be given for any transaction in any security on any day during which an Associated Client of the Access Person has executed a buy or sell order in that security, until seven (7) calendar days after the order has been executed. Notwithstanding a transaction in the previous seven days, clearance may be granted to sell if all Associated Clients have disposed of the security. (b) Securities under Consideration Open Orders No clearance shall be given for any transaction in any security on any day which an Associated Client of the Access Person has a pending buy or sell order for such security, until seven (7) calendar days after the order has been executed or if the order is immediately withdrawn. Recommendations No clearance shall be given for any transaction in any security on any day on which a recommendation for such security was made by a Portfolio Person, until seven (7) calendar days after the recommendation was made and no orders have subsequently been executed or are pending. (c) Limited Offering (Private Placement) In considering requests by Access Persons for approval of limited partnerships and other limited offering, the Director of Global Compliance or Chief Compliance Officer shall take into account, among other factors, whether the investment opportunity should be reserved for a Fund or other client, and whether the investment opportunity is being offered to the Access Person by virtue of his or her position with Franklin Templeton Investments. If the Access 18570-5 32 Person receives clearance for the transaction, an investment in the same issuer may only be made for a Fund or client if an executive officer of Franklin Resources, Inc., who has been informed of the Portfolio Person's pre-existing investment and who has no interest in the issuer, approves the transaction. Please see Schedule F. (d) Duration of Clearance If the Code of Ethics Administration Department approves a proposed securities transaction, the order for the transaction must be placed and effected by the close of the next business day following the day approval was granted. The Director of Global Compliance and/or the Chief Compliance Officer may, in his or her discretion, extend the clearance period up to seven (7) calendar days, beginning on the date of the approval, for a securities transaction of any Access Person who demonstrates that special circumstances make the extended clearance period necessary and appropriate.(10) The Director of Global Compliance or the Chief Compliance Officer may, in his or her discretion, after consultation with an executive officer of Franklin Resources, Inc., renew the approval for a particular transaction for up to an additional seven (7) calendar days upon a showing of special circumstances by the Access Person. The Director of Global Compliance or the Chief Compliance Officer may shorten or rescind any approval or renewal of approval under this paragraph if he or she determines it is appropriate to do so. - ----------------------------------------------------- (10) Special circumstances include but are not limited to, for example, holidays, differences in time zones, delays due to travel, and the unusual size of proposed trades or limit orders. Limit orders must expire within the applicable clearance period. 18570-5 33 B. Waivers by the Director of Global Compliance and/or the Chief Compliance Officer The Director of Global Compliance and/or the Chief Compliance Officer may, in his or her discretion, after consultation with an executive officer of Franklin Resources, Inc., waive compliance by any Access Person with the provisions of the Code, if he or she finds that such a waiver: (1) is necessary to alleviate undue hardship or in view of unforeseen circumstances or is otherwise appropriate under all the relevant facts and circumstances; (2) will not be inconsistent with the purposes and objectives of the Code; (3) will not adversely affect the interests of advisory clients of Franklin Templeton Investments, the interests of Franklin Templeton Investments or its affiliates; and (4) will not result in a transaction or conduct that would violate provisions of applicable laws or regulations. Any waiver shall be in writing, shall contain a statement of the basis for it, and the Director of Global Compliance or the Chief Compliance Officer, shall promptly send a copy to the General Counsel of Franklin Resources, Inc. C. Continuing Responsibilities of the Code of Ethics Administration Department Pre-clearance Recordkeeping The Code of Ethics Administration Department shall keep a record of all requests for pre-clearance regarding the purchase or sale of a security, including the date of the request, the name of the Access Person, the details of the proposed transaction, and whether the request was approved or denied. The Code of Ethics Administration Department shall keep a record of any waivers given, including the reasons for each exception and a description of any potentially conflicting Fund or client transactions. 18570-5 34 Initial, Annual Holdings Reports and Quarterly Transaction Reports The Code of Ethics Administration Department shall also collect the signed Acknowledgment Forms from Supervised and Access Persons as well as reports, on Schedules B, C, D, E, F, G of the Code, as applicable. In addition, the Code of Ethics Administration Department shall keep records of all confirmations, and other information with respect to an account opened and maintained with the broker-dealer by any Access Person of Franklin Templeton Investments. The Code of Ethics Administration Department shall preserve those acknowledgments and reports, the records of consultations and waivers, and the confirmations, and other information for the period required by the applicable regulation. The Code of Ethics Administration Department shall review brokerage transaction confirmations, account statements, Schedules B, C, D, E, F and G for compliance with the Code. The reviews shall include, but are not limited to; (1) Comparison of brokerage confirmations, Schedule Bs, and/or brokerage statements to pre-clearance requests or, if a private placement, the Private Placement Checklist; (2) Comparison of brokerage statements and/or Schedule Cs to current securities holding information, securities account information and discretionary authority information; (3) Conducting periodic "back-testing" of Access Person transactions, Schedule Cs and/or Schedule Es in comparison to fund and client transactions; The Code of Ethics Administration Department shall evidence review by initialing and dating the appropriate document or log. Violations of the Code detected by the Code of Ethics Administration Department during his or her reviews shall be promptly brought to the attention of the Director of Global Compliance and/or the Chief Compliance Officer with periodic reports to each appropriate Chief Compliance Officer. D. Periodic Responsibilities of the Code of Ethics Administration Department The Code of Ethics Administration Department or designated group shall consult with FRI's General Counsel and seek the assistance of the Human Resources Department, as the case may be, to assure that: 1. Adequate reviews and audits are conducted to monitor compliance with the reporting, pre-clearance, prohibited transaction and other requirements of the Code. 2. All Code of Ethics Persons are adequately informed and receive appropriate education and training as to their duties and obligations under the Code. 18570-5 35 3. All new Supervised and Access Persons of Franklin Templeton Investments are required to complete the Code of Ethics Computer Based Training program. Onsite training will be conducted on an "as needed" basis. 4. There are adequate educational, informational and monitoring efforts to ensure that reasonable steps are taken to prevent and detect unlawful insider trading by Supervised and Access Persons and to control access to inside information. 5. Written compliance reports are submitted to the Board of Directors of each relevant Fund at least quarterly. Additionally, written compliance reports are submitted to the Board of Directors of Franklin Resources, Inc., and the Board of each relevant Fund at least annually. Such reports will describe any issues arising under the Code or procedures since the last report, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations. 6. The Global Compliance Department will certify at least annually to the Fund's board of directors that Franklin Templeton Investments has adopted procedures reasonably necessary to prevent Supervised and Access Persons from violating the Code, and 7. Appropriate records are kept for the periods required by law. Types of records include pre-clearance requests and approvals, brokerage confirmations, brokerage statements, initial and annual Code of Ethics certifications. E. Approval by Fund's Board of Directors (1) Basis for Approval The Board of Directors/Trustees must base its approval of the Code on a determination that the Code contains provisions reasonably necessary to prevent Code of Ethics Persons from engaging in any conduct prohibited by Rule 17j-1 or Rule 204A-1. The Code of Ethics Administration Department maintains a detailed list of violations and will amend the Code of Ethics and procedures in an attempt to reduce such violations. (2) New Funds At the time a new fund is organized, the Code Of Ethics Administration Department will provide the Fund's board of directors, a certification that the investment adviser and principal underwriter has adopted procedures reasonably necessary to prevent Code of Ethics Persons from violating the Code. Such certification will state that the Code contains provisions reasonably necessary to prevent Code of Ethics Persons from violating the Code. 18570-5 36 (3) Material Changes to the Code of Ethics The Global Compliance Department will provide the Fund's board of directors a written description of all material changes to the Code no later than six months after adoption of the material change by Franklin Templeton Investments. 18570-5 37 II. Definitions of Important Terms For purposes of the Code of Ethics and Insider Trading Policy, the terms below have the following meanings: 1934 Act - The Securities Exchange Act of 1934, as amended. 1940 Act - The Investment Company Act of 1940, as amended. Access Person - (1) Each director, trustee, general partner or officer of a Fund or investment adviser in Franklin Templeton Investments; (2) any Advisory Representative; and (3) any director, trustee, general partner or officer of a principal underwriter of the Funds, who has access to information concerning recommendations made to a Fund or client with regard to the purchase or sale of a security. Advisers Act - The Investment Advisers Act of 1940, as amended. Advisory Representative - Any director, trustee, general partner, officer or employee of a Fund or investment adviser in Franklin Templeton Investments (or of any company in a control relationship to such Fund or investment adviser) who in connection with his or her regular functions or duties makes any recommendation, who participates in the determination of which recommendation shall be made, whose functions or duties relate to the determination of which recommendation shall be made; or who, obtains any information concerning which securities are being recommended prior to the effective dissemination of such recommendations or of the information concerning such recommendations. Affiliated Person - it has the same meaning as Section 2(a)(3) of the Investment Company Act of 1940. An "affiliated person" of an investment company includes directors, officers, employees, and the investment adviser. In addition, it includes any person owning 5% of the company's voting securities, any person in which the investment company owns 5% or more of the voting securities, and any person directly or indirectly controlling, controlled by, or under common control with the company. Appropriate Analyst - With respect to any Access Person, any securities analyst or portfolio manager making investment recommendations or investing funds on behalf of an Associated Client and who may be reasonably expected to recommend or consider the purchase or sale of a security. Associated Client - A Fund or client whose trading information would be available to the Access Person during the course of his or her regular functions or duties. Automatic Investment Plan-A program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocations. An automatic investment plan includes a dividend reinvestment plan. Beneficial Ownership - Has the same meaning as in Rule 16a-1(a)(2) under the 1934 Act. Generally, a person has a beneficial ownership in a security if he or she, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the security. There is a presumption of a pecuniary interest in a security held or acquired by a member of a person's immediate family sharing the same household. Exchange Traded Funds and Holding Company Depository Receipts - An Exchange-Traded Fund or "ETF" is a basket of securities that is designed to generally track an index--broad stock or bond market, stock industry sector, or international stock. Holding Company Depository Receipts "Holdrs" are securities that represent an investor's ownership in the common stock or American Depository Receipts of specified companies in a particular industry, sector or group. 18570-5 38 Funds - U.S. registered investment companies in the Franklin Templeton Group of Funds. Held or to be Acquired - A security is "held or to be acquired" if within the most recent 15 days it (i) is or has been held by a Fund, or (ii) is being or has been considered by a Fund or its investment adviser for purchase by the Fund. Initial Public Offering - An offering of securities registered under the Securities Act of 1933, the issuer of which immediately before the registration was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934. Limited Offering- An offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) of section 4(6). Portfolio Person - Any employee of Franklin Templeton Investments, who, in connection with his or her regular functions or duties, makes or participates in the decision to purchase or sell a security by a Fund in the Franklin Templeton Groups of Funds, or any other client or if his or her functions relate to the making of any recommendations about those purchases or sales. Portfolio Persons include portfolio managers, research analysts, traders, persons serving in equivalent capacities (such as Management Trainees), persons supervising the activities of Portfolio Persons, and anyone else designated by the Director of Global Compliance. Proprietary Information - Information that is obtained or developed during the ordinary course of employment with Franklin Templeton Investments, whether by you or someone else, and is not available to persons outside of Franklin Templeton Investments. Examples of such Proprietary Information include, among other things, internal research reports, research materials supplied to Franklin Templeton Investments by vendors and broker-dealers not generally available to the public, minutes of departmental/research meetings and conference calls, and communications with company officers (including confidentiality agreements). Examples of non-Proprietary Information include mass media publications (e.g., The Wall Street Journal, Forbes, and Fortune), certain specialized publications available to the public (e.g., Morningstar, Value Line, Standard and Poors), and research reports available to the general public. Reportable Fund - Any fund for which an Franklin Templeton Investments' U.S. registered investment adviser ("FTI Adviser") serves as an investment adviser or a sub-adviser or any fund whose investment adviser or principal underwriter controls a FTI Adviser, is controlled by a FTI adviser or is under common control with a FTI Adviser. Security - Any stock, note, bond, evidence of indebtedness, participation or interest in any profit-sharing plan or limited or general partnership, investment contract, certificate of deposit for a security, fractional undivided interest in oil or gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit), guarantee of, or warrant or right to subscribe for or purchase any of the foregoing, and in general any interest or instrument commonly known as a security. For purposes of the Code, security does not include: 1. direct obligations of the U.S. government (i.e. securities issued or guaranteed by the U.S. government such as Treasury bills, notes and bonds including U.S. savings bonds and derivatives thereof); 2. money market instruments - banker's acceptances, bank certificates of deposits, commercial paper, repurchase agreement and other high quality short-term debt instruments; 3. shares of money market funds; 4. shares issued by open-end funds other than Reportable Funds; and 5. Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are Reportable Funds. 18570-5 39 Supervised Persons- Supervised persons are a U.S. registered investment advisers' partners, officers, directors (or other persons occupying a similar status or performing similar functions), and employees, as well as any other persons who provide advice on behalf of the adviser and are subject to the supervision and control of the adviser. 18570-5 40 APPENDIX B: Acknowledgement Form and Schedules 18570-5 41 Initial and Annual Acknowledgment Form Code of Ethics and Insider Trading Compliance Policy and Procedures
Instructions: Print form, complete, sign and date. Submit completed form as indicated below: Initial Disclosure to: Local Human Resources Dept. Contact Person Annual Disclosure to: Code of Ethics Administration Dept. Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050
To: Code of Ethics Administration Department I hereby acknowledge receipt of a copy of the Franklin Templeton Investment's Code Of Ethics ("Code") and Insider Trading Compliance Policy and Procedures, as amended, which I have read and understand. I will comply fully with all provisions of the Code and the Insider Trading Policy to the extent they apply to me during the period of my employment. If this is an annual certification, I certify that I have complied with all provisions of the Code and the Insider Trading Policy to the extent they applied to me over the past year. Additionally, I authorize any broker-dealer, bank, or investment adviser with whom I have securities accounts and accounts in which I have direct or indirect beneficial ownership, to provide brokerage confirmations and statements as required for compliance with the Code. I further understand and acknowledge that any violation of the Code or Insider Trading Policy, including engaging in a prohibited transaction or failure to file reports as required (see Schedules B, C, D, E, F and G), may subject me to disciplinary action up to and including termination of employment.
- -------------------------------------------------------------------------------------------------------------------------------- Name (print) Signature Date Submitted - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Title Department Name Location - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Non Access Person Access Person Supervised Person Portfolio Person - -------------------------------------------------------------------------------------------------------------------------------- [ ] [ ] [ ] [ ] - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Initial Disclosure Annual Disclosure Year End (for compliance use only) - -------------------------------------------------------------------------------------------------------------------------------- [ ] [ ] [ ] - --------------------------------------------------------------------------------------------------------------------------------
18570-5 42 SCHEDULE A: Legal and Compliance Officers Code of Ethics Administration Dept. Contact Info(11) Legal Officer ------------------------------------------- Craig Tyle Executive Vice President & General Counsel Franklin Templeton Investments One Franklin Parkway San Mateo, CA 94403-1906 Tel: (650) 312-4161 Fax: (650) 312-2221 Email: ctyle@frk.com Compliance Officers ------------------- Director, Global Compliance -------------------------------------------- James M. Davis Franklin Templeton Investments One Franklin Parkway San Mateo, CA 94403-1906 Tel: (650) 312-2832 Fax: (650) 312-5676 Email: jdavis@frk.com Chief Compliance Officer ------------------------ Monica Poon Franklin Templeton Investments One Franklin Parkway San Mateo, CA 94403-1906 Tel: (650) 312-4631 Fax: (650) 312-5676 Email: mpoon2@frk.com Code of Ethics Administration Department ---------------------------------------- Maria Abbott, Manager Darlene James Simon Li Tadao Hayashi Global Compliance Department Franklin Templeton Investments One Franklin Parkway San Mateo, CA 94403-1906 Tel: (650) 312-3693 Fax: (650) 312-5646 Email: Preclear-Code of Ethics (internal) Lpreclear@frk.com (external) - ------------------------- (11) As of April, 2006 18570-5 43 SCHEDULE B: Quarterly Transactions Report Instructions: Print form, complete, sign and date. Submit completed form to the Code of Ethics Administration Department via: - -------------
Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050 This report of personal securities transactions not reported by duplicate confirmations and brokerage statements pursuant to Section 4.3 of the Code is required pursuant to Rule 204A-1of the Investment Advisers Act of 1940 and Rule 17j-1(d) of the Investment Company Act of 1940. The report must be completed and submitted to the Code of Ethics Administration Department no later than thirty (30) calendar days after the end of the calendar quarter in which you completed such as transaction. Refer to Section 4.3 of the Code for further instructions. ================================================================================ Security Name Description/Ticker Symbol or CUSIP Pre-Cleared number/Type of through Security (Interest Quantity Broker-Dealer/ Compliance Trade Buy, Sell Rate and Maturity (Number of Principal Bank and Department Date or other Date, if applicable) Shares) Price Amount Account Number (Date or N/A) =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== =============================================================================================================================== This report shall not be construed as an admission that I have any direct or indirect beneficial ownership in the securities described above. - ------------------------------------------------------------------------------------------------------------------------------- Name (print) Signature - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Date Report Submitted Quarter Ended - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
18570-5 44
SCHEDULE C: Initial & Annual Disclosure of Brokerage Accounts, Securities Holdings and Discretionary Authority - -------------------------------------------------------------------------------------------------------------- Instructions: Print form, complete, sign and date. Submit completed form as indicated below: Initial Disclosure to: Local Human Resources Dept. Contact Person --------------------- Annual Disclosure to: Code of Ethics Administration Dept. -------------------- Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050
This report shall set forth the name and/or description of each securities account and holding in which you have a direct or indirect beneficial interest, including securities accounts and holdings of a spouse, minor children or other immediate family member living in your home, trusts, foundations, and any account for which trading authority has been delegated to you, other than authority to trade for a Fund or other client of Franklin Templeton Investments or by you to an unaffiliated registered broker-dealer, registered investment adviser, or other investment manager acting in a similar fiduciary capacity, who exercises sole investment discretion. In lieu of listing each securities account and holding below, you may attach copies of current brokerage statements, sign below and return the Schedule C along with the brokerage statements to the Code of Ethics Administration Department within 10 days of becoming an Access Person if an initial report or by February 1st of each year, if an annual report. The information in this Schedule C or any attached brokerage statements must be current as of a date no more than 45 days prior to the date you become an Access Person or the date you submit your annual report. Refer to Part 4 of the Code for additional filing instructions. Securities that are EXEMPT from being reported on the Schedule C include: (i) securities that are direct obligations of the U.S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof; (ii) high quality short-term instruments ("money market instruments") including but not limited to bankers' acceptances, U.S. bank certificates of deposit; commercial paper; and repurchase agreements; (iii) shares of money market funds; shares issued by open-end funds other than Reportable Funds (Any fund for which a Franklin Templeton Investments' U.S. registered investment adviser ("FTI Adviser") serves as an investment adviser or a sub-adviser or any fund whose investment adviser or principal underwriter is controlled by an FTI adviser or is under common control with a FTI adviser; and shares issued by unit investment trusts that are invested in one or more open-end funds none of which are Reportable Funds. [ ] I do not have any brokerage accounts. [ ] I do not have any securities holdings. [ ] I have attached statements containing all my brokerage accounts and securities holdings. [ ] I have listed my brokerage accounts containing no securities holdings. [ ] I have listed my securities holdings not held in a brokerage account. 18570-5 45
- ------------------------------------------------------------------------------------------------------------------------------------ Account Name(s) Name of Brokerage Address of Brokerage Account Security Quantity Check this (registration shown Firm, Firm, Bank or Investment Number Description/Title/Ticker Number of box if on brokerage Bank or Investment Adviser Symbol or CUSIP # Shares & Discretionary statement) Adviser (Street/City/State/Zip (interest rate & Principal Account Code) maturity if appropriate) Amount - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ To the best of my knowledge, I have disclosed all of my securities accounts and/or holdings in which I have a direct or indirect beneficial interest, including securities accounts and/or holdings of a spouse, minor children or other immediate member living in my home, trusts, foundations, and any account for which trading authority has been delegated to me or by me to an unaffiliated registered broker-dealer, registered investment adviser, or other investment manager acting in a similar fiduciary capacity, who exercises sole investment discretion. - ------------------------------------------------------------------------------------------------------------------------------------ Name (print) Signature Date Report Submitted - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Initial Disclosure Annual Disclosure Year End (check this box if you're a new access person) (check this box if annual certification) (for compliance use only) - ------------------------------------------------------------------------------------------------------------------------------------ [ ] [ ] - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
18570-5 46
SCHEDULE D: NOTIFICATION OF SECURITIES ACCOUNT - ------------------------------------------------------------------------------------------------------------------- Instructions: Print form, complete, sign and date. Submit completed form to Code of Ethics Administration via: Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050
All Access Persons, prior to opening a brokerage account or placing an initial order in the new account, are required to notify the Code of Ethics Administration Department and the executing broker-dealer in writing. This includes accounts in which the Access Person has or will have a financial interest in (e.g., a spouse's account) or discretionary authority (e.g., a trust account for a minor child) and for Reportable Funds. Upon receipt of the NOTIFICATION OF SECURITIES ACCOUNT form, the Code of Ethics Administration Department will contact the broker-dealer identified below and request that duplicate confirmations and statements of your brokerage account are sent to Franklin Templeton Investments.
ACCOUNT INFORMATION: - ----------------------------------------------------------------------------------------------------------------------------- Name on the Account (If other than employee, state relationship i.e., Account Number or Social Security Date spouse) Number Established - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Name of Your Representative Brokerage Firm Address Brokerage Firm (optional) (City/State/Zip Code) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- EMPLOYEE INFORMATION: - ------------------------------------------------------------------------------------------------------------------------------ Employee's Name (print) Title Department Name - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Interoffice Are you a Registered Are you an Mail Code Representative? Access Person? (NASD Licensed, i.e., Series 6, 7) - ------------------------------------------------------------------------------------------------------------------------------ [ ] Yes [ ] No [ ] Yes [ ] No - ------------------------------------------------------------------------------------------------------------------------------ Phone Extension Signature Date - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
18570-5 47
SCHEDULE E: Notification of Direct or Indirect Beneficial Interest - ---------------------------------------------------------------------------------------------------------------------- Instructions: Print form, complete, sign and date. Obtain required signature and submit completed form to Code of Ethics Administration Dept. via: Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 2505 San Mateo, CA 94402-5050 If you have any beneficial ownership in a security and it is recommended to the Appropriate Analyst that the security be considered for purchase or sale by an Associated Client, or if a purchase or sale of that security for an Associated Client is carried out, you must disclose your beneficial ownership to Code of Ethics Administration Department and the Appropriate Analyst in writing on Schedule E (or an equivalent form containing similar information) before the purchase or sale of the security, or before or simultaneously with the recommendation to purchase or sell a security. The Appropriate Analyst or the fund's primary portfolio manager must review and sign Schedule E and send a copy to the Code of Ethics Administration Department. - ------------------------------------------------------------------------------------------------------------------------------------ Date and Method Learned that Primary Method of Security's Portfolio Ownership Type: Acquisition Under Manager or Security (Direct or Year (Purchase/Gift/ Consideration Portfolio Name of Person Date of Verbal Description Indirect) Acquired Other) by Funds Analyst Notified Notification - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Employee's Name (print) Signature Date - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Primary PM or Analyst's Name (print) Signature Date - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
18570-5 48 SCHEDULE F: Checklist for Investments in Partnerships and Securities Issued in Limited Offerings (Private Placements) Instructions: Print form, complete, sign, date and obtain CIO's signatures. Submit completed form to Code of Ethics Administration Dept. via: Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646
U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050
In deciding whether to approve a transaction, the Director of Global Compliance or the Chief Compliance Officer shall take into account, among other factors, whether the investment opportunity should be reserved for a Fund or other client, and whether the investment opportunity is being offered to the Access Person by virtue of his or her position with Franklin Templeton Investments. If the Access Person receives clearance for the transaction, no investment in the same issuer may be made for a Fund or client unless an executive officer of Franklin Resources, Inc., with no interest in the issuer, approves the transaction. IN ORDER TO EXPEDITE YOUR REQUEST, PLEASE PROVIDE THE FOLLOWING INFORMATION: - ------------------------------------------- ------------------------------------ NAME/DESCRIPTION OF PROPOSED INVESTMENT: - ------------------------------------------- ------------------------------------ PROPOSED INVESTMENT AMOUNT: - ------------------------------------------- ------------------------------------ Please attach pages of the offering memorandum (or other documents) summarizing the investment opportunity, including: i) Name of the partnership/hedge fund/issuer; ii) Name of the general partner, location & telephone number; iii) Summary of the offering; including the total amount the offering/issuer; iv) Percentage your investment will represent of the total offering; v) Plan of distribution; and vi) Investment objective and strategy, Please respond to the following questions: a) Was this investment opportunity presented to you in your capacity as a portfolio manager? If no, please explain the relationship, if any, you have to the issuer or principals of the issuer. b) Is this investment opportunity suitable for any fund/client that you advise? (12) If yes, why isn't the investment being made on behalf of the fund/client? If no, why isn't the investment opportunity suitable for the fund/clients? c) Do any of the fund/clients that you advise presently hold securities of the issuer of this proposed investment (e.g., common stock, preferred stock, corporate debt, loan participations, partnership interests, etc), ? If yes, please provide the names of the funds/clients and security description. - ------------------------------------------- (12) If an investment opportunity is presented to you in your capacity as a portfolio manager and the investment opportunity is suitable for the fund/client, it must first be offered to the fund/client before any personal securities transaction can be effected. 18570-5 49 d) Do you presently have or will you have any managerial role with the company/issuer as a result of your investment? If yes, please explain in detail your responsibilities, including any compensation you will receive. e) Will you have any investment control or input to the investment decision making process? f) Will you receive reports of portfolio holdings? If yes, when and how frequently will these be provided? Reminder: Personal securities transactions that do not generate brokerage confirmations (e.g., investments in private placements) must be reported to the Code of Ethics Administration Department on Schedule B no later than 30 calendar days after the end of the calendar quarter the transaction took place.
- ------------------------------------------------------------------------------------------------------------------------------------ Employee's Name (print) Signature Date - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ "I confirm, to the best of my knowledge and belief, that I have reviewed the private placement and do not believe that the proposed personal trade will be contrary to the best interests of any of our funds' or clients' portfolios." - ------------------------------------------------------------------------------------------------------------------------------------ Chief Investment Officer's Name Signature Date - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- CODE OF ETHICS ADMINISTATION DEPT. USE ONLY - -------------------------------------------------------------------------------- Date Received:_________ Date Forwarded to FRI Executive Officer______________ Approved By: ___________________________________________________ _________________ Director, Global Compliance/Chief Compliance Officer Date Date Entered in Lotus Notes:________ Date Entered in Examiner:________ Precleared: [ ] [ ](attach in E-Mail) Is the Access Person Registered? [ ] [ ] Yes No Yes NO - -------------------------------------------------------------------------------- 18570-5 50
SCHEDULE G: Request for Approval to Serve as a Director Instructions: Print form, complete, sign and date. Submit completed form to Code of Ethics Administration Department via: Inter-office: Code of Ethics Administration, SM-920/2 Fax: (650) 312-5646 U.S. Mail: Franklin Templeton Investments E-mail: Preclear-Code of Ethics (internal) Attn: Code of Ethics Administration Dept. Lpreclear@frk.com (external) P.O. Box 25050 San Mateo, CA 94402-5050 - --------------------------------------------------------------------------------------------------------------------------------- EMPLOYEE INFORMATION - --------------------------------------------------------------------------------------------------------------------------------- EMPLOYEE: - ----------------------- -------------------------------------------------------------- ---------------------- ------------------- Department: Extension: - ----------------------- -------------------------------------------------------------- ---------------------- ------------------- Site/Location: JOB TITLE: - ----------------------- -------------------------------------------------------------- ---------------------- ------------------- Supervisor: Sup. Extension: - ----------------------- -------------------------------------------------------------- ---------------------- ------------------- - --------------------------------------------------------------------------------------------------------------------------------- COMPANY INFORMATION - ---------------------------------- ---------------------------------------------------------------------------------------------- Company Name: - ---------------------------------- ---------------------------------------------------------------------------------------------- Nature of company's business: - ---------------------------------- ---------------------------------------------------------------------------------------------- Is this a public or private company? - ---------------------------------- ---------------------------------------------------------------------------------------------- Title/Position: - ---------------------------------- ---------------------------------------------------------------------------------------------- Justification for serving as a director with the company: - ---------------------------------- ---------------------------------------------------------------------------------------------- Estimate of hours to be devoted to the company: - ---------------------------------- ---------------------------------------------------------------------------------------------- Compensation received: [ ] Yes [ ] No - ---------------------------------- ---------------------------------------------------------------------------------------------- If compensated, how? - ---------------------------------- ---------------------------------------------------------------------------------------------- Starting date: - ---------------------------------- ---------------------------------------------------------------------------------------------- NASD Registered/Licensed? [ ] Yes [ ] No Code of Ethics Designation [ ] Non Access Person [ ] Access Person [ ] Supervised Person [ ] Portfolio Person Signature: Date: -------------------------------------------------- ----------------------------- - --------------------------------------------------------------------------------------------------------------------------------- FOR APPROVAL USE ONLY - --------------------------------------------------------------------------------------------------------------------------------- [ ] Approved [ ] Denied Signatory Name Signatory Title: ------------------------------------- ----------------------------------- Signature: Date: -------------------------------------------------- -----------------------------
18570-5 51
APPENDIX C: Investment Advisor and Broker-Dealer and Other Subsidiaries of Franklin Resources, Inc. - April 2007 - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Advisers, Inc. IA Templeton Global Advisors Ltd. (Bahamas) IA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Advisory Services, LLC IA Franklin Templeton Italia Societa di Gestione del FBD/FIA Risparmio per Axioni (Italy) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Investment Advisory Services, LLC IA Franklin Templeton Investment Services GmbH FBD (Germany) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Portfolio Advisors, Inc. IA Fiduciary Trust International of the South Trust Co - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Mutual Advisers, LLC IA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin/Templeton Distributors, Inc. BD Franklin Templeton Investments Corp. (Ontario) IA/FIA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Services, LLC FA/BM Templeton Asset Management Ltd. (Singapore) IA/FIA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton International Services S.A. FBD Fiduciary Trust Company International Trust Co. (Luxembourg) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Investments Australia Limited FIA Fiduciary International, Inc IA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Investor Services, LLC TA Fiduciary Investment Management International Inc IA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Alternative Strategies, Inc. IA Franklin Templeton Institutional Asia Limited (Hong FIA Kong) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Institutional, LLC IA Fiduciary Trust International Limited (UK) IA/FIA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Fiduciary Financial Services, Corp. BD Franklin Templeton Investment Trust Management, Ltd FIA (Korea) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Asset Management S.A. (France) FIA Franklin Templeton Asset Management (India) Private FBD/FIA Limited (India) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Investments (Asia) FBD/IA Limited (Hong Kong) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Investment Management Limited IA/FIA (UK) - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Templeton/Franklin Investment Services, Inc BD - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Templeton Investment Counsel, LLC IA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Templeton Asset Management, Ltd. IA/FIA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------ Franklin Templeton Investments Japan Ltd. FIA - ---------------------------------------------------- ----------- ----------------------------------------------------- ------------
Codes: IA: US registered investment adviser BD: US registered broker-dealer FIA: Foreign equivalent investment adviser FBD: Foreign equivalent broker-dealer TA: US registered transfer agent FA: Fund Administrator BM: Business manager to the funds REA: Real estate adviser Trust: Trust company 18570-5 52 APPENDIX D: Franklin Resources, Inc. Code of Ethics and Business Conduct This Code of Ethics and Business Conduct (the "Code") has been adopted by the Board of Directors (the "Board") of Franklin Resources, Inc. in connection with its oversight of the management and business affairs of Franklin Resources, Inc. 1. Purpose and Overview. (a) Application. The Code is applicable to all officers, directors, employees and temporary employees (each, a "Covered Person") of Franklin Resources, Inc. and all of its U.S. and non-U.S. subsidiaries and affiliates (collectively, the "Company"). (b) Purpose. The Code summarizes the values, principles and business practices that guide the business conduct of the Company and also provides a set of basic principles to guide Covered Persons regarding the minimum ethical requirements expected of them. The Code supplements the Company's existing employee policies, including those specified in the respective U.S. and non-U.S. employee handbooks and also supplements various other codes of ethics, policies and procedures that have been adopted by the Company or by particular entities within the Company. All Covered Persons are expected to become familiar with the Code and to apply these principles in the daily performance of their jobs. (c) Overriding Responsibilities. It is the responsibility of all Covered Persons to maintain a work environment that fosters fairness, respect and integrity. The Company requires all Covered Persons to conduct themselves in a lawful, honest and ethical manner in all of the Company's business practices. (d) Questions. All Covered Persons are expected to seek the advice of a supervisor, a manager, the Human Resources Department, the Legal Department, the General Counsel of Franklin Resources, Inc. or the Global Compliance Department for additional guidance or if there is any question about issues discussed in this Code. (e) Violations. If any Covered Person observes possible unethical or illegal conduct, such concerns or complaints should be reported as set forth in Section 16 below. (f) Definition of Executive Officer. For the purposes of this Code, the term "Executive Officer" shall mean those officers, as shall be determined by the Board from time to time, who are subject to the reporting obligations of Section 16(a) of the Securities Exchange Act of 1934, as amended. (g) Definition of Director. For purposes of this Code, the term "Director" shall mean a member of the Board. 18570-3 53 2. Compliance with Laws, Rules and Regulations. (a) Compliance. All Covered Persons of the Company are required to comply with all of the applicable laws, rules and regulations of the United States and other countries, and the states, counties, cities and other jurisdictions, in which the Company conducts its business, although traffic violations and other minor offenses will not be considered violations of this Code. Local laws may in some instances be less restrictive than the principles set forth in this Code. In those situations, Covered Persons should comply with the Code, even if the conduct would otherwise be legal under applicable laws. On the other hand, if local laws are more restrictive than the Code, Covered Persons should comply with applicable laws. (b) Insider Trading. Such Global Compliance includes, without limitation, compliance with the Company's insider trading policy, which prohibits Covered Persons from trading securities, either personally or on behalf of others, while in possession of applicable material non-public information or communicating such material non-public information to others in violation of the law. Securities include common stocks, bonds, options, futures and other financial instruments. Material information includes any information that a reasonable investor would consider important in a decision to buy, hold, or sell securities. These laws provide substantial civil and criminal penalties for individuals who fail to comply. The policy is described in more detail in various Company employee handbooks and compliance policies. In addition, the Company has implemented trading restrictions to reduce the risk, or appearance, of insider trading. (c) Questions Regarding Stock Trading. All questions regarding insider trading or reports of impropriety in connection with securities transactions should be made to the Global Compliance Department. See also Section 16 below. 3. Conflicts of Interest. (a) Avoidance of Conflicts. All Covered Persons are required to conduct themselves in a manner and with such ethics and integrity so as to avoid a conflict of interest, either real or apparent. (b) Conflict of Interest Defined. A conflict of interest is any circumstance where an individual's personal interest interferes or even appears to interfere with the interests of the Company. All Covered Persons have a duty to avoid financial, business or other relationships that might be opposed to the interests of the Company or might cause a conflict with the performance of their duties. (c) Potential Conflict Situations. A conflict can arise when a Covered Person takes actions or has interests that may make it difficult to perform his or her Company related work objectively and effectively. Conflicts also may arise when a Covered Person or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. 18570-5 54 (d) Examples of Potential Conflicts. Some of the areas where a conflict could arise include: (i) Employment by a competitor, regardless of the nature of the employment, while employed by the Company. (ii) Placement of business with any firm or organization in which a Covered Person, or any member of the Covered Person's family, has a substantial ownership interest or management responsibility. (iii) Making endorsements or testimonials for third parties. (iv) Processing a transaction on the Covered Person's personal account(s), or his or her friends' or family members' account(s), through the Company's internal systems without first submitting the transaction request to the Company's Customer Service Center. (v) Disclosing the Company's confidential information to a third party without the prior consent of senior management. (e) Questions Regarding Conflicts. All questions regarding conflicts of interest and whether a particular situation constitutes a conflict of interest should be directed to the Global Compliance Department. See also Section 16 below. 4. Gifts and Entertainment. The Company's aim is to deter providers of gifts or entertainment from seeking or receiving special favors from Covered Persons regarding the Company. The concern is that gifts of more than a nominal value may cause Covered Persons to feel placed in a position of "obligation" and/or give the appearance of a conflict of interest. Covered Persons should not solicit any third party for any gift, gratuity, entertainment or any other item regardless of its value. Covered Persons, including members of their immediate families, may accept or participate in "reasonable entertainment." Covered Persons are encouraged to be guided by their own sense of ethical responsibility, along with any policies or guidelines adopted from time to time by the Company with respect to gifts or entertainment. The Company recognizes that this Section 4 is not intended to limit directors who do not also serve in management positions within the Company from accepting compensation, bonuses, fees and other similar consideration paid in the normal course of business as a result of their outside business activity, employment or directorships. 5. Outside Employment. (a) Restrictions. Subject to any departmental restrictions, Covered Persons are permitted to engage in outside employment if it is free of any actions that could be considered a conflict of interest. Outside employment must not adversely affect a Covered Person's job performance at the Company, and outside employment must not result in absenteeism, tardiness or a Covered Person's inability to work overtime when requested or required. Covered Persons may not engage in outside employment that requires or involves using Company time, materials or resources. 18570-5 55 (b) Self-Employment. For purposes of this policy, outside employment includes self-employment. (c) Required Approvals. Due to the fiduciary nature of the Company's business, all potential conflicts of interest that could result from a Covered Person's outside employment should be discussed with the Covered Person's supervisor or manager and the Human Resources Department, prior to entering into additional employment relationships. (d) Outside Directors Exempt. The Company recognizes that this Section 5 is not applicable to directors who do not also serve in management positions within the Company. 6. Confidentiality. (a) Confidentiality Obligation. Covered Persons are responsible for maintaining the confidentiality of information entrusted to them as a result of their roles with the Company, except when disclosure is authorized or legally mandated. The sensitive nature of the investment business requires that the Company keep its customers' confidence and trust. Covered Persons must be continuously sensitive to the confidential and privileged nature of the information to which they have access concerning the Company and its clients and customers, and must exercise the utmost discretion when discussing any work-related matters with third parties. Each Covered Person must safeguard the Company's confidential information and not disclose it to a third party (other than a third party having a duty of confidentiality to the Company) without the prior consent of senior management. (b) What Is Confidential Information. "Confidential information" includes but is not limited to information, knowledge, ideas, documents or materials that are owned, developed or possessed by the Company or that in some other fashion are related to confidential or proprietary matters of the Company, its business, customers, shareholders, Covered Persons or brokers. It includes all business, product, marketing, financial, accounting, personnel, operations, supplier, technical and research information. It also includes computer systems, software, documentation, creations, inventions, literary works, developments, discoveries and trade secrets. Confidential information includes any non-public information of the Company that might be of use to competitors, or harmful to the Company or its customers, if disclosed. (c) Acknowledgment. All employees of the Company are expected to sign an acknowledgment regarding the confidentiality policy set forth above at the time they become employed with the Company. (d) Length of Confidentiality Obligations. Covered Persons are expected to comply with the confidentiality policy not only for the duration of their employment or service with the Company, but also after the end of their employment or service with the Company. 18570-5 56 (e) Confidentiality Under the Code. All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. 7. Ownership of Intellectual Property. (a) Company Ownership. The Company owns all of the work performed by Covered Persons at and/or for the Company, whether partial or completed. All Covered Persons shall be obligated to assign to the Company all "intellectual property" that is created or developed by Covered Persons, alone or with others, while working for the Company. (b) What Is Intellectual Property. "Intellectual Property" includes all trademarks and service marks, trade secrets, patents and patent subject matter and inventor rights in the United States and foreign countries and related applications. It includes all United States and foreign copyrights and subject matter and all other literary property and author rights, whether or not copyrightable. It includes all creations, not limited to inventions, discoveries, developments, works of authorship, ideas and know-how. It does not matter whether or not the Company can protect them by patent, copyright, trade secrets, trade names, trade or service marks or other intellectual property right. It also includes all materials containing any intellectual property. These materials include but are not limited to computer tapes and disks, printouts, notebooks, drawings, artwork and other documentation. To the extent applicable, non-trade secret intellectual property constitutes a "work made for hire" owned by the Company, even if it is not a trade secret. (c) Exceptions. The Company will not be considered to have a proprietary interest in a Covered Person's work product if: (i) the work product is developed entirely on the Covered Person's own time without the use or aid of any Company resources, including without limitation, equipment, supplies, facilities or trade secrets; (ii) the work product does not result from the Covered Person's employment with the Company; and (iii) at the time a Covered Person conceives or reduces the creation to practice, it is not related to the Company's business nor the Company's actual or expected research or development. (d) Required Disclosure. All Covered Persons must disclose to the Company all intellectual property conceived or developed while working for the Company. If requested, a Covered Person must sign all documents necessary to memorialize the Company's ownership of intellectual property under this policy. These documents include but are not limited to assignments and patent, copyright and trademark applications. 8. Corporate Opportunities. Covered Persons are prohibited from (i) taking for themselves opportunities that are discovered through the use of Company property, information or position, (ii) using Company property, information or position for personal gain, and/or (iii) competing with the Company. 9. Fair Dealing. Each Covered Person should endeavor to deal fairly with the Company's customers, suppliers, competitors and Covered Persons and not to take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice. 18570-5 57 10. Protection and Use of Company Property. All Covered Persons should protect the Company's assets and ensure they are used for legitimate business purposes during employment with the Company. Improper use includes unauthorized personal appropriation or use of the Company's assets, data or resources, including computer equipment, software and data. 11. Standards of Business Conduct. (a) Respectful Work Environment. The Company is committed to fostering a work environment in which all individuals are treated with respect and dignity. Each individual should be permitted to work in a business-like atmosphere that promotes equal employment opportunities. (b) Prohibited Conduct. The following conduct will not be tolerated and could result in disciplinary action, including termination: (i) Any act which causes doubt about a Covered Person's integrity, such as the falsifying of Company records and documents, competing in business with the Company, divulging trade secrets, or engaging in any criminal conduct. (ii) Any act which may create a dangerous situation, such as carrying weapons, firearms or explosives on Company premises or surrounding areas, assaulting another individual, or disregarding property and safety standards. (iii) The use, sale, or purchase, or attempted use, sale or purchase of alcohol or illegal drugs while at work or reporting to work in a condition not fit for work, such as reporting to work under the influence of alcohol or illegal drugs. (iv) Insubordination, including refusal to perform a job assignment or to follow a reasonable request from a Covered Person's manager or supervisor, or discourteous conduct toward customers, associates, or supervisors. (v) Harassment of any form including threats, intimidation, abusive behavior and/or coercion of any other person in the course of doing business. (vi) Falsification or destruction of any timekeeping record, intentionally clocking in on another Covered Person's attendance or timekeeping record, assisting another Covered Person's tampering with their attendance record or tampering with one's own attendance record. (vii) Failure to perform work, which meets the standards/expectations of the Covered Person's position. (viii) Excessive absenteeism, chronic tardiness, or consecutive absence of 3 or more days without notification or authorization. 18570-5 58 (ix) Any act of dishonesty or falsification of any Company records or documents, including obtaining employment based on false, misleading, or omitted information. (c) Disciplinary Action. A Covered Person or the Company may terminate the employment or service relationship at will, at any time, without cause or advance notice. Thus, the Company does not strictly adhere to a progressive disciplinary system since each incident of misconduct may have a different set of circumstances or differ in its severity. The Company will take such disciplinary action as it deems appropriate and commensurate with any misconduct of the Covered Person. 12. Disclosure in Reports and Documents. (a) Filings and Public Materials. It is important that the Company's filings with the Securities and Exchange Commission (the "SEC") and other federal, state, domestic and international regulatory agencies are full, fair, accurate, timely and understandable. The Company also makes many other filings with the SEC and other domestic and international regulatory agencies on behalf of the funds that its subsidiaries and affiliates manage. Further, the Company prepares mutual fund account statements, client investment performance information, prospectuses and advertising materials that are sent out to its mutual fund shareholders and clients. (b) Disclosure and Reporting Policy. The Company's policy is to comply with all applicable disclosure, financial reporting and accounting regulations applicable to the Company. The Company maintains the highest commitment to its disclosure and reporting requirements, and expects all Covered Persons to record information accurately and truthfully in the books and records of the Company. (c) Information for Filings. Depending on his or her position with the Company, a Covered Person, may be called upon to provide necessary information to ensure that the Company's public reports and regulatory filings are full, fair, accurate, timely and understandable. The Company expects all Covered Persons to be diligent in providing accurate information to the inquiries that are made related to the Company's public disclosure requirements. (d) Disclosure Controls and Procedures and Internal Control Over Financial Reporting. Covered Persons are required to cooperate and comply with the Company's disclosure controls and procedures and internal control over financial reporting so that the Company's reports and documents filed with the SEC and other federal, state, domestic and international regulatory agencies comply in all material respects with applicable laws, and rules and regulations, and provide full, fair, accurate, timely and understandable disclosure. 13. Relationships with Government Personnel. Covered Persons should be aware that practices that may be acceptable in the commercial business environment (such as providing certain transportation, meals, entertainment and other things of nominal value) may be 18570-5 59 entirely unacceptable and even illegal when they relate to government employees or others who act on the government's behalf. Therefore, Covered Persons are required to comply with the relevant laws and regulations governing relations between government employees and customers and suppliers in every country where the Company conducts business. Covered persons are prohibited from giving money or gifts directly or indirectly to any official or any employee of a governmental entity if doing so could reasonably be construed as having any connection with the Company's business relationship. Any proposed payment or gift directly or indirectly to a government official or employee must be reviewed in advance by the Global Compliance Department, even if such payment is common in the country of payment. 14. Political Contributions. Election laws in many jurisdictions generally prohibit political contributions by corporations to candidates. Many local laws also prohibit corporate contributions to local political campaigns. In accordance with these laws, the Company does not make direct contributions to any candidates for federal, state or local offices where applicable laws make such contributions illegal and, in such cases, contributions to political campaigns must not be made with or reimbursed by the Company's funds or resources. The Company's funds and resources include (but are not limited to) the Company's facilities, office supplies, letterhead, telephones and fax machines. This policy does not prohibit employees from making personal political contributions as they see fit in accordance with all applicable laws. 15. Accountability for Adherence to the Code. (a) Honesty and Integrity. The Company is committed to uphold ethical standards in all of its corporate and business activities. All Covered Persons are expected to perform their work with honesty, truthfulness and integrity and to comply with the general principles set forth in the Code. Covered Persons are also expected to perform their work with honesty and integrity in any areas not specifically addressed by the Code. (b) Disciplinary Actions. A violation of the Code may result in appropriate disciplinary action including the possible termination from employment with the Company. Nothing in this Code restricts the Company from taking any disciplinary action on any matters pertaining to the conduct of a Covered Person, whether or not expressly set forth in the Code. (c) Annual Certifications. Directors and Executive Officers will be required to certify annually, on a form to be provided by the Global Compliance Department, that they have received, read and understand the Code and have complied with the requirements of the Code. (d) Training and Educational Requirements. (i) Orientation. New Covered Persons will receive a copy of the Code during the orientation process conducted by representatives of the Human Resources Department and shall acknowledge that they have received, read and understand the Code and will comply with the requirements of the Code. 18570-5 60 (ii) Continuing Education. Covered Persons shall be required to complete such additional training and continuing education requirements regarding the Code and matters related to the Code as the Company shall from time to time establish. 16. Reporting Violations of the Code. (a) Questions and Concerns. Described in this Code are procedures generally available for addressing ethical issues that may arise. As a general matter, if a Covered Person has any questions or concerns about compliance with this Code he or she is encouraged to speak with his or her supervisor, manager, representatives of the Human Resources Department, the Legal Department, the General Counsel of Franklin Resources, Inc. or the Global Compliance Department. (b) Compliance and Ethics Hot-Line. If a Covered Person does not feel comfortable talking to any of the persons listed above for any reason, he or she should call the Compliance and Ethics Hot-Line. (The telephone number for the Compliance and Ethics Hot-Line is located on the Company's Intranet website through the People Page.) If a Covered Person does not feel comfortable stating his or her name, calls to the Compliance and Ethics Hot-Line may be made anonymously. (c) Responsibility to Report Violations of the Code and Law. As part of its commitment to ethical and lawful conduct, the Company strongly encourages Covered Persons to promptly report any suspected violations of this Code or law. (d) Confidentiality and Investigation. The Company will treat the information set forth in a report of any suspected violation of the Code or law, including the identity of the caller, in a confidential manner and will conduct a prompt and appropriate evaluation and investigation of any matter reported. Covered Persons are expected to cooperate in any investigations of reported violations. (e) Protection of Covered Persons. By law, the Company may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee to provide information or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of any rule or regulation of the SEC or any provision of federal law relating to fraud against shareholders when the information or assistance is provided to or the investigation is conducted by, among others, a person(s) working for the Company with the authority to investigate, discover or terminate misconduct. To encourage Covered Persons to report violations of illegal or unethical conduct, the Company will not allow retaliation to be taken against any Covered Person who has made a report of such conduct in good faith. (f) Accounting/Auditing Complaints. The law requires that the Company's Audit Committee have in place procedures for the receipt, retention and treatment of complaints concerning accounting, internal accounting controls, or auditing matters and procedures for Covered Persons to submit their concerns regarding questionable accounting or auditing matters. 18570-5 61 Complaints concerning accounting, internal accounting controls or auditing matters will be directed to the attention of the Audit Committee, or the appropriate members of that committee. For direct access to the Company's Audit Committee, please address complaints regarding accounting, internal accounting controls, or auditing matters to: Audit Committee Franklin Resources, Inc. One Franklin Parkway San Mateo, California 94403 Complaints or concerns regarding accounting or auditing matters may also be made to the Compliance and Ethics Hot-Line. (The telephone number for Compliance and Ethics Hot-Line is located on the Company's Intranet website through the People Page.) If a Covered Person does not feel comfortable stating his or her name, calls to the Compliance and Ethics Hot-Line may be made anonymously. 17. Waivers of the Code. (a) Waivers by Directors and Executive Officers. Any change in or waiver of this Code for Directors or Executive Officers may be made only by the Board or a committee thereof in the manner described in Section 17(d) below, and any such waiver (including any implicit waiver) shall be promptly disclosed to stockholders of Franklin Resources, Inc. to the extent required by the rules of the SEC, the corporate governance listing standards of the New York Stock Exchange and any other applicable laws, rules and regulations. (b) Waivers by Other Covered Persons. Any requests for waivers of this Code for Covered Persons other than Directors and Executive Officers may be made to the Global Compliance Department in the manner described in Section 17(e) below. (c) Definition of Waiver. For the purposes of the Code, the term "waiver" shall mean a material departure from a provision of the Code. An "implicit waiver" shall mean the failure of the Company to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an Executive Officer. (d) Manner for Requesting Director and Executive Officer Waivers. (i) Request and Criteria. If a Director or Executive Officer wishes to request a waiver of this Code, the Director or Executive Officer may submit to the Director of Global Compliance or the Global Compliance Department a written request for a waiver of the Code only if he/she can demonstrate that such a waiver: (A) is necessary to alleviate undue hardship or in view of unforeseen circumstances or is otherwise appropriate under all the relevant facts and circumstances; 18570-5 62 (B) will not be inconsistent with the purposes and objectives of the Code; (C) will not adversely affect the interests of clients of the Company or the interests of the Company; and (D) will not result in a transaction or conduct that would violate provisions of applicable laws or regulations. (ii) Discretionary Waiver and Response. The Global Compliance Department will forward the waiver request to the Board or a committee thereof for consideration. Any decision to grant a waiver from the Code shall be at the sole and absolute discretion of the Board or committee thereof, as appropriate. The Secretary of Franklin Resources, Inc. will advise the Global Compliance Department in writing of the Board's decision regarding the waiver, including the grounds for granting or denying the waiver request. The Global Compliance Department shall promptly advise the Director or Executive Officer in writing of the Board's decision. (e) Manner for Requesting Other Covered Person Waivers. (i) Request and Criteria. If a Covered Person who is a non-Director and non-Executive Officer wishes to request a waiver of this Code, the Covered Person may submit to the Global Compliance Department a written request for a waiver of the Code only if he/she can demonstrate that such a waiver would satisfy the same criteria set forth in Section 17(d). (ii) Discretionary Waiver and Response. The Director of Global Compliance Department (or his/her designee) shall, after appropriate consultation with the applicable business unit head, forward the waiver request to the General Counsel Franklin Resources, Inc. for consideration. The decision to grant a waiver request shall be at the sole and absolute discretion of the General Counsel of Franklin Resources, Inc. The General Counsel will advise the Global Compliance Department in writing of his/her decision regarding the waiver, including the grounds for granting or denying the waiver request. The Global Compliance Department shall promptly advise the Covered Person in writing of the General Counsel's decision. 18. Internal Use. The Code is intended solely for the internal use by the Company and does not constitute an admission, by or on behalf of the Company, as to any fact, circumstance, or legal conclusion. 19. Other Policies and Procedures. The "Code of Ethics and Policy Statement on Insider Trading" under Rule 17j-1 pursuant to the Investment Company Act of 1940, as amended and other policies and procedures adopted by the Company or entities within the Company are additional requirements that, depending upon the specific terms of such policies and procedures, may apply to some or all Covered Persons. Appendix D last revised October 16, 2006 (document 45401-4) 18570-5 63 INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES A. Legal Requirement Pursuant to the Insider Trading and Securities Fraud Enforcement Act of 1988, No officer, director, employee, consultant acting in a similar capacity, or other person associated with Franklin Templeton Investments may trade, either personally or on behalf of clients, including all client assets managed by the entities in Franklin Templeton Investments, on material non-public information or communicating material non-public information to others in violation of the law. This conduct is frequently referred to as "insider trading." Franklin Templeton Investment's Insider Trading Compliance Policy and Procedures applies to every officer, director, employee or other person associated with Franklin Templeton Investments and extends to activities within and outside their duties with Franklin Templeton Investments. Every officer, director and employee must read and retain this policy statement. Any questions regarding Franklin Templeton Investments Insider Trading Compliance Policy and Procedures or the Compliance Procedures should be referred to the Legal Department. The term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material non-public information to trade in securities (whether or not one is an "insider") or to communications of material non-public information to others. While the law concerning insider trading is not static, it is generally understood that the law prohibits: (1) trading by an insider, while in possession of material non-public information; or (2) trading by a non-insider, while in possession of material non-public information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated; or (3) communicating material non-public information to others. The elements of insider trading and the penalties for such unlawful conduct are discussed below. If, after reviewing this policy statement, you have any questions, you should consult the Legal Department. B. Who is an Insider? The concept of "insider" is broad. It includes officers, directors and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. A temporary insider can include, among others, a company's outside attorneys, accountants, consultants, bank lending officers, and the employees of such organizations. In addition, an investment adviser may become a temporary insider of a company it advises or for which it performs other services. According to the U.S. Supreme Court, the company must expect the outsider to keep the disclosed non-public information confidential and the relationship must at least imply such a duty before the outsider will be considered an insider. C. What is Material Information? Trading on inside information is not a basis for liability unless the information is material. "Material information" generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of the company's securities. Information that officers, directors and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. 18570-5 64 Material information does not have to relate to a company's business. For example, in Carpenter v. U.S., 108 U.S. 316 (1987), the Supreme Court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a Wall Street Journal reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Wall Street Journal and whether those reports would be favorable or not. D. What is Non-Public Information? Information is non-public until it has been effectively communicated to the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission ("SEC"), or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications of general circulation would be considered public. E. Basis for Liability 1. Fiduciary Duty Theory In 1980, the Supreme Court found that there is no general duty to disclose before trading on material non-public information, but that such a duty arises only where there is a fiduciary relationship. That is, there must be a relationship between the parties to the transaction such that one party has a right to expect that the other party will not disclose any material non-public information or refrain from trading. Chiarella v. U.S., 445 U.S. 22 (1980). In Dirks v. SEC, 463 U.S. 646 (1983), the Supreme Court stated alternate theories under which non-insiders can acquire the fiduciary duties of insiders. They can enter into a confidential relationship with the company through which they gain information (e.g., attorneys, accountants), or they can acquire a fiduciary duty to the company's shareholders as "tippees" if they are aware or should have been aware that they have been given confidential information by an insider who has violated his fiduciary duty to the company's shareholders. However, in the "tippee" situation, a breach of duty occurs only if the insider personally benefits, directly or indirectly, from the disclosure. The benefit does not have to be pecuniary but can be a gift, a reputational benefit that will translate into future earnings, or even evidence of a relationship that suggests a quid pro quo. 2. Misappropriation Theory Another basis for insider trading liability is the "misappropriation" theory, under which liability is established when trading occurs on material non-public information that was stolen or misappropriated from any other person. In U.S. v. Carpenter, supra, the Court found, in 1987, a columnist defrauded The Wall Street Journal when he stole information from the Wall Street Journal and used it for trading in the securities markets. It should be noted that the misappropriation theory can be used to reach a variety of individuals not previously thought to be encompassed under the fiduciary duty theory. F. Penalties for Insider Trading Penalties for trading on or communicating material non-public information are severe, both for individuals involved in such unlawful conduct and their employers A violation of the Code resulting in a violation of the law will be severely sanctioned, with disciplinary action including but not limited to termination. Please refer to Part 7 - Penalties for Violations of the Code. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include: o civil injunctions; 18570-5 65 o treble damages; o disgorgement of profits; o jail sentences; o fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and o fines for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided. In addition, any violation of this policy statement can result in serious sanctions by Franklin Templeton Investments, including dismissal of any person involved. G. Insider Trading Procedures All employees shall comply with the following procedures. 1. Identifying Inside Information Before trading for yourself or others, including investment companies or private accounts managed by Franklin Templeton Investments, in the securities of a company about which you may have potential inside information, ask yourself the following questions: o Is the information material? o Is this information that an investor would consider important in making his or her investment decisions? o Is this information that would substantially affect the market price of the securities if generally disclosed? o Is the information non-public? o To whom has this information been provided? o Has the information been effectively communicated to the marketplace (e.g., published in Reuters, The Wall Street Journal or other publications of general circulation)? If, after consideration of these questions, you believe that the information may be material and non-public, or if you have questions as to whether the information is material and non-public, you should take the following steps: (i) Report the matter immediately to the designated Compliance Officer, or if he or she is not available, to the Legal Department. (ii) Do not purchase or sell the securities on behalf of yourself or others, including investment companies or private accounts managed by Franklin Templeton Investments. 18570-5 66 (iii) Do not communicate the information inside or outside Franklin Templeton Investments , other than to the Compliance Officer or the Legal Department. (iv) The Compliance Officer shall immediately contact the Legal Department for advice concerning any possible material, non-public information. (v) After the Legal Department has reviewed the issue and consulted with the Compliance Officer, you will be instructed either to continue the prohibitions against trading and communication noted in (ii) and (iii), or you will be allowed to trade and communicate the information. (vi) In the event the information in your possession is determined by the Legal Department or the Compliance Officer to be material and non-public, it may not be communicated to anyone, including persons within Franklin Templeton Investments, except as provided in (i) above. In addition, care should be taken so that the information is secure. For example, files containing the information should be sealed and access to computer files containing material non-public information should be restricted to the extent practicable. Securities for which there is material, non-public information shall be placed on the personal trading restricted list for a timeframe determined by the Compliance Officer. 2. Restricting Access to Other Sensitive Information All Franklin Templeton Investments personnel also are reminded of the need to be careful to protect from disclosure other types of sensitive information that they may obtain or have access to as a result of their employment or association with Franklin Templeton Investments. H. General Access Control Procedures Franklin Templeton Investments has established a process by which access to company files that may contain sensitive or non-public information such as the Bargain List and the Source of Funds List is carefully limited. Since most of Franklin Templeton Investments files, which contain sensitive information, are stored in computers, personal identification numbers, passwords and/or code access numbers are distributed to Franklin Templeton Investments computer Access Persons only. This activity is monitored on an ongoing basis. In addition, access to certain areas likely to contain sensitive information is normally restricted by access codes. 18570-5 67 FAIR DISCLOSURE POLICIES AND PROCEDURES A. What is Regulation FD? Regulation FD under the Securities Exchange Act of 1934, as amended, prohibits certain persons associated with FRI, its affiliates, and its subsidiaries (FRI together with its affiliates and subsidiaries, collectively, "FTI"), closed-end funds advised by an investment advisory subsidiary of FRI ("FTI Closed-End Funds") and certain persons associated with the FTI investment advisers to the FTI Closed-End Funds, from selectively disclosing material nonpublic information about FRI or the FTI Closed-End Funds or their respective securities to certain securities market professionals and security holders. Regulation FD is designed to promote the full and fair disclosure of information by issuers such as FRI and the FTI Closed-End Funds. The scope of Regulation FD is limited. Regulation FD applies to FRI and FTI Closed-End Funds, but does not apply to open-end investment companies managed by FTI investment advisers. Regulation FD also does not apply to all communications about FRI or FTI Closed-End Funds with outside persons. Rather, Regulation FD applies only to communications to securities market professionals and to any security holder of FRI or FTI Closed-End Funds under circumstances in which it is reasonably foreseeable that such security holder will trade on the basis of the information. In addition, Regulation FD does not apply to all employees and officers. It only applies to certain senior officials (directors, executive officers, investor relations or public relations officers, or other persons of similar functions) of FRI and the FTI investment advisers to the FTI Closed-End Funds and any other officer, employee or agent of FRI and the FTI Closed-End Funds. Consequently, Regulation FD and the Franklin Templeton Investments Fair Disclosure Policies and Procedures (the "Policies and Procedures") will not apply to a variety of legitimate, ordinary-course business communications with customers, vendors, government regulators, etc. or to disclosures made to the public media. Irrespective of Regulation FD, all FTI personnel must comply with the "Franklin Templeton Investment Insider Trading Compliance Policy and Procedures" and should be aware that disclosure of material nonpublic information to another person may constitute a form of illegal insider trading called "tipping." B. FTI's Corporate Policy for Regulation FD FTI is committed to being fully compliant with Regulation FD. It is not the intention of these Policies and Procedures, however, to interfere with legitimate, ordinary-course business communications or disclosures made to the public media or governmental agencies and excluded from Regulation FD. FTI believes it is in its best interest to maintain an active and open dialogue with securities market professionals, security holders and investors regarding FRI and the FTI Closed-End Funds. In compliance with Regulation FD, FTI will continue to provide current and potential security holders access to key information reasonably required for making an informed decision on whether to invest in shares of FRI or FTI Closed-End Funds. FTI personnel will make appropriate announcements and conduct interviews about FRI and FTI Closed-End Funds with the media, in accordance with Corporate Communication's policies and procedures regarding such announcements or interviews and in compliance with Regulation FD. C. General Provisions of Regulation FD Whenever: 1) an issuer, or person acting on its behalf (i.e. any senior official of FRI or the FTI investment adviser to an FTI Closed-End Fund, or any other officer, employee or agent of FRI or an FTI Closed-End Fund who regularly communicates with securities professionals or security holders of FRI or the FTI Closed-End Fund, or any employee directed to make a disclosure by a member of senior management) 18570-5 68 2) discloses any material non-public information (see below under Frequently Asked Questions for a discussion of "materiality" and "non-public" information) 3) to certain specified persons (generally, securities market professionals or security holders of FRI or an FTI Closed-End Fund under circumstances in which it is reasonably foreseeable that such security holders will trade on the basis of the information) Then: (4) the issuer shall make public disclosure of that same information: o simultaneously (for intentional disclosures), or o promptly (for non-intentional disclosures). In the case of non-intentional disclosures, "promptly" means as soon as reasonably practicable (but in no event longer than 24 hours (or the commencement of the next day's trading on the NYSE, whichever is later), after a senior official of FRI or the FTI investment adviser to the applicable FTI Closed-End Fund learns that there has been a non-intentional disclosure and knows, or is reckless in not knowing, that the information is both material and non-public. D. Persons to whom selective disclosure may not be made: (1) broker-dealers and their associated persons; (2) investment advisers, certain institutional investment managers and their associated persons, (3) investment companies, hedge funds and their affiliated persons, and (4) holders of securities of FRI or an FTI Closed-End Fund, under circumstances in which it is reasonably foreseeable that the person would purchase or sell such securities on the basis of the information. Regulation FD is designed to cover sell-side analysts, buy-side analysts, large institutional investment managers, and other market professionals who may be likely to trade on the basis of selectively disclosed information. E. Exclusions from Regulation FD Certain disclosures are excluded from the coverage of Regulation FD: (1) communications to "temporary insiders" who owe a duty of trust or confidence to the issuer (i.e. attorneys, investment bankers, or accountants); (2) communications to any person who expressly agrees to maintain the information in confidence (e.g., disclosures by a public company to private investors in private offerings following an agreement to maintain the confidentiality of the information received); (3) communications to an entity whose primary business is the issuance of credit ratings, provided the information is disclosed solely for the purpose of developing a credit rating and the entity's ratings are publicly available; and (4) communications made in connection with most offerings of securities registered under the Securities Act of 1933. 18570-5 69 F. Methods of Public Disclosure: Regulation FD provides that an issuer's disclosure obligation may be met by any method or combination of methods of disclosure reasonably designed to provide broad, non-exclusionary distribution of the information to the public. Acceptable methods of public disclosure include: o Furnishing or filing with the SEC a Form 8-K (not applicable to closed-end investment companies); o press releases distributed through a widely circulated news or wire service; or o announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephonic transmission, or by other electronic transmission (including use of the Internet), of which the public has adequate advance notice and means of access. Posting of new information on issuer's own website is not by itself a sufficient method of public disclosure. It may be used in combination with other methods. G. Training Appropriate training will be provided to certain employees identified as follows: o Corporate Communications Department o Portfolio managers of FTI Closed-End Funds and their assistants; o Managers and supervisors of Customer Service Representatives. As a part of this training, each employee will be notified that they should not communicate on substantive matters involving FRI or the FTI Closed-End Funds except in accordance with these Policies and Procedures. H. Reporting Consequences FTI personnel must promptly report to their supervisor or the Code of Ethics Administration Department any violations of these Policies and Procedures. Any violation of these Policies and Procedures may result in disciplinary action, up to and including termination of employment and/or referral to appropriate governmental agencies. I. Questions All inquiries regarding these Policies and Procedures should be addressed to Barbara Green, Vice President, Deputy General Counsel and Secretary of FRI (650-525-7188), or Jim Davis, Director of Global Compliance (650-312-2832). J. Frequently Asked Questions When is disclosure considered intentional within the meaning of Regulation FD and when is disclosure considered non-intentional? Under Regulation FD, selective disclosure is considered intentional when the issuer (or person acting on its behalf) knows, or is reckless in not knowing, that the information disclosed is BOTH material and non-public. A non-intentional disclosure would be the inadvertent disclosure of material non-public information (i.e., a senior official later determines that the same information was not previously public or was material). For example, non-intentional selective disclosures may occur when senior officials inadvertently disclose material information in response to questions from analysts or security holders or when a decision is made to selectively disclose 18570-5 70 information that the company does not view as material but the market moves in response to the disclosure. What is non-public information? Information is non-public if it has not been disseminated in a manner making it available to investors generally. What is material information? The Supreme Court has held that a fact is material if there is a substantial likelihood that it would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available. Another way of considering whether information is material is if there is a substantial likelihood that a reasonable person would consider it important in deciding whether to buy or sell shares. Are there specific types of information that are considered material? There is no bright line test to determine materiality. However, below is a list of items that should be reviewed carefully to determine whether they are material. o An impending departure of a portfolio manager who is primarily responsible for day-to-day management of an FTI Closed-End Fund; o A plan to convert an FTI Closed-End Fund from a closed-end investment company to an open-end investment company; o A plan to merge an FTI Closed-End Fund into another investment company; o Impending purchases or sales of particular portfolio securities; o Information about FRI related to earnings or earnings forecasts; o Mergers, acquisitions, tender offers, joint ventures, or material change in assets; o Changes in control or in management; o Change in auditors or auditor notification that the issuer may no longer rely on an auditor's audit report; o Events regarding the securities of FRI or an FTI Closed-End Fund - e.g., repurchase plans, stock splits or changes in dividends, calls of securities for redemption, changes to the rights of security holders, and public or private sales of additional securities; and o Bankruptcies or receiverships. Are all issuer communications covered by Regulation FD? No. Regulation FD applies only to communications by an issuer's senior officials and others who regularly communicate with securities market professionals or security holders of the issuer. Regulation FD isn't intended to apply to persons who are engaged in ordinary-course business communications in connection with the issuer or to interfere with disclosures to the media. However, the traditional disclosure concerns (such as "tipping" material non-public information and leaking disclosure into the market) still apply. Are communications to the public media covered by Regulation FD? No. However, an interview with a reporter is not the best way to disseminate material information to the public and is not a method of public disclosure mentioned by the SEC as a means to satisfy Regulation FD. Are one-on-one discussions with analysts permitted? Yes. Regulation FD is not intended to undermine the role of analysts in "sifting through and extracting information that may not be significant to the ordinary investor to reach material conclusions." However, without an agreement from an analyst to maintain material non-public 18570-5 71 information in confidence until the information is made public by the issuer, persons covered by Regulation FD must not disclose material non-public information in one-on-one discussions with an analyst. May issuers provide guidance on earnings? Not selectively. Although many issuers have historically provided earnings guidance, the SEC observed in Regulation FD's adopting release that an issuer that has a private conversation with an analyst in which the issuer provides direct or indirect guidance as to whether earnings will be higher than, lower than or even the same as forecasted will likely violate Regulation FD. Moreover, Regulation FD may be violated simply by confirming in a non-public manner an earnings forecast that is already public, because such confirmation may be material. K. Supplemental Information - SECs Division of Corporate Finance The following supplemental information is from the fourth supplement to the telephone interpretation manual of the Division of Corporation Finance of the U.S. Securities and Exchange Commission. It contains interpretations issued by members of the staff of the Division of Corporation Finance in response to telephone inquiries relating to Regulation FD and was last modified by the staff in June of 2001. Interpretations Issued October 2000 1. Can an issuer ever confirm selectively a forecast it has previously made to the public without triggering the rule's public reporting requirements? Yes. In assessing the materiality of an issuer's confirmation of its own forecast, the issuer should consider whether the confirmation conveys any information above and beyond the original forecast and whether that additional information is itself material. That may depend on, among other things, the amount of time that has elapsed between the original forecast and the confirmation (or the amount of time elapsed since the last public confirmation, if applicable). For example, a confirmation of expected quarterly earnings made near the end of a quarter might convey information about how the issuer actually performed. In that respect, the inference a reasonable investor may draw from such a confirmation may differ significantly from the inference he or she may have drawn from the original forecast early in the quarter. The materiality of a confirmation also may depend on, among other things, intervening events. For example, if it is clear that the issuer's forecast is highly dependent on a particular customer and the customer subsequently announces that it is ceasing operations, a confirmation by the issuer of a prior forecast may be material. We note that a statement by an issuer that it has "not changed," or that it is "still comfortable with," a prior forecast is no different than a confirmation of a prior forecast. Moreover, under certain circumstances, an issuer's reference to a prior forecast may imply that the issuer is confirming the forecast. If, when asked about a prior forecast, the issuer does not want to confirm it, the issuer may simply wish to say "no comment." If an issuer wishes to refer back to the prior estimate without implicitly confirming it, the issuer should make clear that the prior estimate was as of the date it was given and is not being updated as of the time of the subsequent statement. 2. Does Regulation FD create a duty to update? No. Regulation FD does not change existing law with respect to any duty to update. 18570-5 72 3. If an issuer wants to make public disclosure of material nonpublic information under Regulation FD by means of a conference call, what information must the issuer provide in the notice and how far in advance should notice be given? An adequate advance notice under Regulation FD must include the date, time, and call-in information for the conference call. Issuers also should consider the following non-exclusive factors in determining what constitutes adequate advance notice of a conference call: o Timing: Public notice should be provided a reasonable period of time ahead of the conference call. For example, for a quarterly earnings announcement that the issuer makes on a regular basis, notice of several days would be reasonable. We recognize, however, that the period of notice may be shorter when unexpected events occur and the information is critical or time sensitive. o Availability: If a transcript or re-play of the conference call will be available after it has occurred, for instance via the issuer's website, we encourage issuers to indicate in the notice how, and for how long, such a record will be available to the public. 4. Can an issuer satisfy Regulation FD's public disclosure requirement by disclosing material nonpublic information at a shareholder meeting that is open to all shareholders, but not to the public? No. If a shareholder meeting is not accessible by the public, an issuer's selective disclosure of material nonpublic information at the meeting would not satisfy Regulation FD's public disclosure requirement. 5. Could an Exchange Act filing other than a Form 8-K, such as a Form 10-Q or proxy statement, constitute public disclosure? Yes. In general, including information in a document publicly filed on EDGAR with the SEC within the time frames that Regulation FD requires would satisfy the rule. In considering whether that disclosure is sufficient, however, companies must take care to bring the disclosure to the attention of readers of the document, must not bury the information, and must not make the disclosure in a piecemeal fashion throughout the filing. 6. For purposes of Regulation FD, must an issuer wait some period of time after making a filing or furnishing a report on EDGAR that complies with the Exchange Act before making disclosure of the same information to a select audience? Prior to making disclosure to a select audience, the issuer need only confirm that the filing or furnished report has received a filing date (as determined in accordance with Rules 12 and 13 of Regulation S-T) that is no later than the date of the selective disclosure. 18570-5 73 7. Can an issuer ever review and comment on an analyst's model privately without triggering Regulation FD's disclosure requirements? Yes. It depends on whether, in so doing, the issuer communicates material nonpublic information. For example, an issuer ordinarily would not be conveying material nonpublic information if it corrected historical facts that were a matter of public record. An issuer also would not be conveying such information if it shared seemingly inconsequential data which, pieced together with public information by a skilled analyst with knowledge of the issuer and the industry, helps form a mosaic that reveals material nonpublic information. It would not violate Regulation FD to reveal this type of data even if, when added to the analyst's own fund of knowledge, it is used to construct his or her ultimate judgments about the issuer. An issuer may not, however, use the discussion of an analyst's model as a vehicle for selectively communicating - either expressly or in code - material nonpublic information. 8. During a nonpublic meeting with analysts, an issuer's CEO provides material nonpublic information on a subject she had not planned to cover. Although the CEO had not planned to disclose this information when she entered the meeting, after hearing the direction of the discussion, she decided to provide it, knowing that the information was material and nonpublic. Would this be considered an intentional disclosure that violated Regulation FD because no simultaneous public disclosure was made? Yes. A disclosure is "intentional" under Regulation FD when the person making it either knows, or is reckless in not knowing, that the information he or she is communicating is both material and nonpublic. In this example, the CEO knew that the information was material and nonpublic, so the disclosure was "intentional" under Regulation FD, even though she did not originally plan to make it. 9. May an issuer provide material nonpublic information to analysts as long as the analysts expressly agree to maintain confidentiality until the information is public? Yes. 10. If an issuer gets an agreement to maintain material nonpublic information in confidence, must it also get the additional statement that the recipient agrees not to trade on the information in order to rely on the exclusion in Rule 100(b)(2)(ii) of Regulation FD? No. An express agreement to maintain the information in confidence is sufficient. If a recipient of material nonpublic information subject to such a confidentiality agreement trades or advises others to trade, he or she could face insider trading liability. 11. If an issuer wishes to rely on the confidentiality agreement exclusion of Regulation FD, is it sufficient to get an acknowledgment that the recipient of the material nonpublic information will not use the information in violation of the federal securities laws? No. The recipient must expressly agree to keep the information confidential. 12. Must road show materials in connection with a registered public offering be disclosed under Regulation FD? Any disclosure made "in connection with" a registered public offering of the type excluded from Regulation FD is not subject to Regulation FD. That includes road shows in those offerings. All other road shows are subject to Regulation FD in the absence of 18570-5 74 another applicable exclusion from Regulation FD. For example, a disclosure in a road show in an unregistered offering is subject to Regulation FD. Also, a disclosure in a road show made while the issuer is not in registration and is not otherwise engaged in a securities offering is subject to Regulation FD. If, however, those who receive road show information expressly agree to keep the material nonpublic information confidential, disclosure to them is not subject to Regulation FD. 13. Can an issuer disclose material nonpublic information to its employees (who may also be shareholders) without making public disclosure of the information? Yes. Rule 100(b)(1) states that Regulation FD applies to disclosures made to "any person outside the issuer." Regulation FD does not apply to communications of confidential information to employees of the issuer. An issuer's officers, directors, and other employees are subject to duties of trust and confidence and face insider trading liability if they trade or tip. 14. If an issuer has a policy that limits which senior officials are authorized to speak to persons enumerated in Rule 100(b)(1)(i) - (b)(1)(iv), will disclosures by senior officials not authorized to speak under the policy be subject to Regulation FD? No. Selective disclosures of material nonpublic information by senior officials not authorized to speak to enumerated persons are made in breach of a duty of trust or confidence to the issuer and are not covered by Regulation FD. Such disclosures may, however, trigger liability under existing insider trading law. 15. A publicly traded company has decided to conduct a private placement of shares and then subsequently register the resale by those shareholders on a Form S-3 registration statement. The company and its investment bankers conduct mini-road shows over a three-day period during the private placement. Does the resale registration statement filed after completion of the private placement affect whether disclosure at the road shows is covered by Regulation FD? No. The road shows are made in connection with an offering by the issuer that is not registered (i.e., the private placement), regardless of whether a registration statement is later filed for an offering by those who purchased in the private placement. Additional Interpretations Issued December 2000 1. Does the mere presence of the press at an otherwise non-public meeting attended by persons outside the issuer described in paragraph (b)(1) of Rule 100 under Regulation FD render the meeting public for purposes of Regulation FD? Regulation FD states that a company can make public disclosure by filing or furnishing a Form 8-K or by disseminating information through another method (or combination of methods) that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public. Some companies may attempt to satisfy the latter method for public dissemination by merely having the press in attendance at a meeting to which the public is not invited or otherwise present. If it is attended by persons outside the issuer described in paragraph (b)(1) of Rule 100 under Regulation FD and if it is not 18570-5 75 otherwise public, the meeting will not necessarily be deemed public for purposes of Regulation FD by the mere presence of the press at the meeting. Whether or not the meeting would be deemed public would depend, among other things, on when, what and how widely the press reports on the meeting. 2. Is Regulation FD intended to replace the practice of using a press release to disseminate earnings information in advance of a conference call or webcast at which earnings information will be discussed? No. In adopting Regulation FD, the Commission specifically indicated that it did not intend the regulation to alter or supplant the rules of self-regulatory organizations with respect to the use of press releases to announce material developments. In this regard, the Commission specifically endorsed a model for the planned disclosure of material information, such as earnings, in which the conference call or webcast is preceded by a press release containing the earnings information. 18570-5 76 Appendix E: Chinese Wall Policy As revised August, 2004 The following revised memorandum updates the memo, dated November 19, 1999, and reflects changes to the Advisory Groups. The memorandum sets forth FTI's policies and procedures for restricting the flow of "Investment Information" and erecting barriers to prevent the flow of such "Investment Information" (the "Chinese Wall") between the following Advisory Groups: 1. Franklin Templeton Advisory Group ("Franklin Templeton"); 2. Franklin Floating Rate Trust Advisory Group ("Floating Rate"); and 3. Franklin Mutual Advisory Group ("Franklin Mutual") "Investment Information" of each respective Advisory Group is information relating to: o actual and proposed trading on behalf of clients of the Advisory Group; o current and prospective Advisory Group client portfolio positions; and o investment research related to current and prospective positions. Specifically, under the Chinese Wall, access persons(13) from these Advisory Groups (as defined in Appendix A) are prohibited from having access to Investment Information of an Advisory Group other than his or her own Advisory Group with the following exception: Access persons to Floating Rate may have access to Investment Information of Franklin Templeton, but access persons to Franklin Templeton may not have access to Floating Rate. The Chinese Wall applies to all access persons, including part-time employees, and consultants, and are in addition to those obligations prescribed by Franklin Templeton Investments's Code of Ethics (the "Code of Ethics"). Questions regarding these procedures should be directed to the attention of the Director, Global Compliance, San Mateo, California at (650) 312-2832 or e-mailed to jdavis@frk.com. GENERAL PROCEDURES Confidentiality. Access persons within one Advisory Group (e.g., Franklin Templeton) may not disclose Investment Information to access persons of the other Advisory Group (e.g., Franklin Mutual). Any communication of Investment Information outside an Advisory Group should be limited to persons (such as Accounting, Investment Operations, Legal and Compliance personnel) who have a valid "need to know" such information and each of whom is specifically prohibited from disclosing Investment Information from one to another except when necessary for regulatory purposes. Nothing contained herein is designed to prohibit the proper exchange of accounting, operational, legal or compliance information among such persons in the normal course of performing his or her duties. - ------------------------------------------------------ (13) The definition of access person is the same as that contained in the Code of Ethics. 18570-5 77 Discussions. Access persons within one Advisory Group shall avoid discussing Investment Information in the presence of persons who do not have a need to know the information. Extreme caution should be taken with discussions in public places such as hallways, elevators, taxis, airplanes, airports, restaurants, and social gatherings. Avoid discussing confidential information on speakerphones. Mobile telephones should be used with great care because they are not secure. Access. Access persons should limit physical access to areas where confidential or proprietary information may be present or discussed. Only persons with a valid business reason for being in such an area should be permitted. In this regard, meetings with personnel who are not members of the same Advisory Group should be conducted in conference rooms rather than employee offices. Work on confidential projects should take place in areas that are physically separate and secure. Outside Inquiries. Any person not specifically authorized to respond to press or other outside inquiries concerning a particular matter shall refer all calls relating to the matter to the attention of the Director, Corporate Communications, Franklin Templeton Investments, in San Mateo, California, at (650) 312-4701. Documents and Databases. Confidential documents should not be stored in common office areas where they may be read by unauthorized persons. Such documents shall be stored in secure locations and not left exposed overnight on desks or in workrooms. Confidential databases and other confidential information accessible by computer shall be protected by passwords or otherwise secured against access by unauthorized persons. Faxing, Mailing and Emailing Procedures. Confidential documents shall not be faxed, e-mailed or sent via interoffice or other mailto locations where they may be read by unauthorized persons, including to other FRI offices outside the Advisory Group, unless steps have been taken to remove or redact any confidential information included in such documents. Prior to faxing a document that includes confidential information, the sender shall confirm that the recipient is attending the machine that receives such documents. THE CHINESE WALL General. FRI has adopted the Chinese Wall to separate investment management activities conducted by certain investment advisory subsidiaries of FRI. The Chinese Wall may be amended or supplemented from time to time by memoranda circulated by the Global Compliance Department. Chinese Wall Restrictions. Except in accordance with the Wall-crossing procedures described below or in accordance with such other procedures as may be developed by the Global Compliance Department for a particular department or division: * No access person in any Advisory Group (as defined in Appendix A) shall disclose Investment Information to any access person in the any other Advisory Group, or give such access persons access to any file or database containing such Investment Information; and * No access person in any Advisory Group shall obtain or make any effort to obtain Investment Information within the any other Advisory Group from any person. 18570-5 78 An access person who obtains Investment Information of an Advisory Group other than his or her own in a manner other than in accordance with the Chinese Wall procedures described herein, shall immediately notify an appropriate supervisory person in his or her department who, in turn, should consult with the Global Compliance Department concerning what, if any, action should be taken. Unless expressly advised to the contrary by the Global Compliance Department, such employee shall refrain from engaging in transactions in the related securities or other securities of the related issuer for any account and avoid further disclosure of the information. Crossing Procedures. Disclosure of Investment Information of one Advisory Group to an access person in another Advisory Group on a "need to know" basis in the performance of his or her duties, should be made only if absolutely necessary. In such instance, the disclosure of such information may be made only in accordance with the specific procedures set forth below. An access person within one Advisory Group must obtain prior approval from the Global Compliance Department before making any disclosure of Investment Information to an access person within the other Advisory Group. Before approval is granted, the Global Compliance Department must be notified in writing by an Executive Officer within the Advisory Group (the "Originating Group") which proposes to cross the Chinese Wall of (1) the identity of the Advisory Group access person(s) who are proposed to cross the Chinese Wall, (2) the identity of the access person(s) in the other Advisory Group (the "Receiving Group") who are proposed to receive the Investment Information, (3) the applicable issuer(s), (4) the nature of the information to be discussed, and (5) the reason for crossing the Chinese Wall. The form of notice is attached to this Memorandum as Appendix B. The Global Compliance Department will notify an Executive Officer within the Receiving Group of the identity of the access person(s) who are proposed to cross the Chinese Wall. The Global Compliance Department may not disclose any additional information to such person. If approval is obtained from an Executive Officer within the Receiving Group, the Global Compliance Department will notify the requesting Executive Officer in the Originating Group that the proposed Wall-crosser(s) may be contacted. Personnel from the Global Compliance Department or their designees must attend all meetings where Wall-crossing communications are made. Communications permitted by these crossing procedures shall be conducted in a manner not to be overheard or received by persons not authorized to receive confidential information. A record of Wall-crossings will be maintained by the Global Compliance Department. An access person who has crossed the Chinese Wall under these procedures must maintain the confidentiality of the Investment Information received and may use it only for the purposes for which it was disclosed. Any questions or issues arising in connection with these crossing procedures will be resolved between the appropriate Executive Officers(s), the Global Compliance Department and the Legal Department. 18570-5 79 APPENDIX A As of JUNE 2004 FRANKLIN TEMPLETON INVESTMENT'S ADVISORY GROUPS 1.FRANKLIN/TEMPLETON ADVISORY GROUP Franklin Advisers, Inc. Franklin Advisory Services, LLC Franklin Investment Advisory Services, Inc. Franklin Private Client Group, Inc. Franklin Templeton Alternative Strategies, Inc. Franklin Templeton Asset Management S.A. (France) Franklin Templeton Fiduciary Bank & Trust Ltd. (Bahamas) Franklin Templeton Institutional Asia Limited (Hong Kong) Franklin Templeton Institutional, LLC Franklin Templeton Investments Corp (Canada) Franklin Templeton Investment Management, Limited (UK) Franklin Templeton Investment Trust Management Co., Ltd. (Korea) Franklin Templeton Investments Japan, Ltd. Franklin Templeton Investments (Asia) Limited (Hong Kong) Franklin Templeton Investments Australia Limited Franklin Templeton Italia Societa di Gestione del Risparimo per Azioni (Italy) Templeton/Franklin Investment Services, Inc. Templeton Investment Counsel, LLC Templeton Asset Management, Limited. Templeton Global Advisors Limited (Bahamas) Franklin Templeton Asset Management (India) Pvt. Ltd. Fiduciary Trust Company International (NY) Fiduciary International, Inc. Fiduciary Investment Management International, Inc. Fiduciary International Ireland Limited (Ireland) Fiduciary Trust International Limited (UK) Fiduciary Trust International of California Fiduciary Trust International of Delaware Fiduciary Trust International of the South (Florida) FTI -Banque Fiduciary Trust (Switzerland) 2.FRANKLIN FLOATING RATE TRUST ADVISORY GROUP 3. FRANKLIN MUTUAL ADVISORY GROUP Franklin Mutual Advisers, LLC 18570-5 80 APPENDIX B M E M O R A N D U M TO: The Global Compliance Department - San Mateo FROM: RE: Chinese Wall Crossing DATE: The following access person(s) Name Title Department ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ within the _______________________ Advisory Group are proposing to cross the Chinese Wall and communicate certain Investment Information to the access persons within the ______________________ Advisory Group identified below. Name Title Department ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Such access person(s) will cross the Chinese Wall with respect to the following issuer: ________________________________________________________________________________ ________________________________________________________________________________ The following is a description of the nature of the information to be discussed by such access person(s): ________________________________________________________________________________ ________________________________________________________________________________ APPROVED: ___________________________________ ___________________________________ Executive Officer (Originating Group) Executive Officer (Receiving Group) 18570-5 81 EX-99.P.13 15 file015.txt JENNISON COE JENNISON ASSOCIATES LLC CODE OF ETHICS, POLICY ON INSIDER TRADING AND PERSONAL TRADING POLICY AS AMENDED JANUARY 22, 2008 TABLE OF CONTENTS SECTION I: CODE OF ETHICS 1. STANDARDS OF PROFESSIONAL BUSINESS CONDUCT...........................1 2. CONFIDENTIAL INFORMATION.............................................3 A. PERSONAL USE 3 B. RELEASE OF CLIENT INFORMATION........................................3 3........CONFLICTS OF INTEREST................................................4 A-G. HOW TO AVOID POTENTIAL CONFLICTS OF INTEREST..........4 4. OTHER BUSINESS ACTIVITIES............................................5 A. ISSUES REGARDING THE RETENTION OF SUPPLIERS..........................5 B. GIFTS 5 C. IMPROPER PAYMENTS....................................................6 D. BOOKS, RECORDS AND ACCOUNTS..........................................6 E. LAWS AND REGULATIONS.................................................6 F. OUTSIDE ACTIVITIES & POLITICAL AFFILIATIONS..........................7 5........COMPLIANCE WITH THE CODE & CONSEQUENCES IF VIOLATION OCCURS..........7 6. DISCLOSURE REQUIREMENTS..............................................8 SECTION II: INSIDER TRADING 1. POLICY STATEMENT AGAINST INSIDER TRADING.............................9 2. EXPLANATION OF RELEVANT TERMS AND CONCEPTS..........................10 A. WHO IS AN INSIDER...................................................10 B. WHAT IS MATERIAL INFORMATION........................................10 C. WHAT IS NON-PUBLIC INFORMATION......................................11 D. MISAPPROPRIATION THEORY.............................................11 E. WHO IS A CONTROLLING PERSON.........................................11 F. HOW IS NON-PUBLIC INFORMATION MONITORED.............................11 3. PENALTIES FOR INSIDER TRADING VIOLATIONS............................12 A-G TYPES OF PENALTIES.....................................12 SECTION III: IMPLEMENTATION PROCEDURES & POLICY 1. IDENTIFYING INSIDE INFORMATION......................................13 A. IS THE INFORMATION MATERIAL.........................................13 B. IS THE INFORMATION NON-PUBLIC.......................................13 2. RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION...............14 3. ALLOCATION OF BROKERAGE.............................................14 4. RESOLVING ISSUES CONCERNING INSIDER TRADING.........................14 SECTION IV: GENERAL POLICY AND PROCEDURES 1. GENERAL POLICY AND PROCEDURES.......................................16 2. PERSONAL TRANSACTION REPORTING REQUIREMENTS.........................17 A. JENNISON EMPLOYEES..................................................18 1. INITIAL HOLDING REPORTS............................................18 2. QUARTERLY REPORTS 18 3. ANNUAL HOLDINGS REPORTS.............................................20 B. OTHER PERSONS DEFINED BY JENNISON ACCESS PERSONS....................20 3. PRE-CLEARANCE PROCEDURES...........................................21 4. PERSONAL TRADING POLICY.............................................22 A. BLACKOUT PERIODS 22 B. SHORT-TERM TRADING PROFITS..........................................23 C-K PROHIBITION ON SHORT TERM TRADING PROFITS...24 L. DESIGNATION PERSONS: REQUIREMENTS FOR TRANSACTIONS IN SECURITIES ISSUED BY PRUDENTIAL...................26 M. JENNISON EMPLOYEE PARTICIPATION IN MANAGED STRATEGIES...............26 N. EXCEPTIONS TO THE PERSONAL TRADING POLICY...........................27 5. MONITORING/ADMINISTRATION...........................................28 6. PENALTIES FOR VIOLATIONS OF JENNISON'S PERSONAL TRADING POLICY......28 7. TYPE OF VIOLATION...................................................29 A. PENALTIES FOR FAILURE TO SUCURE PRE-APPROVAL........................29 1. FAILURE TO PRE-CLEAR 29 2. FAILURE TO PRE-CLEAR SALES IN LONG TERM CAPITAL GAINS...............29 3. FAILURE TO PRE-CLEAR SALES THAT RESULT IN SHORT-TERM CAPITAL GAINS..30 4. ADDITIONAL CASH PENALTIES...........................................30 B. FAILURE TO COMPLY WITH REPORTING REQUIREMENTS.......................31 C. PENALTY FOR VIOLATION OF SHORT TERM TRADING PROFIT RULE.............31 D. OTHER POLICY INFRINGEMENTS DEALT WITH ON A CASE BY CASE BASIS......31 E. DISGORGED PROFITS...................................................32 8. MISCELLANEOUS.......................................................32 A. POLICIES AND PROCEDURES REVISIONS...................................32 B. COMPLIANCE .........................................................32 SECTION I CODE OF ETHICS FOR JENNISON ASSOCIATES LLC This Code of Ethics ("Code"), as well as Section II, III and IV that follow, sets forth rules, regulations and standards of professional conduct for the employees of Jennison Associates LLC (hereinafter referred to as "Jennison or the Company"). Jennison expects that all employees will adhere to this code without exception. The Code incorporates aspects of ethics policies of Prudential Financial Inc. ("Prudential"), as well as additional policies specific to Jennison Associates LLC. Although not part of this Code, all Jennison employees are also subject to Prudential's "Making the Right Choices" and "Statement of Policy Restricting Communication and the Use of Issuer-Related Information By Prudential Investment Associates' ("Chinese Wall Policy") policies and procedures. These policies can also be found by clicking on Jennison's Compliance intranet website (HTTP://BUZZ/JENNONLINE/DESKTOPDEFAULT.ASPX). 1. STANDARDS OF PROFESSIONAL CONDUCT POLICY STATEMENT It is Jennison's policy that its employees must adhere to the highest ethical standards when discharging their investment advisory duties to our clients or in conducting general business activity on behalf of Jennison in every possible capacity, such as investment management, administrative, dealings with vendors, confidentiality of information, financial matters of every kind, etc. Jennison, operating in its capacity as a federally registered investment adviser, has a fiduciary responsibility to render professional, continuous, and UNBIASED investment advice to its clients. Furthermore, ERISA and the federal securities laws define an investment advisor as a fiduciary who owes their clients a duty of undivided loyalty, who shall not engage in any activity in conflict with the interests of the client. As a fiduciary, our personal and corporate ethics must be above reproach. Actions, which expose any of us or the organization to even the appearance of an impropriety, must not occur. Fiduciaries owe their clients a duty of honesty, good faith, and fair dealing when discharging their investment management responsibilities. It is a fundamental principle of this firm to ensure that the interests of our clients come before those of Jennison or any of its employees. Therefore, as an employee of Jennison, we expect you to uphold these standards of professional conduct by not taking inappropriate advantage of your position, such as using information obtained as a Jennison employee to benefit yourself or anyone else in any way. 1 It is particularly important to adhere to these standards when engaging in personal securities transactions and maintaining the confidentiality of information concerning the identity of security holdings and the financial circumstances of our clients. Any investment advice provided must be unbiased, independent and confidential. It is extremely important to not violate the trust that Jennison and its clients have placed in its employees. The prescribed guidelines and principles, as set forth in the policies that follow, are designed to reasonably assure that these high ethical standards long maintained by Jennison continue to be applied and to protect Jennison's clients by deterring misconduct by its employees. The rules prohibit certain activities and personal financial interests as well as require disclosure of personal investments and related business activities of all supervised persons, includes directors, officers and employees, and others who provide advice to and are subject to the supervision and control of Jennison. The procedures that follow will assist in reasonably ensuring that our clients are protected from employee misconduct and that our employees do not violate federal securities laws. All employees of Jennison are expected to follow these procedures so as to ensure that these ethical standards, as set forth herein, are maintained and followed without exception. These guidelines and procedures are intended to maintain the excellent name of our firm, which is a direct reflection of the conduct of each of us in everything we do. Jennison's continued success depends on each one of us meeting our obligation to perform in an ethical manner and to use good judgment at all times. All employees have an obligation and a responsibility to conduct business in a manner that maintains the trust and respect of fellow Jennison employees, our customers, shareholders, business colleagues, and the general public. You are required to bring any knowledge of possible or actual unethical conduct to the attention of management. Confidentiality will be protected insofar as possible, with the assurance that there will be no adverse consequences as a result of reporting any unethical or questionable behavior. If you have any knowledge of or suspect anyone is about to engage in unethical business activity that either violates any of the rules set forth herein, or simply appears improper, please provide such information to either the Chief Compliance Officer or senior management through the Jennison Financial Reporting Concern Mailbox located on the Risk Management webpage. Emails sent in this manner anonymously. The default setting is set to display your email address, so if you prefer the email to be anonymous, please be sure to check the appropriate box. If you choose not to report your concerns anonymously, you should be aware that Jennison has strict policies prohibiting retaliation against employees who report ethical concerns. Jennison employees should use this Code, as well as the accompanying policies and procedures that follow, as an educational guide that will be complemented by Jennison's training protocol. Each Jennison employee has the responsibility to be fully aware of and strictly adhere to the Code of Ethics and the accompanying policies that support the Code. It should be noted that because ethics is not a science, there may be gray areas that are not covered by laws or regulations. Jennison and its 2 employees will nevertheless be held accountable to such standards. Individuals are expected to seek assistance for help in making the right decision. If you have any questions as to your obligation as a Jennison employee under either the Code or any of the policies that follow, please contact the Compliance Department. 2........CONFIDENTIAL INFORMATION Employees may become privy to confidential information (information not generally available to the public) concerning the affairs and business transactions of Jennison, companies researched by us for investment, our present and prospective clients, client portfolio transactions (executed, pending or contemplated) and holdings, suppliers, officers and other staff members. Confidential information also includes trade secrets and other proprietary information of the Company such as business or product plans, systems, methods, software, manuals and client lists. Safeguarding confidential information is essential to the conduct of our business. Caution and discretion are required in the use of such information and in sharing it only with those who have a legitimate need to know (including other employees of Jennison and clients). A) PERSONAL USE: Confidential information obtained or developed as a result of employment with the Company is not to be used or disclosed for the purpose of furthering any private interest or as a means of making any personal gain. Unauthorized or disclosure of such information (other than as described above) could result in civil or criminal penalties against the Company or the individual responsible for disclosing such information. Further guidelines pertaining to confidential information are contained in the "Policy Statement on Insider Trading" (Set forth in Section II dedicated specifically to Insider Trading). B) RELEASE OF CLIENT INFORMATION: All requests for information concerning a client (other than routine inquiries), including requests pursuant to the legal process (such as subpoenas or court orders) must be promptly referred to the Chief Compliance Officer, or Legal Department. No information may be released, nor should the client involved be contacted, until so directed by either the Chief Compliance Officer, or Legal Department. In order to preserve the rights of our clients and to limit the firm's liability concerning the release of client proprietary information, care must be taken to: |_| Limit use and discussion of information obtained on the job to normal business activities. |_| Request and use only information that is related to our business needs. |_| Restrict access to records to those with proper authorization and legitimate business needs. 3 |_| Include only pertinent and accurate data in files, which are used as a basis for taking action or making decisions. 3. CONFLICTS OF INTEREST You should avoid actual or apparent conflicts of interest - that is, any personal interest inside or outside the Company, which could be placed ahead of your obligations to our clients, Jennison Associates or Prudential. Conflicts may exist even when no wrong is done. The opportunity to act improperly may be enough to create the appearance of a conflict. We recognize and respect an employee's right of privacy concerning personal affairs, but we must require a full and timely disclosure of any situation, which could result in a conflict of interest, or even the appearance of a conflict. The Company, not by the employee involved, will determine the appropriate action to be taken to address the situation. To reinforce our commitment to the avoidance of potential conflicts of interest, the following rules have been adopted, that prohibit you from engaging in certain activities without the pre-approval from the Chief Compliance Officer: A) YOU MAY NOT, without first having secured prior approval, serve as a director, officer, employee, partner or trustee - nor hold any other position of substantial interest - in any outside business enterprise. You do not need prior approval, however, if the following three conditions are met: one, the enterprise is a family firm owned principally by other members of your family; two, the family business is not doing business with Jennison or Prudential and is not a securities or investment related business; and three, the services required will not interfere with your duties or your independence of judgment. Significant involvement by employees in outside business activity is generally unacceptable. In addition to securing prior approval for outside business activities, you will be required to disclose all relationships with outside enterprises annually. * Note: The above deals only with positions in business enterprises. It does not affect Jennison's practice of permitting employees to be associated with governmental, educational, charitable, religious or other civic organizations. These activities may be entered into without prior consent, but must still be disclosed on an annual basis. B) YOU MAY NOT act on behalf of Jennison in connection with any transaction in which you have a personal interest. 4 C) YOU MAY NOT, without prior approval, have a substantial interest in any outside business which, to your knowledge, is involved currently in a business transaction with Jennison or Prudential, or is engaged in businesses similar to any business engaged in by Jennison. A substantial interest includes any investment in the outside business involving an amount greater than 10 percent of your gross assets, or involving a direct or indirect ownership interest greater than 2 percent of the outstanding equity interests. You do not need approval to invest in open-ended registered investment companies such as investments in mutual funds and similar enterprises that are publicly owned. D) YOU MAY NOT, without prior approval, engage in any transaction involving the purchase of products and/or services from Jennison, except on the same terms and conditions as they are offered to the public. Plans offering services to employees approved by the Board of Directors are exempt from this rule. E) YOU MAY NOT, without prior approval, borrow an amount greater than 10% of your gross assets, on an unsecured basis from any bank, financial institution, or other business that, to your knowledge, currently does business with Jennison or with which Jennison has an outstanding investment relationship. F) YOU MAY NOT favor one client account over another client account or otherwise disadvantage any client in any dealings whatsoever to benefit either yourself, Jennison or another third-party client account. G) YOU MAY NOT, as result of your status as a Jennison employee, take advantage of any opportunity that your learn about or otherwise personally benefit from information you have obtained as an employee that would not have been available to you if you were not a Jennison employee. 4........OTHER BUSINESS ACTIVITIES A) ISSUES REGARDING THE RETENTION OF SUPPLIERS: The choice of our suppliers must be based on quality, reliability, price, service, and technical advantages. B) GIFTS: Jennison employees and their immediate families should not solicit, accept, retain or provide any gifts or entertainment which might influence decisions you or the recipient must make in business transactions involving Jennison or which others might reasonably believe could influence those decisions. Even a nominal gift should not be accepted if, to a reasonable observer, it might appear that the gift would influence your business decisions. Modest gifts and favors, which would not be regarded by others as improper, may be accepted or given on an occasional basis. Examples of such gifts are those received as normal business entertainment (I.E., meals or golf games); non-cash gifts of nominal value (such as received at Holiday time); gifts received because of kinship, marriage 5 or social relationships entirely beyond and apart from an organization in which membership or an official position is held as approved by the Company. Entertainment, which satisfies these requirements and conforms to generally accepted business practices, also is permissible. Please reference Jennison Associates' Gifts and Entertainment Policy and Procedures located on COMPLIANCE web page of Jennison Online for a more detailed explanation of Jennison's policy towards gifts and entertainment. C) IMPROPER PAYMENTS - KICKBACKS: In the conduct of the Company's business, no bribes, kickbacks, or similar remuneration or consideration of any kind are to be given or offered to any individual or organization or to any intermediaries such as agents, attorneys or other consultants. D) BOOKS, RECORDS AND ACCOUNTS: The integrity of the accounting records of the Company is essential. All receipts and expenditures, including personal expense statements must be supported by documents that accurately and properly describe such expenses. Staff members responsible for approving expenditures or for keeping books, records and accounts for the Company are required to approve and record all expenditures and other entries based upon proper supporting documents so that the accounting records of the Company are maintained in reasonable detail, reflecting accurately and fairly all transactions of the Company including the disposition of its assets and liabilities. The falsification of any book, record or account of the Company, the submission of any false personal expense statement, claim for reimbursement of a non-business personal expense, or false claim for an employee benefit plan payment are prohibited. Disciplinary action will be taken against employees who violate these rules, which may result in dismissal. E) LAWS AND REGULATIONS: The activities of the Company must always be in full compliance with applicable laws and regulations. It is the Company's policy to be in strict compliance with all laws and regulations applied to our business. We recognize, however, that some laws and regulations may be ambiguous and difficult to interpret. Good faith efforts to follow the spirit and intent of all laws are expected. To ensure compliance, the Company intends to educate its employees on laws related to Jennison's activities, which may include periodically issuing bulletins, manuals and memoranda. Staff members are expected to read all such materials and be familiar with their content. For example, it would constitute a violation of the law if Jennison or any of its employees either engaged in or schemed to engage in: i) any manipulative act with a client; or ii) any manipulative practice including a security, such as touting a security to anyone or the press and executing an order in the opposite direction of such recommendation. Other scenarios and the policies that address other potential violations of the law and conflicts of interest are addressed more fully in Jennison's compliance program and the policies adopted to complement that program which reside on the Jennison Online intranet at (http://buzz/jennonline/DesktopDefault.aspx) 6 F) OUTSIDE ACTIVITIES & POLITICAL AFFILIATIONS: Jennison Associates does not contribute financial or other support to political parties or candidates for public office except where lawfully permitted and approved in advance in accordance with procedures adopted by Jennison's Board of Directors. Employees may, of course, make political contributions, but only on their own behalf; the Company for such contributions will not reimburse them. However, employees may not make use of company resources and facilities in furtherance of such activities, E.G., mail room service, facsimile, photocopying, phone equipment and conference rooms. Legislation generally prohibits the Company or anyone acting on its behalf from making an expenditure or contribution of cash or anything else of monetary value which directly or indirectly is in connection with an election to political office; as, for example, granting loans at preferential rates or providing non-financial support to a political candidate or party by donating office facilities. Otherwise, individual participation in political and civic activities conducted outside of normal business hours is encouraged, including the making of personal contributions to political candidates or activities. Employees are free to seek and hold an elective or appointive public office, provided you do not do so as a representative of the Company. However, you must conduct campaign activities and perform the duties of the office in a manner that does not interfere with your responsibilities to the firm. 5. COMPLIANCE WITH THE CODE & CONSEQUENCES IF VIOLATION OF THE CODE OCCURS Each year all employees will be required to complete a form certifying that they have read this policy, understand their responsibilities, and are in compliance with the requirements set forth in this statement. This process should remind us of the Company's concern with ethical issues and its desire to avoid conflicts of interest or their appearance. It should also prompt us to examine our personal circumstances in light of the Company's philosophy and policies regarding ethics. Jennison employees will be required to complete a form verifying that they have complied with all company procedures and filed disclosures of significant personal holdings and corporate affiliations. Please note that both the Investment Advisers Act of 1940, as amended, and ERISA both prohibit investment advisers (and its employees) from doing indirectly that which they cannot do directly. Accordingly, any Jennison employee who seeks to circumvent the requirements of this Code of Ethics and any of the policies that follow, or otherwise devise a scheme where such activity would result in a violation of these policies indirectly will be deemed to be a violation of the applicable policy and will be subject to the full impact of any disciplinary action taken by Jennison as if such policies were violated directly. 7 It should be further noted that, and consistent with all other Jennison policies and procedures, failure to uphold the standards and principles as set forth herein, or to comply with any other aspect of these policies and procedures will be addressed by Legal and Compliance. Jennison reserves the right to administer whatever disciplinary action it deems necessary based on the facts, circumstances and severity of the violation or conflict. Disciplinary action can include termination of employment. 6. DISCLOSURE REQUIREMENTS The principles set forth in this Code of Ethics and the policies and procedures that follow will be included in Jennison's Form ADV, which shall be distributed or offered to Jennison's clients annually, in accordance with Rule 204-3 of the Investment Advisers Act of 1940. 8 SECTION II INSIDER TRADING The Investment Advisors Act of 1940, requires that all investment advisors establish, maintain and enforce policies and supervisory procedures designed to prevent the misuse of material, non-public information by such investment advisor, and any associated person sometimes referred to as "insider trading." This section of the Code sets forth Jennison Associates' policy statement on insider trading. It explains some of the terms and concepts associated with insider trading, as well as the civil and criminal penalties for insider trading violations. In addition, it sets forth the necessary procedures required to implement Jennison Associates' Insider Trading Policy Statement. Please note that this policy applies to all Jennison Associates' employees 1. JENNISON ASSOCIATES' POLICY STATEMENT AGAINST INSIDER TRADING Personal Securities transactions should not conflict, or appear to conflict, with the interest of the firm's clients when contemplating a transaction for your personal account, or an account in which you may have a direct or indirect personal or family interest, we must be certain that such transaction is not in conflict with the interests of our clients. Specific rules in this area are difficult, and in the final analysis. Although it is not possible to anticipate all potential conflicts of interest, we have tried to set a standard that protects the firm's clients, yet is also practical for our employees. The Company recognizes the desirability of giving its corporate personnel reasonable freedom with respect to their investment activities, on behalf of themselves, their families, and in some cases, non-client accounts (I.E., charitable or educational organizations on whose boards of directors corporate personnel serve). However, personal investment activity may conflict with the interests of the Company's clients. In order to avoid such conflicts - or even the appearance of conflicts - the Company has adopted the following policy: Jennison Associates LLC forbids any director, officer or employee from trading, either personally or on behalf of clients or others, on material, non-public information or communicating material, non-public information to others in violation of the law, such as tipping or recommending that others trade on such information. Said conduct is deemed to be "insider trading." Such policy applies to every director, officer and employee and extends to activities within and outside their duties at Jennison Associates. 9 Every director, officer, and employee is required to read and retain this policy statement. Questions regarding Jennison Associates' Insider Trading policy and procedures should be referred to the Compliance or Legal Departments. 2........EXPLANATION OF RELEVANT TERMS AND CONCEPTS Although insider trading is illegal, Congress has not defined "insider," "material" or "non-public information." Instead, the courts have developed definitions of these terms. Set forth below is very general descriptions of these terms. However, it is usually not easily determined whether information is "material" or "non-public" and, therefore, whenever you have any questions as to whether information is material or non-public, consult with the Compliance or Legal Departments. Do not make this decision yourself. A) WHO IS AN INSIDER? The concept of an "insider" is broad. It includes officers, directors and employees of a company. A person may be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. Examples of temporary insiders are the company's attorneys, accountants, consultants and bank lending officers, employees of such organizations, persons who acquire a 10% beneficial interest in the issuer, other persons who are privy to material non-public information about the company. Jennison Associates and its employees may become "temporary insiders" of a company in which we invest, in which we advise, or for which we perform any other service. An outside individual may be considered an insider, according to the Supreme Court, if the company expects the outsider to keep the disclosed non-public information confidential or if the relationship suggests such a duty of confidentiality. B) WHAT IS MATERIAL INFORMATION? Trading on inside information is not a basis for liability unless the information is material. Material Information is defined as: |_| Information, for which there is a substantial likelihood, that a reasonable investor would consider important in making his or her investment decisions, or |_| Information that is reasonably certain to have a substantial effect on the price of a company's securities. Information that directors, officers and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, a significant increase or decline in orders, significant new products or discoveries, significant merger or acquisition proposals or 10 agreements, major litigation and liquidity problems, for clients and extraordinary management developments. In addition, knowledge about Jennison Associates' client holdings and transactions (including transactions that are pending or under consideration) as well as Jennison trading information and patterns may be deemed material. C) WHAT IS NON-PUBLIC INFORMATION? Information is "non-public" until it has been effectively communicated to the market place, including clients' holdings, recommendations and transactions. One must be able to point to some fact to show that the all information and not just part of the information is generally available to the public. For example, information found in a report filed with the SEC, holdings disclosed in a publicly available website regarding the top 10 portfolio holdings of a mutual fund, appearing in Dow Jones, REUTERS ECONOMICS SERVICES, THE WALL STREET JOURNAL or other publications of general circulation would be considered public. D) MISAPPROPRIATION THEORY Under the "misappropriation" theory, liability is established when trading occurs on material non-public information that is stolen or misappropriated from any other person. In U.S. V. CARPENTER, a columnist defrauded THE WALL STREET Journal by stealing non-public information from the JOURNAL and using it for trading in the securities markets. Note that the misappropriation theory can be used to reach a variety of individuals not previously thought to be encompassed under the fiduciary duty theory. E) WHO IS A CONTROLLING PERSON? "Controlling persons" include not only employers, but also any person with power to influence or control the direction of the management, policies or activities of another person. Controlling persons may include not only the company, but also its directors and officers. F) HOW IS NON-PUBLIC INFORMATION MONITORED? When an employee is in possession of non-public information, a determination is made as to whether such information is material. If the non-public information is material, as determined by Jennison Compliance/Legal, the issuer is placed on a Restricted List ("RL"). Once a security is on the RL all personal and company trading activity is restricted. All securities that are placed on the RL are added to Jennison's internal trading restriction systems, which restricts company trading activity. Personal trading activity in such RL issuers is also restricted through the personal trading pre-clearance process. 11 In addition, Prudential distributes a separate list of securities for (Enterprise Restricted List) which Prudential and its affiliates, including Jennison, are restricted from engaging in trading activity, in accordance with various securities laws. In applying this policy and monitoring securities trading Jennison makes no distinction between securities on the Restricted List and those that appear on the Enterprise Restricted List. 3........PENALTIES FOR INSIDER TRADING VIOLATIONS Penalties for trading on or communicating material non-public information are more severe than ever. The individuals involved in such unlawful conduct may be subject to both civil and criminal penalties. A controlling person may be subject to civil or criminal penalties for failing to establish, maintain and enforce Jennison Associates' Policy Statement against Insider Trading and/or if such failure permitted or substantially contributed to an insider trading violation. Individuals can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include: A) CIVIL INJUNCTIONS B) TREBLE DAMAGES C) DISGORGEMENT OF PROFITS D) JAIL SENTENCES -Maximum jail sentences for criminal securities law violations up to 10 years. E) CIVIL FINES - Persons who committed the violation may pay up to three times the profit gained or loss avoided, whether or not the person actually benefited. F) CRIMINAL FINES - The employer or other "controlling persons" may be subject to substantial monetary fines. G) Violators will be barred from the securities industry. 12 SECTION III IMPLEMENTATION PROCEDURES & POLICY The following procedures have been established to assist the officers, directors and employees of Jennison Associates in preventing and detecting insider trading. Every officer, director and employee must follow these procedures or risk serious sanctions, including but not limited to possible suspension or dismissal, substantial personal liability and criminal penalties. If you have any questions about these procedures you should contact the Compliance or Legal Departments. 1........IDENTIFYING INSIDE INFORMATION Before trading for yourself or others, including client accounts managed by Jennison Associates, in the securities of a company about which you may have potential inside information, ask yourself the following questions: A) IS THE INFORMATION MATERIAL? |_| Would an investor consider this information important in making his or her investment decisions? |_| Would this information substantially affect the market price of the securities if generally disclosed? B) IS THE INFORMATION NON-PUBLIC? |_| To whom has this information been provided? |_| Has the information been effectively communicated to the marketplace by being published in REUTERS, THE WALL STREET JOURNAL, SEC filings, websites or other publications of general circulation? If, after consideration of the above, you believe that the information is material and non-public ("MNPI"), or if you have questions as to whether the information is material and non-public, you should take the following steps: A) Report the matter immediately to the Compliance or Legal Departments. 13 B) Do not purchase or sell the securities on behalf of yourself or others, including client accounts managed by Jennison Associates. C) Do not communicate the information inside or OUTSIDE Jennison Associates, other than to a senior staff member of either Compliance or Legal Departments. D) After the issue has been reviewed by Compliance/Legal, you will be instructed to continue the prohibitions against trading and communication, or you will be allowed to trade and communicate the information. 2........RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION Information that you, Legal or Compliance identify as MNPI may not be communicated to anyone, including persons within and outside of Jennison Associates LLC, except as provided above. In addition, care should be taken so that such information is secure. For example, files containing MNPI should be locked; given to Legal or Compliance (should not be reproduced or otherwise photocopied); access to computer files containing non-public information should be restricted, until such information becomes public. Jennison employees have no obligation to the clients of Jennison Associates to trade or recommend trading on their behalf on the basis of MNPI (inside) in their possession. Jennison's fiduciary responsibility to its clients requires that the firm and its employees regard the limitations imposed by Federal securities laws. 3........ALLOCATION OF BROKERAGE To supplement its own research and analysis, to corroborate data compiled by its staff, and to consider the views and information of others in arriving at its investment decisions, Jennison Associates, consistent with its efforts to secure best price and execution, allocates brokerage business to those broker-dealers in a position to provide such services. It is the firm's policy not to allocate brokerage in consideration of the attempted furnishing of inside information or MNPI. Employees, in recommending the allocation of brokerage to broker-dealers, should not give consideration to the provision of any MNPI. The policy of Jennison Associates as set forth in this statement should be brought to the attention of such broker-dealer. 14 4........RESOLVING ISSUES CONCERNING INSIDER TRADING If doubt remains as to whether information is material or non-public, or if there is any unresolved question as to the applicability or interpretation of the foregoing procedures and standards, or as to the propriety of any action, it must be discussed with either the Compliance or Legal Departments before trading or communicating the information to anyone. This Code of Ethics, Policy on Insider Trading and Personal Trading Policy will be distributed to all Jennison Associates personnel. Each quarter you will be required to certify in writing that you have received, read and understand and will comply with all the provisions of this policy. In addition, newly hired employees must also attest to the policy. Periodically or upon request, a representative from the Compliance or Legal Departments will meet with such personnel to review this statement of policy, including any developments in the law and to answer any questions of interpretation or application of this policy. From time to time this statement of policy will be revised in light of developments in the law, questions of interpretation and application, and practical experience with the procedures contemplated by the statement. Any amendments to the above referred to policy and procedures will be highlighted and distributed to ensure that all employees are informed of and such changes and receive the most current policy, set forth in these policies and procedures. 15 SECTION IV JENNISON ASSOCIATES PERSONAL TRADING POLICY 1........GENERAL POLICY AND PROCEDURES The management of Jennison Associates is fully aware of and in no way wishes to deter the security investments of its individual employees. The securities markets, whether equity, fixed income, international or domestic, offer individuals alternative methods of enhancing their personal investments. Due to the nature of our business and our fiduciary responsibility to our client funds, we must protect the firm and its employees from the possibilities of both conflicts of interest and illegal insider trading in regard to their personal security transactions. It is the duty of Jennison and its employees to place the interests of clients first and to avoid all actual or potential conflicts of interest. It is important to consider all sections to this combined policy to fully understand how best to avoid potential conflicts of interests and how best to serve our clients so that the interests of Jennison and its employees do not conflict with those of its clients when discharging its fiduciary duty to provide fair, equitable and unbiased investment advice to such clients. Jennison employees are prohibited from short term trading or market timing mutual funds and variable annuities managed by Jennison other than those that permit such trading, as well as Prudential affiliated funds and variable annuities, and must comply with any trading restrictions established by Jennison to prevent market timing of these funds. We have adopted the following policies and procedures on employee personal trading to reasonably ensure against actual or potential conflicts of interest that could lead to violations of federal securities law, such as short term trading or market timing of affiliated mutual funds, or as previously described in the preceding sections of the attached policies. To prevent the rapid trading of certain mutual funds and variable annuities, Jennison employees may not engage in opposite direction transactions within 90 days of the last transaction with respect to the mutual funds and variable annuities listed on the attached Exhibit D ("Covered Funds"). Jennison employees are also required to arrange the reporting of Covered Funds transactions under this policy identified in Exhibit D. This policy DOES NOT apply to money market mutual funds, and the Dryden Ultra Short Bond Fund. These policies and procedures are in addition to those set forth in the Code of Ethics and the Policy Statement Against Insider Trading. However, the standards of professional conduct as described in such policies must be considered when a Jennison employee purchases and sells securities on behalf of either their own or any other account for which the employee is considered to be the beneficial owner, other than those accounts over which the Jennison employee does not exercise investment discretion - as more fully described in this personal trading policy. 16 All Jennison employees are required to comply with such policies and procedures in order to avoid the penalties set forth herein. 2........PERSONAL TRANSACTION REPORTING REQUIREMENTS Jennison employees are required to provide Jennison with reports concerning their securities holdings and transactions, as described below. These include Jennison's policies and procedures, including Code of Ethics, names of Jennison's access personnel including those employees no longer employed by Jennison, their holdings and transaction reports, acknowledgements, pre-approvals, violations and the disposition thereof, exceptions to any policy, every transaction in securities in which any of its personnel has any direct or indirect beneficial ownership, except transactions effected in any account over which neither the investment adviser nor any advisory representative of the investment adviser has any direct or indirect influence or control and transactions in securities which are direct obligations of the United States, high-quality short-term instruments and unaffiliated mutual funds and variable annuities. For purposes of this policy, mutual funds and annuities that are exempt from this recordkeeping requirement are money market funds and funds that are either not managed by Jennison or affiliated with Prudential. This requirement applies to all securities accounts in which an employee has a beneficial interest, including the following: |X| Personal accounts of an employee, |X| Accounts in which your spouse has a beneficial interest, |X| Accounts in which your minor children or any dependent family member has a beneficial interest, |X| Joint or tenant-in-common accounts in which the employee is a participant, |X| Accounts of any individual to whose financial support the employee materially contributes,(1) |X| Accounts for which the employee acts as trustee, executor or custodian, and |X| Accounts over which the employee exercises control or has any investment discretion. However, the above requirements do not apply if the investment decisions for the above mentioned account(s) are made by an independent investment manager in a fully discretionary account ("Discretionary Account"). In order to take advantage of this exemption, a fully executed copy of such discretionary account agreement(s) must be provided to Compliance for review and approval. Jennison recognizes that some of its employees may, due to their living arrangements, be uncertain as to their obligations under this Personal Trading Policy. If an employee has any question or doubt as to whether an account is subject to this policy, he or she must consult with the Compliance or Legal Departments as to their status and obligations with respect to the account in question. Please refer to Jennison's Record Management Policy located on the Jennison Online compliance website for a complete list of records and retention periods. __________________________________ (1) For example, this would include individuals with whom you share living expenses, bank accounts, rent or mortgage payments, ownership of a home, or any other material financial support. 17 In addition, Jennison, as a subadviser to investment companies registered under the Investment Company Act of 1940 (E.G., mutual funds), is required by Rule 17j-1 under the Investment Company Act to review and keep records of personal investment activities of "access persons" of these funds, unless the access person does not have direct or indirect influence or control of the accounts. An "access person" is defined as any director, officer, general partner or Advisory Person of a Fund or Fund's Investment Adviser. "Advisory Person" is defined as any employee of the Fund or investment adviser (or of any company in a control relationship to the Fund or investment adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of investments by a Fund, or whose functions relate to the making of any recommendations with respect to the purchases or sales. Jennison's "access persons" and "advisory persons" include Jennison's employees and any other persons that Jennison may designate. A) JENNISON EMPLOYEES All Jennison employees are Access Persons and are subject to the following reporting requirements. Access Persons are required to report all transactions, as set forth on Exhibit A, including activity in Prudential affiliated and Jennison managed mutual funds, as well as affiliated variable annuities or Covered Funds. A list of these funds and variable annuities is attached hereto as Exhibit D. This requirement applies to all accounts in which Jennison employees have a direct or indirect beneficial interest, as previously described. All Access Persons are required to provide the Compliance Department with the following: 1) INITIAL HOLDINGS REPORTS: Within 10 days of commencement of BECOMING AN ACCESS PERSON, an initial holdings report detailing all personal investments (including private placements, and index futures contracts and options thereon, but excluding automatic investment plans approved by Compliance, all direct obligation government, such as US Treasury securities, mutual funds and variable annuities that are not Covered Funds and short-term high quality debt instruments) must be submitted to Compliance. The report should contain the following information, and must be current, not more than 45 days prior to becoming an "access person": a. The title, number of shares and principal amount of each investment in which the Access Person had any direct or indirect beneficial ownership; b. The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person; and c. The date that the report is submitted by the Access Person. 18 2) QUARTERLY REPORTS: a. TRANSACTION REPORTING: Within 30 days after the end of a calendar quarter, with respect to any transaction, including activity in Covered Funds, during the quarter in investments in which the Access Person had any direct or indirect beneficial ownership: i) The date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each investment involved; ii) The nature of the transaction (I.E., purchase, sale or any other type of acquisition or disposition); iii) The price of the investment at which the transaction was effected; iv) The name of the broker, dealer or bank with or through which the transaction was effected; and v) The date that the report is submitted by the Access Person. b. PERSONAL SECURITIES ACCOUNT REPORTING: Within 30 days after the end of a calendar quarter, with respect to any account established by the Access Person (including Discretionary Accounts) in which any securities were held during the quarter for the direct or indirect benefit of the Access Person: i) The name of the broker, dealer or bank with whom the Access Person established the account; ii) The date the account was established; and iii) The date that the report is submitted by the Access Person. To facilitate compliance with this reporting requirement, Jennison Associates requires that a duplicate copy of all trade confirmations and brokerage statements be supplied directly to Jennison Associates' Compliance Department and to Prudential's Corporate Compliance Department, other than transactions in a Discretionary Account. Access 19 Persons are required to notify the Compliance Department of any Covered Fund including accounts of all household members, held directly with the fund. The Compliance Department must also be notified prior to the creation of any new personal investment accounts so that we may request that duplicate statements and confirmations of all trading activity (including mutual funds) be sent to the Compliance Department. Although Discretionary Accounts are exempt from the reporting requirements described above, this notification provision is applicable only to the opening of any new Discretionary Account(s). 3) ANNUAL HOLDINGS REPORTS: Annually, the following information (which information must be current as of a date no more than 45 days before the report is submitted): a. The title, number of shares and principal amount of each investment, including investments set forth Covered Funds, in which the Access Person had any direct or indirect beneficial ownership; b. The name of any broker, dealer or bank with whom the Access Person maintains an account (includes any Discretionary Account(s)) in which any securities are held for the direct or indirect benefit of the Access Person; and c. The date that the report is submitted by the Access Person. 4) A copy of all discretionary investment advisory contracts or agreements between the officer, director or employee and his investment advisors. Please note that Access Persons may hold and trade Covered Funds listed through Authorized Broker/Dealers, Prudential Mutual Fund Services, the Prudential Employee Savings Plan ("PESP"), and the Jennison Savings and Pension Plans. As indicated above, opposite direction trading activity within a 90 day period is prohibited with respect to Covered Funds, other than money market funds and Dryden Ultra Short Fund. It should also be noted that transacting the same Covered Funds in opposite directions on the same day and at the same NAV will not be considered market timing for purposes of this policy, as such activity would not result in a gain to the employee. In addition, Access Persons may maintain accounts with respect to certain Covered Funds directly with the fund company, provided that duplicate confirms and statements are provided to the Compliance Department. 20 B) OTHER PERSONS DEFINED BY JENNISON AS ACCESS PERSONS Other Persons Defined by Jennison as Access Persons, pursuant to Rule 204A-1 under the Investment Advisers Act of 1940, as amended, include individuals who in connection with his or her regular functions or duties may obtain information regarding the purchase or sale of investments by Jennison on behalf of its clients. These individuals or groups of individuals are identified on Exhibit C and will be required to comply with such policies and procedures that Jennison deems necessary to reasonably ensure that the interests of our clients are not in any way compromised. These policies and procedures are specified on Exhibit C. 3........PRE-CLEARANCE PROCEDURES All employees of Jennison Associates may need to obtain clearance from Jennison's Compliance Department prior to effecting transactions in any securities including ETF's (EXCEPT for those securities described in Exhibit A and ETF's listed in Exhibit E ) in which they or their immediate families (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control, have a beneficial interest on behalf of a trust of which they are trustee, or for any other account in which they have a beneficial interest or direct or indirect influence or control. Determination as to whether or not a particular transaction requires pre-approval should be made by consulting the "Compliance and Reporting of Personal Transactions Matrix" found on Exhibit A and the ETF's exempt from preclearance found on Exhibit E. The Compliance Department will make its decision of whether to clear a proposed trade on the basis of the personal trading restrictions set forth below. . Notification of approval or denial to trade is promptly provided except in the case of private placement requests which requires further review. Please note that the approval granted will be valid ONLY for that day in which the approval has been obtained; provided, however, that approved orders for securities traded in certain foreign markets may be executed within 2 business days from the date pre-clearance is granted. In other words, if a trade was not effected on the day for which approval was originally sought, a new preclearance request must be re-entered on each subsequent day in which trading may occur. Or, if the security for which approval has been granted is traded on foreign markets, approval is valid for an additional day (I.E., the day for which approval was granted and the day following the day for which approval was granted). Only transactions where the investment decisions for the account are made by an independent investment manager in a fully Discretionary Account (including managed accounts) will be exempt from the pre-clearance procedures, except for those transactions that are directed by an employee in a Jennison managed account. Copies of the agreement of such discretionary accounts, must be submitted to the Compliance Department for review and record retention. 21 NOTICE OF YOUR INTENDED SECURITIES ACTIVITIES MUST BE SUBMITTED FOR APPROVAL PRIOR TO EFFECTING ANY TRANSACTION FOR WHICH PRIOR APPROVAL IS REQUIRED. Key information, but not limited to, the ticker, the nature of the transaction (purchase or sale) and the estimated value of the trade, must be entered on your preclearance request. If proper procedures are not complied with, action will be taken against the employee. The violators may be asked to reverse the transaction and/or transfer the security or profits gained over to the accounts of Jennison Associates. In addition, penalties for personal trading violations shall be determined in accordance with the penalties schedule set forth in Section 5, "Penalties for Violating Jennison Associates' Personal Trading Policies." Each situation and its relevance will be given due weight. 4. PERSONAL TRADING POLICY The following rules, regulations and restrictions apply to the personal security transactions of all employees. These rules will govern whether clearance for a proposed transaction will be granted. These rules also apply to the sale of securities once the purchase of a security has been pre-approved and completed. No director, officer or employee of the Company may effect for himself, an immediate family member (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control, or any trust of which they are trustee, or any other account in which they have a beneficial interest or direct or indirect influence or control ("Covered Accounts") any transaction in a security, or recommend any such transaction in a security, of which, to his/her knowledge, the Company has either effected or is contemplating effecting the same for any of its clients, if such transaction would in any way conflict with, or be detrimental to, the interests of such client, or if such transaction was effected with prior knowledge of material, non-public information, or any other potential conflict of interest as described in the sections preceding this personal trading policy. Except in particular cases in which Jennison's Compliance Department has determined in advance that proposed transactions would not conflict with the foregoing policy, the following rules shall govern all transactions (and recommendations) by all Jennison employees for their Covered Accounts. The provisions of the following paragraphs do not necessarily imply that Jennison's Compliance Department will conclude that the transactions or recommendations to which they relate are in violation of the foregoing policy, but rather are designed to indicate the transactions for which PRIOR APPROVAL should be obtained to ensure that no actual, potential or perceived conflict occurs. A) BLACKOUT PERIODS 1) Company personnel may not purchase any security recommended, or proposed to be recommended to any client for purchase, nor any security purchased or proposed to be purchased for any client may be purchased by any corporate 22 personnel if such purchase will interfere in any way with the orderly purchase of such security by any client. 2) Company personnel may not sell any security recommended, or proposed to be recommended to any client for sale, nor any security sold, or proposed to be sold, for any client may be sold by any corporate personnel if such sale will interfere in any way with the orderly sale of such security by any client. 3) Company personnel may not sell any security after such security has been recommended to any client for purchase or after being purchased for any client Company personnel may not purchase a security after being recommended to any client for sale or after being sold for any client, if the sale or purchase is effected with a view to making a profit on the anticipated market action of the security resulting from such recommendation, purchase or sale. 4) In order to prevent even the appearance of a violation of this rule or a conflict of interest with a client account, YOU SHOULD REFRAIN FROM TRADING IN THE SEVEN (7) CALENDAR DAYS BEFORE AND AFTER Jennison trades in that security. This restriction does not apply to certain Jennison trading activity. Examples include: (1) trading activity that occurs in Jennison Managed Account ("JMA") when either implementing a pre-existing model for new accounts or in situations where JMA trading activity is generated due to cash flow instructions from the managed account sponsor. (2) program trades, whereby the portfolio manager will instruct the trading desk to take a "slice" of the portfolio. Program trades are a tool used by the portfolio manager to spend or raise cash and at the same time maintain the current portfolio's security weightings. (3) trades that are determined quantitatively. Securities in a program trade and those that are determined quantitatively will be exempt from the 7 day blackout period, subject to the following conditions: o Employee trades require preclearance. o Employee attests to not having knowledge of trading in that particular security. o Security must have a market capitalization equal to or greater than $1 billion. o For trades in securities with a market capitalization of at least $1 billion but less than $5 billion, an employee's investment will be capped at $10,000 over a rolling seven (7) calendar day period. o For trades in security with a market capitalization greater than $5 billion, an employee's investment will be capped at $50,000 over a rolling seven (7) calendar day period. If an employee trades during a blackout period, disgorgement may be required. For example, if an Employee's trade is pre-approved and executed and subsequently, within seven days of the transaction, the Firm trades on behalf of 23 Jennison's clients, the Jennison Compliance Department shall review the personal trade in light of firm trading activity and determine on a case-by-case basis the appropriate action. If the Jennison Compliance Department finds that a client is disadvantaged by the personal trade, the employee may be required to REVERSE THE TRADE AND DISGORGE TO THE FIRM ANY DIFFERENCE DUE TO ANY INCREMENTAL PRICE ADVANTAGE OVER THE CLIENT'S TRANSACTION. B) SHORT-TERM TRADING PROFITS All employees of Jennison Associates are prohibited from profiting in Covered Accounts from the purchase and sale, or the sale and purchase of the same or equivalent securities within 60 calendar days. All employees are prohibited from executing a purchase and a sale or a sale and a purchase of the Covered Funds that appear on Exhibit D, during any 90-day period. Any profits realized from the purchase and sale or the sale and purchase of the same (or equivalent) securities within the 60 and 90 day restriction periods, respectively, shall be disgorged to the firm. In other words, this rule excludes those transactions that would trade at a loss. "Profits realized" shall be calculated consistent with interpretations under section 16(b) of the Securities Exchange Act of 1934, as amended, and the regulations thereunder, which require matching any purchase and sale that occur with in a 60 calendar day period and, for purposes of this policy, within a 90 calendar day period for any purchase and sale or sale and purchase in those Covered Funds that appear on Exhibit D, across all Covered Accounts. As such, a person who sold a security and then repurchased the same (or equivalent) security would need to disgorge a profit if matching the purchase and the sale would result in a profit. Conversely, if matching the purchase and sale would result in a loss, profits would not be disgorged. In addition, the last in, first out ("LIFO") method will be used in determining if any exceptions have occurred in any Covered Fund. Profits realized on such transactions must be disgorged. Certain limited exceptions to this holding period are available and must be approved by the Chief Compliance Officer or her designee prior to execution. Exceptions to this policy include, but are not limited to, hardships and extended disability. Automatic investment and withdrawal programs and automatic rebalancing are permitted transactions under the policy. The prohibition on short-term trading profits shall not apply to trading of index options and index futures contracts and options on index futures contracts on broad based indices. However, trades related to non-broad based index transactions remains subject to the pre-clearance procedures and other applicable procedures. A list of broad-based indices is provided on Exhibit B. C) Jennison employees may not purchase any security if the purchase would deprive any of Jennison's clients of an investment opportunity, after taking into account (in determining whether such purchase would constitute an investment opportunity) the client's 24 investments and investment objectives and whether the opportunity is being offered to corporate personnel by virtue of his or her position at Jennison. D) Jennison employees may not purchase NEW ISSUES OF EITHER COMMON STOCK, FIXED INCOME SECURITIES or CONVERTIBLE SECURITIES in Covered Accounts except in accordance with item E below. This prohibition does not apply to new issues of shares of open-end investment companies. All Jennison employees shall also obtain approval of the Compliance Department and Chief Investment Officer before effecting any purchase of securities on a `PRIVATE PLACEMENT' basis. Such approval will take into account, among other factors, whether the investment opportunity should be reserved for Jennison's clients and whether the opportunity is being offered to the employee by virtue of his or her position at Jennison. E) Subject to the pre-clearance and reporting procedures, Jennison employees may purchase securities on the date of issuance, provided that such securities are acquired in the secondary market. Upon requesting approval of such transactions, employees must acknowledge that he or she is aware that such request for approval may not be submitted until AFTER the security has been issued to the public and is trading at prevailing market prices in the secondary market. F) Subject to the preclearance and reporting procedures, Jennison employees may effect purchases upon the exercise of rights issued by an issuer PRO RATA to all holders of a class of its securities, to the extent that such rights were acquired from such issuer, and sales of such rights so acquired. In the event that approval to exercise such rights is denied, subject to preclearance and reporting procedures, corporate personnel may obtain permission TO SELL such rights on the last day that such rights may be traded. G) Any transactions in index futures contracts and index options, except those effected on a broad-based index, are subject to preclearance and all are subject to the reporting requirements. H) No employee of Jennison Associates may short sell or purchase put options or write call options on securities that represent a long position in any portfolios managed by Jennison on behalf of its clients. Conversely, no employee may sell put options, or purchase either the underlying security or call options that represent a short position which was derived from a fundamental, bottom up research decision in a Jennison client portfolio. Employees may take long positions and the economically equivalent transactions where the short sales in client accounts are in quantitatively managed hedging strategies, subject to the following conditions: o Employee trades require preclearance. o Employee attests to not having knowledge of trading in that particular security. o Security must have a market capitalization equal to or greater than $1 billion. 25 o For trades in securities with a market capitalization of at least $1 billion but less than $5 billion, an employee's investment will be capped at $10,000 over a rolling seven (7) calendar day period. o For trades in securities with a market capitalization greater than $5 billion, an employee's investment will be capped at $50,000 over a rolling seven (7) calendar day period. Any profits realized from such transactions shall be disgorged to the Firm. All options and short sales are subject to the preclearance rules. All employees are prohibited from selling short including "short sales against the box" and from participating in any options or futures transactions on any securities issued by Prudential, except in connection with bona fide hedging strategies (e.g., covered call options and protected put options). However, employees are prohibited from buying or selling options to hedge their financial interest in employee stock options granted to them by Prudential. I) No employee of Jennison Associates may participate in investment clubs. J) While participation in employee stock purchase plans and employee stock option plans need not be pre-approved, copies of the terms of the plans should be provided to the Compliance Department as soon as possible. Jennison employees must obtain pre-approval for any discretionary disposition of securities or discretionary exercise of options acquired pursuant to participation in an employee stock purchase or employee stock option plan, EXCEPT for the exercise of Prudential options and/or the purchase or sale of Prudential common stock (this exception does not apply to Designated Employees). All such transactions, however, must be reported. Nondiscretionary dispositions of securities or exercise are not subject to pre-approval. Additionally, Jennison employees should report holdings of such securities and options on an annual basis. K) Subject to pre-clearance, long-term investing through direct stock purchase plans is permitted. The terms of the plan, the initial investment, and any notice of intent to purchase through automatic debit must be provided to and approved by the Jennison Compliance Department. Any changes to the original terms of approval, E.G., increasing, decreasing in the plan, as well as any sales or discretionary purchase of securities in the plan must be submitted for pre-clearance. Termination of participation in such a plan, must be reported to Compliance. Provided that the automatic monthly purchases have been approved by the Jennison Compliance Department, each automatic monthly purchase need not be submitted for pre-approval. "Profits realized" for purposes of applying the ban on short-term trading profits will be determined by matching the proposed discretionary purchase or sale transaction against the most recent discretionary purchase or sale, as applicable, not the most recent automatic purchase or sale (if applicable). Additionally, holdings should be disclosed annually. 26 L) DESIGNATED PERSONS: REQUIREMENTS FOR TRANSACTIONS IN SECURITIES ISSUED BY PRUDENTIAL A Designated Person is an employee who, during the normal course of his or her job has routine access to material, nonpublic information about Prudential, including information about one or more business units or corporate level information that may be material about Prudential. Employees that have been classified as Designated Persons have been informed of their status. Designated Persons are permitted to exercise their Prudential options and trade in Prudential common stock (symbol: "PRU") only during certain "open trading windows". Trading windows will be closed for periods surrounding the preparation and release of Prudential financial results. Approximately 24 hours after Prudential releases its quarterly earnings to the public, the trading window generally opens and will remain open until approximately three weeks before the end of the quarter. Designated Persons will be notified by the Compliance Department announcing the opening and closing of each trading window. Designated Persons are required to obtain PRE-CLEARANCE approval from Prudential in order to trade in Prudential common stock or exercise their Prudential options during the "open trading window" period. To request pre-clearance approval, Designated Persons are required to complete a pre-clearance form for Prudential. These forms can be obtained from the Compliance Department. The Compliance Department will notify the Designated Person if their request has been approved or denied. All other pre-clearance rules and restrictions apply. M) JENNISON EMPLOYEE PARTICIPATION IN SEPARATELY MANAGED ACCOUNTS (SMA) All eligible employees must adhere to the following conditions in order to open an account in a SMA program; commonly referred to wrap programs: |_| All employees may open a SMA in any managed account program, including those that offer Jennison-managed strategies. |_| All transactions in any SMA account for which a Jennison employee has discretion e.g. tax selling will be subject to the pre-clearance and applicable blackout period requirement of this policy. N) EXCEPTIONS TO THE PERSONAL TRADING POLICY 27 Notwithstanding the foregoing restrictions, exceptions to certain provisions (E.G., blackout period, pre-clearance procedures, and short-term trading profits) of the Personal Trading Policy may be granted on a case-by-case basis by Jennison when no abuse is involved and the facts of the situation strongly support an exception to the rule. Investments in the following instruments are not bound to the rules and restrictions as set forth above and may be made without the approval of the Jennison Compliance Department: direct governments obligations (Bills, Bonds and Notes), money markets, commercial paper, repurchase orders, reverse repurchase orders, bankers acceptances, bank certificates of deposit, other high quality short-term debt instrument(2) and certain exchange traded funds or ETFs listed on Exhibit E Although not subject to pre-clearance, Covered Funds listed on Exhibit D, are subject to reporting and a ban on short term trading, I.E. buying and selling or selling and buying within 90 days. .........5. MONITORING/ADMINISTRATION ------------------------- The Jennison Associates' Compliance Department will maintain and enforce this policy and the Chief Compliance Officer ("CCO"), or her designee(s), will be directly responsible for reasonably assuring for monitoring compliance with the policy. If such authority is delegated to another compliance professional, a means of reporting deficiencies to the CCO, with respect to any one of the policies as set forth in this combined document, must be established to ensure the CCO is aware of all violations. Requests for exceptions to the policy will be provided to the Jennison CCO or her designee and from time to time shared with the Prudential Personal Securities Trading Department and Jennison Compliance Committees. While Jennison has primary responsibility to administer its own Personal Trading Policy, Prudential will assist Jennison by monitoring activity in Prudential mutual funds and variable annuities, as well as Jennison funds in Jennison Savings and Pension Plans, and identifying violations to the ban on short term trading, as described in this policy. As part of monitoring compliance with these policies, Compliance will employ various monitoring techniques, that may consist of but not limited to, reviewing personal securities transactions to determine whether the security was pre-cleared, compare personal securities requests against a firm-wide (includes affiliates of Prudential) or Jennison specific restricted list(s), receiving exception reporting to monitor Jennison 7 day black out period, as described above. In addition, as indicated above, short term or market timing trading in any Covered Fund identified in Exhibit D, represents a significant conflict of interest for Jennison and Prudential. Market timing any of these investment vehicles may suggest the use of inside information - namely, knowledge of portfolio holdings or contemplated transactions - acquired or developed by an employee for personal gain. The use of such information constitutes a violation of the law that can ________________________________________ (2) "High Quality Short-Term Debt Instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Agency (E.G. Moody's and S&P). 28 lead to severe disciplinary action against Jennison and its senior officers. Therefore, trading activity in certain Covered Funds will be subject to a heightened level of scrutiny. Jennison employees who engage in short term trading of such funds can be subject to severe disciplinary action, leading up to and including possible termination. 6........PENALTIES FOR VIOLATIONS OF JENNISON ASSOCIATES' PERSONAL TRADING POLICIES Violations of Jennison's Personal Trading Policy and Procedures, while in most cases may be inadvertent, must not occur. It is important that every employee abide by the policies established by the Board of Directors. Penalties will be assessed in accordance with the schedules set forth below. THESE, HOWEVER, ARE MINIMUM PENALTIES. THE FIRM RESERVES THE RIGHT TO TAKE ANY OTHER APPROPRIATE ACTION, INCLUDING BUT NOT LIMITED TO SUSPENSION OR TERMINATION OF EMPLOYMENT. All violations and penalties imposed will be reported to Jennison's Compliance Committee. The Compliance Committee will review annually a report which at a minimum: A) summarizes existing procedures concerning personal investing and any changes in procedures made during the preceding year; B) identifies any violations requiring significant remedial action during the preceding year; and C) identifies any recommended changes in existing restrictions or procedures based upon Jennison's experience under its policies and procedures, evolving industry practices, or developments in applicable laws and regulations. 7........TYPE OF VIOLATION A) PENALTIES FOR FAILURE TO SECURE PRE-APPROVAL The minimum penalties for failure to pre-clear personal securities transactions include POSSIBLE REVERSAL OF THE TRADE, POSSIBLE DISGORGEMENT OF PROFITS, POSSIBLE SUSPENSION, POSSIBLE REDUCTION IN DISCRETIONARY BONUS AS WELL AS THE IMPOSITION OF ADDITIONAL CASH PENALTIES TO THE EXTENT PERMISSIBLE BY APPLICABLE STATE LAW. 1) FAILURE TO PRE-CLEAR PURCHASE Depending on the circumstances of the violation, the individual may be asked to reverse the trade (I.E., the securities must be sold). Any profits realized from the 29 subsequent sale must be turned over to the firm. PLEASE NOTE: THE SALE OR REVERSAL OF SUCH TRADE MUST BE SUBMITTED FOR PRE-APPROVAL. 2) FAILURE TO PRE-CLEAR SALES THAT RESULT IN LONG-TERM CAPITAL GAINS Depending on the circumstances of the violation, the firm may require that profits realized from the sale of securities that are defined as "long-term capital gains" by Internal Revenue Code (the "IRC") section 1222 and the rules thereunder, as amended, to be turned over to the firm, subject to the following maximum amounts:
---------------------------------------------- --------------------------------------------------- JALLC POSITION DISGORGEMENT PENALTY* ---------------------------------------------- --------------------------------------------------- ---------------------------------------------- --------------------------------------------------- Senior Vice Presidents, Managing Directors Realized long-term capital gain, up to $10,000.00 and above ---------------------------------------------- --------------------------------------------------- ---------------------------------------------- --------------------------------------------------- Vice Presidents, Assistant Vice Presidents Realized long-term capital gain, up to $5,000.00 and Principals ---------------------------------------------- --------------------------------------------------- ---------------------------------------------- --------------------------------------------------- All other JALLC Personnel 25% of the realized long-term gain, irrespective of taxes, up to $3,000.00 ---------------------------------------------- ---------------------------------------------------
* Penalties will be in the form of fines to the extent permissible by law, suspension, or the reduction of discretionary bonus. 3) FAILURE TO PRE-CLEAR SALES THAT RESULT IN SHORT-TERM CAPITAL GAINS Depending on the nature of the violation, the firm may require that all profits realized from sales that result in profits that are defined as "short-term capital gains" by IRC section 1222 and the rules thereunder, as amended, be disgorged irrespective of taxes. Please note, however, any profits that result from violating the ban on short-term trading profits are addressed in section 6.C), "Penalty for Violation of Short-Term Trading Profit Rule." 4) ADDITIONAL CASH PENALTIES
------------------------- ----------------------------------- ------------------------------------- VP'S, MANAGING DIRECTORS AND OTHER JALLC PERSONNEL INCLUDING ABOVE* PRINCIPALS* ------------------------- ----------------------------------- ------------------------------------- ------------------------- ----------------------------------- ------------------------------------- FIRST OFFENSE None/Warning None/Warning ------------------------- ----------------------------------- ------------------------------------- ------------------------- ----------------------------------- ------------------------------------- SECOND OFFENSE $1,000 $200 ------------------------- ----------------------------------- ------------------------------------- ------------------------- ----------------------------------- ------------------------------------- THIRD OFFENSE $2,000 $300 ------------------------- ----------------------------------- ------------------------------------- ------------------------- ----------------------------------- ------------------------------------- FOURTH OFFENSE $3,000 $400 ------------------------- ----------------------------------- ------------------------------------- ------------------------- ----------------------------------- ------------------------------------- FIFTH OFFENSE $4,000 & Automatic Notification $500 & Automatic Notification of of the Board of Directors the Board of Directors ------------------------- ----------------------------------- -------------------------------------
30 NOTWITHSTANDING THE FOREGOING, JENNISON RESERVES THE RIGHT TO NOTIFY THE BOARD OF DIRECTORS FOR ANY VIOLATION. Penalties shall be assessed over a rolling three year period. For example, if over a three year period (year 1 through year 3), a person had four violations, two in year 1, and one in each of the following years, the last violation in year 3 would be considered a fourth offense. However, if in the subsequent year (year 4), the person only had one violation of the policy, this violation would be penalized at the third offense level because over the subsequent three year period (from year 2 through year 4), there were only three violations. Thus, if a person had no violations over a three year period, a subsequent offense would be considered a first offense, notwithstanding the fact that the person may have violated the policy prior to the three year period. * Penalties will be in the form of fines to the extent permissible by law, suspension, or the reduction of discretionary bonus. B) FAILURE TO COMPLY WITH REPORTING REQUIREMENTS Such violations occur if Jennison does not receive a broker confirmation within ten (10) business days following the end of the quarter in which a transaction occurs or if Jennison does not routinely receive brokerage statements. Evidence of written notices to brokers of Jennison's requirement and assistance in resolving problems will be taken into consideration in determining the appropriateness of penalties.
----------------------------- -------------------------------------- --------------------------------------- VP'S, MANAGING DIRECTORS AND ABOVE * OTHER JALLC PERSONNEL INCLUDING PRINCIPALS* ----------------------------- -------------------------------------- --------------------------------------- ----------------------------- -------------------------------------- --------------------------------------- FIRST OFFENSE None/Warning None/Warning ----------------------------- -------------------------------------- --------------------------------------- ----------------------------- -------------------------------------- --------------------------------------- SECOND OFFENSE $200 $50 ----------------------------- -------------------------------------- --------------------------------------- ----------------------------- -------------------------------------- --------------------------------------- THIRD OFFENSE $500 $100 ----------------------------- -------------------------------------- --------------------------------------- ----------------------------- -------------------------------------- --------------------------------------- FOURTH OFFENSE $600 $200 ----------------------------- -------------------------------------- --------------------------------------- ----------------------------- -------------------------------------- --------------------------------------- FIFTH OFFENSE $700& Automatic Notification of the $300 & Automatic Notification of the Board Board ----------------------------- -------------------------------------- ---------------------------------------
* Penalties will be in the form of fines to the extent permissible by law, suspension, or the reduction of discretionary bonus. NOTWITHSTANDING THE FOREGOING, JENNISON RESERVES THE RIGHT TO NOTIFY THE BOARD OF DIRECTORS FOR ANY VIOLATION. C) PENALTY FOR VIOLATION OF SHORT-TERM TRADING PROFIT RULE 31 Any profits realized from the purchase and sale or the sale and purchase of the same (or equivalent) securities within 60 calendar days and within 90 calendar days for all Covered Funds that appear on Exhibit D, shall be disgorged to the firm. "Profits realized" shall be calculated consistent with interpretations under section 16(b) of the Securities Exchange Act of 1934, as amended, which requires matching any purchase and sale that occur with in a 60 calendar day period without regard to the order of the purchase or the sale during the period. As such, a person who sold a security and then repurchased the same (or equivalent) security would need to disgorge a profit if matching the purchase and the sale would result in a profit. The LIFO standard will be applied when determining if any violations have occurred in the trading of a Prudential affiliated or Jennison managed mutual fund, other than a money market fund, and whether the corresponding purchase and sale or sale and purchase of such fund(s) has resulted in a profit or loss. Conversely, if matching the purchase and sale would result in a loss, profits would not be disgorged. D) OTHER POLICY INFRINGEMENTS WILL BE DEALT WITH ON A CASE-BY-CASE BASIS PENALTIES WILL BE COMMENSURATE WITH THE SEVERITY OF THE VIOLATION. Serious violations would include: |_| Failure to abide by the determination of the Jennison Compliance Department. |_| Failure to submit pre-approval for securities in which Jennison actively trades. |_| Failure to comply with the ban on all short term trading, I.E. buying and selling or selling and buying the same or equivalent securities and mutual funds set forth on Exhibit D, within 60 and 90 days, respectively. E) DISGORGED PROFITS Profits disgorged to the firm shall be donated to a charitable organization selected by the firm in the name of the firm. Such funds may be donated to such organization at such time as the firm determines. 8. MISCELLANEOUS A........POLICIES AND PROCEDURES REVISIONS These policies and procedures (Code of Ethics, Policy on Insider Trading and Personal Trading Policy and Procedures) may be changed, amended or revised as frequently as necessary in order to accommodate any changes in operations or by operation of law. 32 Any such change, amendment or revision may be made only by Jennison Compliance in consultation with the business groups or areas impacted by these procedures and consistent with applicable law. Such changes will be promptly distributed to all impacted personnel and entities. B. COMPLIANCE The Jennison Chief Compliance Officer shall be responsible for the administration of this Policy. Jennison Compliance continuously monitors for compliance with theses policies and procedures, as set forth herein, through its daily pre-clearance process and other means of monitoring, as described above in 5. Monitoring/Administration. This data that is reviewed and our other means of monitoring ensures that employees are in compliance with the requirements of these policies and procedures. All material obtained during this review, including any analysis performed, reconciliations, violations (and the disposition thereof), exceptions granted is retained and signed by compliance and retained in accordance with section 2 RECORDKEEPING REQUIREMENTS above. In addition, this Code of Ethics, Policy on Insider Trading and Personal Trading Policy will be reviewed annually for adequacy and effectiveness. Any required revisions will be made consistent with section A above. 33 EXHIBIT A COMPLIANCE AND REPORTING OF PERSONAL TRANSACTIONS MATRIX
Investment Category/Method Sub-Category Required Reportable If reportable, l minimum Pre-Approva reporting (Y/N) (Y/N) frequency =================================== ================================================ =========== ============ ================= BONDS Treasury Bills, Notes, Bonds N N N/A Commercial Paper N N N/A Other High Quality Short-Term Debt N N N/A Instrument(3) Agency Y Y Quarterly Corporates Y Y Quarterly MBS Y Y Quarterly ABS Y Y Quarterly CMO's Y Y Quarterly Municipals Y Y Quarterly Convertibles Y Y Quarterly Public Offering Y Y Quarterly STOCKS Common Y Y Quarterly Preferred Y Y Quarterly Rights Y Y Quarterly Warrants Y Y Quarterly Initial, Secondary and Follow On Public Y Y Quarterly Offerings Automatic Dividend Reinvestments N N N/A Optional Dividend Reinvestments Y Y Quarterly Direct Stock Purchase Plans with automatic Y Y Quarterly investments Employee Stock Purchase/Option Plan Y* Y * OPEN-END MUTUAL FUNDS AND Affiliated Investments - see Exhibit D. N Y Quarterly ANNUITIES Non-Affiliated Funds, not managed by Jennison. N N N/A CLOSED END FUNDS, UN UNIT INVESTMENT TRUSTS and ETF All Affiliated & Non-Affiliated Funds N Y Quarterly US Funds N Y Quarterly Exchange Traded Funds (ETF)(4) Y Y Quarterly Foreign Funds N Y Quarterly Holders Y Y Quarterly
_________________________________ (3) "High Quality Short-Term Debt Instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Agency (Moody's and S&P). (4) All ETFs are subject to pre-clearance except those listed on attached EXHIBIT E. 34
DERIVATIVES Any exchange traded, NASDAQ, or OTC option or futures contract, including, but not limited to: Financial Futures ** Y Quarterly Commodity Futures N Y Quarterly Options on Futures ** Y Quarterly Options on Securities ** Y Quarterly Non-Broad Based Index Options Y Y Quarterly Non Broad Based Index Futures Y Y Quarterly Contracts and Options on Non-Broad Based Index Futures Contracts Broad Based Index Options N Y Quarterly Broad Based Index Futures Contracts N Y Quarterly and Options on Broad Based Index Futures Contracts LIMITED PARTNERSHIPS, PRIVATE PLACEMENTS, & PRIVATE INVESTMENTS Y Y Quarterly VOLUNTARY TENDER OFFERS Y Y Quarterly MANAGED ACCOUNT PROGARMS Employee Directed Portfolio Y Y Quarterly Transactions
* Pre-approval of sales of securities or exercises of options acquired through employee stock purchase or employee stock option plans are required, except for the exercise of Prudential options (this exception does not apply to certain Designated Employees). Holdings are required to be reported annually; transactions subject to pre-approval are required to be reported quarterly. Pre-approval is not required to participate in such plans. ** Pre-approval of a personal derivative securities transaction is required if the underlying security requires pre-approval. 35 EXHIBIT B BROAD-BASED INDICES ----------------------------------------------------------------------- Dow Jones Industrial (30) Average ----------------------------------------------------------------------- ----------------------------------------------------------------------- GSTI (Goldman Sachs 178 Technology Companies) ----------------------------------------------------------------------- ----------------------------------------------------------------------- CBOE Mini-NDX (1 tenth value of NDX Index) ----------------------------------------------------------------------- ----------------------------------------------------------------------- CBOE Technology Index (30 Stocks) ----------------------------------------------------------------------- ----------------------------------------------------------------------- MSCI Multinational Company Index (50 US Stocks) ----------------------------------------------------------------------- ----------------------------------------------------------------------- Nikkei 300 Index CI/Euro ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 100 Close/Amer Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 3000 Growth ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 3000 Value ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell MidCap Growth ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 1000 Growth ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 1000 Value ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell Midcap ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell Midcap Value ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 3000 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 1000 Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 2000 Value ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 2000 Growth ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 500 Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 500 Open/Euro Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 500 Long-Term Close ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 500 (Wrap) ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 500 Open/Euro Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 2000 Open/Euro Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P Midcap 400 Open/Euro Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P 100 Euro Style ----------------------------------------------------------------------- ----------------------------------------------------------------------- S&P Small Cap 600 ----------------------------------------------------------------------- ----------------------------------------------------------------------- U.S. Top 100 Sector ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 2000 L-T Open./Euro ----------------------------------------------------------------------- ----------------------------------------------------------------------- Russell 2000 Long-Term Index ----------------------------------------------------------------------- 36 EXHIBIT C OTHER PERSONS DEFINED BY JENNISON AS ACCESS PERSONS The following groups of persons have been defined by Jennison as Access Persons because these are individuals who, in connection with his or her regular functions or duties obtain information regarding the purchase or sale of investments by Jennison on behalf of its clients. These individuals or groups of individuals are identified on this Exhibit C and will be required to comply with such policies and procedures that Jennison deems necessary as specified on this Exhibit. 1. JENNISON DIRECTORS AND OFFICERS WHO ARE PRUDENTIAL EMPLOYEES Jennison recognizes that a Jennison director or officer who is employed by Prudential ("Prudential Director or Officer") may be subject to the Prudential Personal Securities Trading Policy ("Prudential's Policy"), a copy of which and any amendments thereto shall have been made available to Jennison's Compliance Department. A Prudential Director or Officer does not need to obtain preclearance from Jennison's Compliance Department; provided that the Prudential Director or Officer does not otherwise have access to current Jennison trading activity. For purposes of the recordkeeping requirements of this Policy, Prudential Directors and Officers are required to comply with Prudential's Policy. Prudential will provide an annual representation to the Jennison Compliance Department, with respect to employees subject to the Prudential Policy, that the employee has complied with the recordkeeping and other procedures of Prudential's Policy during the most recent calendar year. If there have been any violations of Prudential's Policy by such employee, Prudential will submit a detailed report of such violations and what remedial action, if any was taken. If an employee is not subject to the Prudential Policy, Prudential will provide a certification that the employee is not subject to the Prudential Policy. 2. OUTSIDE CONSULTANTS AND INDEPENDENT CONTRACTORS Outside Consultants and Independent Contractors who work on-site at Jennison and who in connection with his or her regular functions or duties obtain information regarding the purchase or sale of investments in portfolios managed by Jennison will be subject to such policies and procedures as determined by Jennison. 37 EXHIBIT D JENNISON MANAGED AND PRUDENTIAL AFFILIATED MUTUAL FUNDS A. JENNISON NON-PROPRIETARY FUNDS (ALSO KNOWN AS COVERED FUNDS) AEGON/Transamerica Series Trust - Jennison Growth Harbor Fund - Harbor Capital Appreciation Fund John Hancock Trust - Capital Appreciation Trust John Hancock Funds II - Capital Appreciation Fund Metropolitan Series Fund, Inc. - Jennison Growth Portfolio Ohio National Fund, Inc. - Capital Appreciation Portfolio Pacific Select Fund - Health Sciences Portfolio The Hirtle Callaghan Trust - The Growth Equity Portfolio Transamerica IDEX Mutual Funds - TA IDEX Jennison Growth USAllianz Variable Insurance Products Trust - USAZ Jennison 20/20 Focus Fund USAllianz Variable Insurance Products Trust - USAZ Jennison Growth Fund Vanguard Morgan Growth Fund Northern Multi-Manager Large Cap Fund B. PRUDENTIAL AND PRUDENTIAL INVESTMENT MANAGEMENT (PIM) MUTUAL FUNDS America Skandia JennisonDryden Funds Prudential's Gibraltar Fund, Inc. SEI Institutional Investors Trust Fund Strategic Partners The Prudential Series Fund The Prudential Variable Contract Account-10 The Prudential Variable Contract Account- 2 This Exhibit D may change from time to time due to new product development or changes in relationships and may not always be up-to-date. If you are not sure whether or not you either hold or anticipate purchasing a mutual fund that is either affiliated with Prudential, managed by Jennison, or is a variable annuity, please contact the Compliance Department. Last update 11/20/2007 38 EXHIBIT E EXCHANGE TRADED FUNDS EXEMPT FROM PRECLEARANCE - --------------------------------------- ------------------- TYPE OF ETF SYMBOL - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- Equity ETF's - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- SPDR SPY - --------------------------------------- ------------------- - --------------------------------------- ------------------- Nasdaq 100 QQQQ - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 2000 IWM - --------------------------------------- ------------------- - --------------------------------------- ------------------- S&P MidCap 400 MDY - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares MSCI Emerging Mkts EEM - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares MSCI EAFE EFA - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 2000 Value IWN - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 2000 Growth IWO - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 1000 Value IWD - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 2000 Growth IWF - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Russell 1000 IWB - --------------------------------------- ------------------- - --------------------------------------- ------------------- Vanguard Total Stk Mkt VIPERS VTI - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- Fixed Income ETF's - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman 1-3 Yr Treasury SHY - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman 7-10 Yr Treasury IEF - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman 20+ Yr Treasury TLT - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman GS $ InvesTop Corp LQD - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman Aggregate AGG - --------------------------------------- ------------------- - --------------------------------------- ------------------- iShares Lehman TIPS TIP - --------------------------------------- ------------------- 39 EX-99.P.18 16 file016.txt NICHOLAS APPLEGATE COE [Nicholas Applegate Logo] NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES CODE OF ETHICS AND CONDUCT February 8, 2007 Revised May 10, 2007 [GRAPHIC OMITTED: Nicholas Applegate Logo] Our first priority as an investment adviser is to develop a relationship of trust and confidence with our clients. It is our fiduciary responsibility to act in the best interests of our clients in both investing their assets and conducting our business with the highest standards of care, loyalty, honesty and integrity. Our Code of Ethics and Conduct prescribes effective business conduct covering many areas such as personal trading, the receipt and giving of gifts, and outside business and employment activities. The Code of Ethics and Conduct is designed to minimize conflicts of interest and to avoid any appearances of impropriety. However, in today's complex business environment the Code of Ethics and Conduct may not cover every situation you face in your work. All employees are required to adhere carefully to the elements of the Code of Ethics and Conduct that are applicable to them. If you have any questions or need guidance in a specific business situation or application of the Code of Ethics and Conduct, please contact the Legal/Compliance Department. Sincerely, [/s/Marna C. Whittington] Marna C. Whittington [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] CODE OF ETHICS SUMMARY The Code of Ethics applies to every NACM employee, immediate family members, and other certain affiliated parties. 1. COVERED PERSONS (SECTION II) |X| "NON-ACCESS" means any individual who does NOT, in connection with their regular duties makes, participates in, or has access to non-public information regarding the purchase or sale of securities by NACM, or has access to non-public information regarding the portfolio holdings of affiliated mutual funds. |X| "ACCESS PERSON" means any trustee, officer of NAIF, Executive Committee member, investment management personnel (e.g., portfolio managers, traders, and analysts) and any individual who, in connection with their regular duties, makes, participates in, or has access to non-public information regarding the purchase or sale of securities by NACM, or has access to non-public information regarding the portfolio holdings of affiliated mutual funds (e.g., all employees with access to custodian systems including access through NAIF's administrator, Bloomberg Trading System, Cognos, DataZone, FMC Pages, Nicholas-Applegate Trading System ("NATS"), Pacer, Sylvan and XSP). NOTE: THE SEC EXPANDED THIS DEFINITION IN 2005. MOST NACM EMPLOYEES ARE DESIGNATED AS ACCESS PERSONS. 2. COVERED SECURITIES AND TRANSACTIONS (SECTION III) |X| Equity securities including common, preferred and convertible stock, except as otherwise exempted below, and any derivative instrument relating to these securities (e.g. options and warrants); |X| Debt securities; |X| Any interest in a partnership investment; |X| Shares in NAIF Funds and other mutual funds sub-advised by NACM and affiliates and in the AGI mutual fund family(1) (collectively the "Mutual Funds") and |X| Shares in any Allianz Global Investors Fund Management Sponsored Closed-End Funds(2) 3. EXEMPT SECURITIES AND TRANSACTIONS (SECTION IV) |X| Direct obligations of the United States government, its agencies or instrumentalities; |X| Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; |X| Shares of all registered money market funds; |X| Shares of registered open-end and closed-end(3) investment companies that are NOT advised or sub-advised by NACM or by affiliates of AGI; |X| Shares issued by a unit investment trust if the unit investment trust is invested exclusively in unaffiliated mutual funds; |X| Stock index futures; |X| HOLDRs; |X| Exchange traded funds including but not limited to SPDRS, QQQs, MDYs, DIAs, WEBS, Diamonds and iShares Funds(4) ; |X| Commodities, futures and options traded on a commodity exchange including currency futures; |X| Acquisitions or dispositions of Covered Securities as the result of a stock dividend, stock split, reverse stock split, merger, consolidation, spin-off or other similar corporate distribution or reorganization applicable to all holders of a class of securities of which you have a beneficial ownership(5); |X| Purchases that are part of a direct investment plan or employee stock option plan(6); and - --------------------------------------- (1) AGI mutual funds include funds available through the AGI 401(k), Auto Invest Program and Deferred Compensation Plan as well as PIMCO MMS and PIMS Funds. (2) A list of all Allianz Global Investors Fund Management Sponsored Closed-End funds can be found on the NACM intranet under the Compliance section. (3) Shares in any registered closed-end investment company are reportable regardless of affiliation. (4) The iShares Funds are registered with the SEC under the Investment Company Act of 1940 as iShares,Inc. and iShares Trust. (5) See Appendix One for examples of beneficial ownership. i [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] |X| Other specific transactions as determined by the Chief Compliance Officer or General Counsel based upon the determination that the transaction(s) do not interfere or appear to interfere with making decisions in the best interest of our Advisory clients. All requests to exempt a transaction must be in writing and forwarded to the Legal/Compliance Department for approval PRIOR to your executing the transaction. 4. DE MINIMIS CRITERIA (SECTION IV) NON-ACCESS PERSON DE MINIMIS CRITERIA |X| Equity securities: purchase or sale, across all accounts, of 2,000 shares or less with a market capitalization over $1 billion; and |X| Debt securities: purchase or sale, across all accounts, in an issuer with a market capitalization of at least $1 billion. |X| Options: any option transaction, across all accounts, for 20 contracts or less on underlying securities that would otherwise qualify as De Minimis are the functional equivalents of trading 2,000 shares or less with a market capitalization greater than $1 billion. ACCESS PERSON DE MINIMIS CRITERIA |X| Equity securities: purchase or sale, across all accounts, of 2,000 shares or less with a market capitalization over $5 billion; and |X| Debt securities: purchase or sale, across all accounts, in an issuer with a market capitalization of at least $5 billion. |X| Options: any option transaction, across all accounts, for 20 contracts or less on underlying securities that would otherwise qualify as De Minimis are the functional equivalents of trading 2,000 shares or less with a market capitalization greater than $5 billion. 5. PRE-CLEARANCE OF PERSONAL TRADES (SECTION V) |X| Access and Non-Access Persons must pre-clear all personal securities transactions by submitting a Trade Request Form through CTI iTrade. |X| NACM Investment management personnel must receive authorization for all Covered Securities transactions except Mutual Funds from the Chief Investment Officer ("CIO"), Trader or a senior Portfolio Manager ("senior PM"). |X| All pre-clearance approvals are valid for the day you received approval up through "market open" of the next business day. 6. 30 DAY HOLDING PERIOD FOR INVESTMENT MANAGEMENT PERSONNEL (SECTION V) |X| Investment management personnel may only sell a Covered Security including De Minimis transactions that were held for less than 30 days, if the security is being sold at a loss. 7. SPECIAL RULES APPLICABLE TO MUTUAL FUNDS (SECTION V) |X| Access and Non-Access Persons are prohibited from excessive trading in Mutual Funds, regardless of whether those transactions occurred in a single account (e.g. brokerage account, a 401(k) account, a deferred compensation account, etc.) or across multiple accounts in which the employee has a beneficial interest. |X| Excessive trading is defined as the purchase and sale, or sale and purchase, of any Mutual Fund, in any 30 day period. |X| Systematic purchases/sales are not deemed purchases or sales for purposes of the 30 day hold period. |X| No employee may engage in transactions that are in violation of a fund's stated policy as disclosed in its prospectus and statement of additional information. 8. - -------------------------------------------------- (6) Note: You must inform the Legal/Compliance Department of your initial purchase or participation in the plan. If you were to contribute more to the direct investment plan, you must obtain pre-clearance from the Legal/Compliance Department. You are required to pre-clear your intent to purchase the employee stock within one week of the actual transaction date. ii [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] 8. TRADING IN MUTUAL FUNDS WHERE NACM IS THE SUB-ADVISER (SECTION V) |X| Access Persons must notify the Legal/Compliance Department if they make investments in any fund NACM or an affiliate (e.g. AGI, RCM, PIMCO) sub-advises. |X| Duplicate statements must be provided to the Legal/Compliance department on a quarterly basis. Purchase and sale, sale and purchase, in any 30 day period is considered excessive trading and is prohibited. |X| Systematic purchases/sales are not deemed purchases or sales for purposes of the 30 day hold period. 9. TRADING IN ANY ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT SPONSORED CLOSED-END FUND (SECTION V) |X| Access and Non-Access Persons must pre-clear all transactions in any Allianz Global Investors Fund Management Sponsored Closed-End Fund(7). |X| Pre-Clearance Form is attached in Appendix Six. |X| Allianz Global Investors Fund Management Sponsored Closed-End Fund shares must be held for at least 60 days prior to selling the security. |X| Section 16 Reporting Persons must hold the Allianz Global Investors Fund Management Sponsored Closed-End Fund for at least 6 months or any profit on the sale will be disgorged. 10. DISCLOSURE OF PORTFOLIO HOLDINGS (SECTION V) |X| For all requests received on or after the 5th business day of the month, NACM will furnish portfolio holdings as of the end of the prior month. |X| For all requests received before the 5th business day of the month, NACM will furnish portfolio holdings as of the end of the month prior to the previous month. 11. BLACKOUT PERIODS (SECTION VI) |X| You are not allowed to trade a security if NACM has engaged in a transaction in the same or equivalent security for a client account within the last three days or if the security is currently on the main/proposed blotter. |X| This rule does not apply to De Minimis Transactions. |X| Blackout dates applicable to shares of Allianz SE ("AZ") and derivatives thereon are: REVISED o January 11, 2007 to February 22, 2007 o April 27, 2007 to May 11, 2007 o July 27, 2007 to August 10, 2007 o October 31, 2007 to November 14, 2007 |X| Blackout dates are also applicable to Allianz Global Investors Fund Management Sponsored Closed-End Funds in Appendix Seven. 12. MISAPPROPRIATION OF ACCOUNT OPPORTUNITY (SECTION VI) |X| NACM Portfolio Managers of Small and Micro cap products may not buy a security with a market capitalization of less than one billion ($1B) and that is eligible for purchase by any fund or account under their management except with the approval of the Chief Investment Officer or his designee upon a determination that the purchase is not appropriate for any such fund or account. 13. TRADING VIOLATIONS (SECTION VII) |X| Violations of the Code are subject to disgorgement of profits, monetary penalties and may lead to disciplinary action, including termination of employment. - ---------------------------------------------- (7) A list of all Allianz Global Investors Fund Management Sponsored Closed-End funds can be found on the NACM intranet under the Compliance section. iii [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] 14. BROKERAGE ACCOUNTS (SECTION VIII) |X| You must maintain your personal brokerage and trading accounts with a "Designated Broker" (currently Charles Schwab). 15. PUBLIC OFFERINGS AND PRIVATE PLACEMENTS (SECTION IX) |X| You may not engage in a personal securities transaction in any security in a private placement or public offering (initial, primary, secondary offerings) WITHOUT prior written approval by the Chief Compliance Officer or General Counsel. 16. OUTSIDE BUSINESS ACTIVITIES AND SERVICE ON BOARDS OF OTHER COMPANIES (SECTION X) |X| You are required to notify the Legal/Compliance Department promptly if you become involved with any public company as a board member, employee, owner, or any other position. Some activities may not be permitted or may require Firm approval. |X| If your position with another company is investment-related, you are required to disclose this information regardless if it is a private company, non-profit company, not-for-profit company, or a college/university. 17. GIFTS (SECTION XII) NEW |X| Gifts received or given from anyone business related must be reported quarterly. |X| Gifts made in connection with the distribution of Mutual Fund shares may not in aggregate exceed $100 per person on an annual basis. 18. GIFTS IN CONNECTION WITH LABOR ORGANIZATIONS (SECTION XII) |X| To maintain accurate tracking of payments to Taft-Hartley union officials or union employees, NACM employees are required to disclose to the Legal/Compliance Department in advance any type of entertainment or any other activity that would give rise to the filing of form LM-10. 19. REPORTING AND CERTIFICATION (SECTION XV) |X| You are required to read and sign the Code of Ethics annually confirming that you understand all policies and procedures. iv [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] TABLE OF CONTENTS I. INTRODUCTION__________________________________________________________1 II. COVERED PERSONS_______________________________________________________1 III. COVERED SECURITIES AND TRANSACTIONS___________________________________2 IV. EXEMPT SECURITIES AND TRANSACTIONS____________________________________2 V. PROCEDURES FOR TRADING SECURITIES_____________________________________4 VI. PROHIBITED TRANSACTIONS_______________________________________________8 VII. VIOLATIONS OF THE CODE________________________________________________9 VIII. BROKERAGE ACCOUNTS___________________________________________________10 IX. PUBLIC OFFERINGS AND PRIVATE PLACEMENTS______________________________10 X. SERVICE ON BOARDS OF OTHER COMPANIES_________________________________10 XI. CONSULTANTS__________________________________________________________10 XII. GIFTS________________________________________________________________11 XIII. FORM 700, STATEMENT OF ECONOMIC INTERESTS____________________________12 XIV. PAY-TO-PLAY__________________________________________________________12 XV. REPORTING AND CERTIFICATION__________________________________________13 XVI. RECORDKEEPING REQUIREMENTS___________________________________________13 XVII. ADMINISTRATION_______________________________________________________14 XVIII. ANNUAL BOARD REVIEW__________________________________________________14 XIX. AMENDMENTS AND MODIFICATIONS_________________________________________14 APPENDIX ONE: EXAMPLES OF BENEFICIAL OWNERSHIP________________________________15 APPENDIX TWO: INSTRUCTIONS FOR USING CTI ITRADE_______________________________16 APPENDIX THREE: OPTIONS DISCUSSION____________________________________________22 APPENDIX FOUR: INSIDER TRADING POLICY AND PROCEDURES__________________________23 APPENDIX FIVE: NACM DESIGNATED BROKERAGE PROGRAM OFFERED BY CHARLES SCHWAB____26 APPENDIX SIX: CLOSED-END FUND PRE-CLEARANCE FORM______________________________28 APPENDIX SEVEN: ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT SPONSORED CLOSED-END FUNDS DIVIDEND BLACK OUT CALENDAR__________29 APPENDIX EIGHT: PRIVATE PLACEMENT AND PRIVATE SECURITIES TRANSACTION FORM_____30 APPENDIX NINE: QUARTERLY GIFT REPORT__________________________________________31 APPENDIX TEN: NAIF CODE OF ETHICS CERTIFICATION_______________________________32 APPENDIX ELEVEN: NAIF QUARTERLY TRANSACTION REPORT_____________________33 APPENDIX TWELVE: INITIAL ACKNOWLEDGEMENT FORMS________________________________34 APPENDIX THIRTEEN: INITIAL LISTING OF PERSONAL SECURITIES HOLDINGS____________35 APPENDIX FOURTEEN: QUARTERLY TRANSACTION REPORT_______________________________37 APPENDIX FIFTEEN: ANNUAL CERTIFICATION FORMS_________________________________38 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] NICHOLAS-APPLEGATE CAPITAL MANAGEMENT ("NACM") NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS ("NAIF") NICHOLAS-APPLEGATE SECURITIES ("NAS") CODE OF ETHICS AND CONDUCT I. INTRODUCTION This Code of Ethics and Conduct ("Code") is based on the principle that we have a fiduciary duty to our clients and their shareholders including the investment companies for which NACM serves as an adviser or sub-adviser. At all times, you must: 1. PLACE THE INTERESTS OF OUR CLIENTS FIRST. As a fiduciary, you must avoid putting personal interests ahead of the interests of clients. 2. CONDUCT ALL OF YOUR PERSONAL SECURITIES TRANSACTIONS IN FULL COMPLIANCE WITH THIS CODE AND THE NICHOLAS-APPLEGATE INSIDER TRADING POLICY. NACM encourages you and your family to develop personal investment programs. However, you must not take any action in connection with your personal investments that could cause even the appearance of unfairness or impropriety. 3. AVOID TAKING INAPPROPRIATE ADVANTAGE OF YOUR POSITION. The receipt of investment opportunities, privileges or gifts from persons seeking business with NACM could call into question the independence of your judgment. 4. COMPLY WITH ALL APPLICABLE FEDERAL AND SECURITIES LAWS. In connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by an Advisory Client, you are not permitted to:(i) defraud such client in any manner; (ii) mislead such client, including making a statement that omits material facts; (iii) engage in any act, practice or course of conduct which operates or would operate as a fraud or deceit upon such client; (iv) engage in any manipulative practice with respect to such client; or (v) engage in any manipulative practices with respect to securities, including price manipulation. Please consult with the Chief Compliance Officer if you have questions regarding any laws, rules or regulations. If you have any questions about any aspect of the Code, or if you have questions regarding application of the Code in a particular situation, contact the Legal/Compliance Department. II. COVERED PERSONS The Code applies to every NACM and NAS employee (hereinafter "you" or "your"); and your immediate family members(1) sharing the same household, non-employee trustees and NAIF's administrator ("Covered Persons"). Please note the pre-clearance requirements apply to all employees based upon your activities and role within NACM, NAS or NAIF. |X| A. "NON-ACCESS PERSON" means any individual who does NOT, in connection with their regular duties, makes, participates in, or has access to non-public information regarding the purchase or sale of securities by NACM, or has access to non-public information regarding the portfolio holdings of affiliated mutual funds. - ------------------------------------------------------------------ (1) Immediate family members include any spouse, domestic partner, child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and any adoptive relationship. 1 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] B. "ACCESS PERSON" means any trustee, officer of NAIF, Executive Committee member, investment management personnel (e.g., portfolio managers, traders, and analysts), and any individual who, in connection with their regular duties, makes, participates in, or has access to non-public information regarding the purchase or sale of securities by NACM, or has access to non-public information regarding the portfolio holdings of affiliated mutual funds (e.g., all employees with access to custodian systems including access through NAIF's administrator, Bloomberg Trading System, Cognos, DataZone, FMC Pages, Nicholas-Applegate Trading System ("NATS"), Pacer, Sylvan and XSP). Notwithstanding anything to the contrary stated in this Code, the trustees of NAIF who are not an "interested person"(2) and any officers of NAIF that are employees of NAIF's administrator will only be subject to the following provisions of this Code: Special Rules Applicable to the Mutual Funds, Insider Trading Policy, Public Offerings and Private Placements, Gifts (but not quarterly reporting for gifts), Quarterly Reporting if they knew or should have known that during the 15 day period immediately before or after the trustee's transaction in a Covered Security, NAIF purchased or sold the Covered Security or had considered purchasing or selling the Covered Security, and Code of Ethics Certification. III. COVERED SECURITIES AND TRANSACTIONS The following list identifies Covered Securities(3) and transactions that are subject to the requirements of the Code: o Equity securities including common, preferred and convertible stock, except as otherwise exempted below, and any derivative instrument relating to these securities (e.g. options and warrants); o Debt securities; o Any interest in a partnership investment; o Shares in NAIF Funds and other mutual funds sub-advised by NACM and affiliates and in the AGI mutual fund family(4) (collectively the "Mutual Funds"); and o Shares in any Allianz Global Investors Fund Management Sponsored Closed-End Fund(5) IV. EXEMPT SECURITIES AND TRANSACTIONS The following list of Exempt Securities and transactions are excluded from the pre-clearance, holding period for investment management personnel and certain reporting requirements under the Code. - ----------------------------------------------------- (2) as defined under section 2(a)(19) of the Act (3) Covered Securities means any security as defined in Section 202 (a) (18) of the Investment Advisers Act. "Security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. (4) AGI mutual funds include funds available through the AGI 401(k), Auto Invest Program and Deferred Compensation Plan as well as PIMCO MMS and PIMS Funds. (5) A list of Allianz Global Investors Fund Management Sponsored Closed-End Funds can be found on the NACM intranet under the Compliance section. 2 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] EXEMPT SECURITIES AND TRANSACTIONS o Direct obligations of the United States government, its agencies or instrumentalities; o Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; o Shares of all registered money market funds; o Shares of registered open-end and closed-end(6) investment companies that are NOT advised or sub-advised by NACM or by affiliates of AGI; o Shares issued by a unit investment trust if the unit investment trust is invested exclusively in unaffiliated mutual funds; o Stock index futures; o HOLDRs; o Exchange Traded Funds including but not limited to SPDRS, QQQs, MDYs, DIAs, WEBS, Diamonds and iShares Funds(7) ; o Commodities, futures and options traded on a commodity exchange including currency futures; o Acquisitions or dispositions of Covered Securities as the result of a stock dividend, stock split, reverse stock split, merger, consolidation, spin-off or other similar corporate distribution or reorganization applicable to all holders of a class of securities of which you have a beneficial ownership(8); o Purchases that are part of a direct investment plan or employee stock option plan(9); and o Other specific transactions as determined by the Chief Compliance Officer or General Counsel based upon the determination that the transaction(s) do not interfere or appear to interfere with making decisions in the best interest of our Advisory clients. All requests to exempt a transaction must be in writing and forwarded to the Legal/Compliance Department for approval PRIOR to your executing the transaction. - -------------------------------- (6) Shares in any registered closed-end investment company are reportable regardless of affiliation. (7) The iShares Funds are registered with the SEC under the Investment Company Act of 1940 as iShares,Inc. and iShares Trust. (8) See Appendix One for examples of beneficial ownership. (9) Note: You must inform the Legal/Compliance Department of your initial purchase or participation in the plan. If you were to contribute more to the direct investment plan, you must obtain pre-clearance from the Legal/Compliance Department. You are required to pre-clear your intent to purchase the employee stock within one week of the actual transaction date. 3 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] DE MINIMIS TRANSACTIONS - ----------------------- The De Minimis criteria apply to transactions across all of your accounts. De Minimis transactions do not require pre-clearance however, are not exempt from reporting and holding requirements as stated in the Code. NON-ACCESS PERSON DE MINIMIS CRITERIA |X| Equity securities: purchase or sale of 2,000 shares or less with a market capitalization over $1 billion; |X| Debt securities: purchase or sale in an issuer with a market capitalization of at least $1 billion. |X| Options: any option transaction for 20 contracts or less on underlying securities that would otherwise qualify as De Minimis are the functional equivalents of trading 2,000 shares or less with a market capitalization greater than $1 billion. ACCESS PERSON DE MINIMIS CRITERIA |X| Equity securities: purchase or sale of 2,000 shares or less with a market capitalization over $5 billion; |X| Debt securities: purchase or sale in an issuer with a market capitalization of at least $5 billion. |X| Options: any option transaction for 20 contracts or less on underlying securities that would otherwise qualify as De Minimis are the functional equivalents of trading 2,000 shares or less with a market capitalization greater than $5 billion. V. PROCEDURES FOR TRADING SECURITIES PRE-CLEARANCE - ------------- You must pre-clear the purchase or sale of all Covered Securities except Mutual Funds(10) for your own account or any account which you have control or have a beneficial interest. Access and Non-Access Persons must pre-clear all personal securities transactions by submitting a Trade Request Form through CTI iTrade. If you have any questions regarding the use of CTI, please call the CARE Hotline. See Appendix Two for instructions on how to use CTI iTrade. All pre-clearance approvals are valid for the day you received approval up through "market open" of the next business day (e.g., 6:30 a.m. PT, excluding stock market holidays for domestically traded securities). NACM INVESTMENT MANAGEMENT PERSONNEL - ------------------------------------ NACM Investment management personnel must receive authorization for all Covered Securities transactions except Mutual Funds from the Chief Investment Officer ("CIO"), Trader or a senior Portfolio Manager ("senior PM"). NACM Investment management personnel must submit an e-mail to the CIO, Trader or a senior PM requesting authorization of the personal securities transaction. The CIO, Trader or senior PM's reply will be forwarded to the Legal/Compliance Department for pre-clearance. The Legal/Compliance Department will not review the pre-clearance request until this information is received. - ----------------------------------------------- (10) See Special Rules Applicable to Mutual Funds, Trading in Mutual Funds Where NACM is the Sub-Adviser and Trading in Allianz Global Investors Fund Management Sponsored Closed-End Funds. 4 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] 30 DAY HOLDING PERIOD FOR INVESTMENT MANAGEMENT PERSONNEL - --------------------------------------------------------- Investment management personnel may only sell a Covered Security including De Minimis transactions that were held for less than 30 days, if the security is being sold at a loss. The 30 day holding rule is also applicable to options and shorting. OPTIONS GUIDELINES: - ------------------- The 30 day hold period begins from the date the put or call is purchased or sold/written. Not when the option is exercised or expired. To illustrate: a) Writing covered calls is deemed a sale of the underlying security, so if you have owned the underlying security for greater than 30 days, you may write a covered call on that security, with any expiration. b) Writing naked puts is deemed a purchase of the underlying security, so if you are to put the shares of the underlying security, the purchase date of the stock put reverts back to the date the naked put was written. c) Buying a call is deemed a purchase of the underlying security, so if you exercise the call, the purchase date of the stock you receive reverts back to the date you purchased the call. d) Writing naked calls is speculative in nature. Therefore, the expiration date must be at least 30 days from the opening date of the naked position. A more detailed discussion of Options is found in Appendix Three. SHORTING GUIDELINES: a) If you buy a stock, you may not sell that stock, including short sales against the box, within 30 days, unless you are at a loss. b) If you sell a stock short, you may not buy it back for at least 30 days, unless you are at a loss. The Chief Compliance Officer or General Counsel may also grant exceptions to this prohibition upon prior written request. SPECIAL RULES APPLICABLE TO MUTUAL FUNDS - ---------------------------------------- Access and Non-Access Persons are prohibited from excessive trading in the Mutual Funds, regardless of whether those transactions occurred in a single account (e.g. brokerage account, a 401(k) account, a deferred compensation account, etc.) or across multiple accounts in which the employee has a beneficial interest. Excessive trading is defined as the purchase and sale, or sale and purchase, of any Mutual Fund, in any 30 day period. Systematic purchases/sales are not deemed purchases or sales for purposes of the 30 day hold period. In addition, no employee of NACM and NAS may engage in transactions that are in violation of a fund's stated policy as disclosed in its respective prospectus and statement of additional information. As a participant in the mutual fund industry, the Firm strongly discourages all NACM and NAS employees from excessive trading in un-affiliated mutual funds as well. TRADING IN MUTUAL FUNDS WHERE NACM IS THE SUB-ADVISER - ----------------------------------------------------- Access Persons must notify the Legal/Compliance Department if they make investments in any fund NACM or an affiliate (e.g. AGI, RCM, PIMCO) sub-advises. Duplicate statements must be provided to the Legal/Compliance department on a quarterly basis. Purchase and sale, sale and purchase, in any 30 day period is considered excessive trading and is prohibited. 5 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] The Chief Compliance Officer or General Counsel may grant exceptions to this prohibition upon prior written request. TRADING IN ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT SPONSORED CLOSED-END FUNDs - ------------------------------------------------------------------------------- Prior to purchasing or selling shares in any Allianz Global Investors Fund Management Sponsored Closed-End Fund, Access and Non-Access Persons must complete a pre-clearance form(11) (the "Pre-Clearance of Closed-End Fund Transaction Form") and submit it for approval to the Legal/Compliance Department. In determining whether to pre-clear the trade, the Legal/Compliance Department in conjunction with the Chief Compliance Officer of AGIFM ("AGIFM CCO") must make an assessment as to whether the transaction complies with the Code of Ethics and is otherwise appropriate. In order to make an initial purchase of an Allianz Global Investors Fund Management Sponsored Closed-End Fund, such fund must have completed all of its initial common and preferred shares offerings and not otherwise be engaged in an offering of its shares. Purchases in the primary market are strictly prohibited. No trades are permitted in (i) a particular Allianz Global Investors Fund Management Sponsored Closed-End Fund within a three business day period before, and a two business day period after, such Allianz Global Investors Fund Management Sponsored Closed-End Fund's dividend declaration press release (see Appendix Seven for Closed-End Dividend Blackout Calendar for dividend blackout dates for each Allianz Global Investors Fund Management Sponsored Closed-End Fund); and (ii) a particular Allianz Global Investors Fund Management Sponsored Closed-End Fund within a five business day period before, and a two business day period after, such Allianz Global Investors Fund Management Sponsored Closed-End Fund's quarterly earnings release. If Legal/Compliance approves the requested transaction (which must be a market order or limit order that expires no later than 4 p.m. EDT the business day the clearance is provided), you will have until 4 p.m. EDT the business day the clearance is provided to purchase or sell the Allianz Global Investors Fund Management Sponsored Closed-End Fund. After that time, the pre-clearance will have expired. Once a purchase is made, you must hold the Allianz Global Investors Fund Management Sponsored Closed-End Fund shares for at least sixty days prior to selling the security. Section 16 Reporting Persons (see below) must hold the Allianz Global Investors Fund Management Sponsored Closed-End Fund for at least 6 months or any profit on the sale will be disgorged. Any executed trade must be reported to Compliance promptly. The report must include: (1) the execution date of the transaction(s), (2) name of the Allianz Global Investors Fund Management Sponsored Closed-End Fund, (3) purchase or sale, (4) number of shares bought or sold and total number of shares owned after the transaction, (5) price(s), and (6) name of broker through which the transaction was executed. Section 16 persons must make such report within one business day. SPECIAL RULES FOR SECTION 16 REPORTING PERSONS Allianz Global Investors Fund Management Sponsored Closed-End Funds are registered under Section 12 of the Securities and Exchange Act of 1934. As such, there are specific reporting requirements under Sections 16(a) and (b) of Securities Exchange Act of 1934 imposes on "INSIDERS"(12) of operating companies and Section 30(h) of the Investment Company Act of 1940 for officers, directors, principal stockholders (i.e., those owning 10% or more of the outstanding shares of the issuer), investment advisors and their affiliates ("Section 16 Reporting Persons"). If you fall under any of these categories, - ------------------------------------------- (11) See Appendix Six for Pre-Clearance of Closed-End Transaction Form. (12) In an exchange of letters between the SEC and ICI in 1991, the industry has defined "INSIDER" to include the president, principal financial accounting officer, heads of principal business units, employees who are directly or indirectly involved in the policy making function of the Fund, and employees whose regular duties provide access to confidential information of the Fund. 6 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] then you must file electronically the following forms with the Securities and Exchange Commission and the exchange, if applicable, on which the securities are listed: o FORM 3, "Initial Statement of Beneficial Ownership of Securities," is required to be filed within ten days after you become an officer, director, or principal stockholder or other reporting person. o FORM 4, "Statement of Changes in Beneficial Ownership," is required to be filed within two business days following the day on which your transaction is executed. o FORM 5, "Annual Statement of Changes in Beneficial Ownership of Securities," must be filed within forty five (45) days of the closed-end fund's fiscal year. Each officer, director, or principal stockholder is personally responsible for insuring that his or her transactions comply fully with any and all applicable securities laws, including, but not limited to, the restrictions imposed under Sections 16(a) and (b) of Securities Exchange Act of 1934 and Section 30(h) of the Investment Company Act. The date of filing with the SEC or exchange is the date the form is received by the SEC or exchange. NOTE: While individuals are personally responsible to file the forms under Section 16, personnel in Allianz Global Investors of America New York Office handle the actual Section 16 filings on behalf of those individuals with the legal obligation to make such filings. If you are a Section 16 Reporting Person, you must ensure that your pre-cleared trade information is provided to Allianz Global Investors of America New York Office within one business day for filing. DISCLOSURE OF PORTFOLIO HOLDINGS To prevent improper disclosure of the Mutual Fund holdings or any holdings of any closed-end fund for which NACM serves as an adviser or sub-adviser, NACM has the following policy: for all requests received on or after the 5th business day of the month, NACM will furnish portfolio holdings as of the end of the prior month; for all requests received before the 5th business day of the month, NACM will furnish portfolio holdings as of the end of the month prior to the previous month. Portfolio holdings disclosure of sub-advised funds will vary from fund to fund. NACM will comply with each respective fund's requirements. NACM will also disclose NAIF holdings to 3rd party service providers in the normal course of business and rating agencies for purposes of marketing and 3rd party distribution pursuant to confidentiality agreements. In addition, NACM will disclose portfolio holdings pursuant to duly authorized requests of the Federal Government and or pursuant to subpoena or court order. AGI VISION SUPPORT TEAM NACM Employees designated as part of the AGI Vision Support Team are subject to the NACM Code of Ethics. The Blackout Period applies to transactions in which NACM and/or the respective sleeve managers have engaged in the same or equivalent security for a client account within the last three days, or the security is on the NACM trading blotter or proposed blotter. 7 [GRAPHIC OMITTED: Nicholas Applegate Logo] VI. PROHIBITED TRANSACTIONS BLACKOUT PERIODS - ---------------- You may not enter into a transaction involving a Covered Security, unless otherwise exempt for your personal accounts if: 1. NACM has engaged in a transaction in the same or an equivalent security for a client account within the last three days, or 2. The security is on the NACM trading blotter or proposed blotter. - -------------------------------------------------------------------------------- If the firm is active in a Covered Security on a Monday, your pre-clearance request will be subject to a three day blackout period until Thursday of the same week, at which time you may re-submit your pre-clearance request. - -------------------------------------------------------------------------------- ALLIANZ SE (SYMBOL "AZ") BLACKOUT DATES The following are the 2007 blackout dates in which you are restricted from personal transactions in shares of Allianz SE ("AZ") and derivatives thereon. January 11, 2007 to February 22, 2007 April 27, 2007 to May 11, 2007 July 27, 2007 to August 10, 2007 October 31, 2007 to November 14, 2007 If you have any questions regarding the blackout date periods, please contact the Legal/Compliance Department. ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT SPONSORED CLOSED-END FUNDS DIVIDEND BLACKOUT DATEs Employees are not permitted to trade within a three business day period before and a two business day period after the dividend declaration press release for each of the Allianz Global Investors Fund Management Sponsored Closed-End Funds. Due to dividend declarations scheduled for 2007, you MAY NOT purchase or sell the applicable Allianz Global Investors Fund Management Closed-End Funds on these dates. See Appendix Seven for the Allianz Global Investors Fund Management Sponsored Closed-End Funds Dividend Blackout Calendar. FRONT-RUNNING You may not front-run an order being made for or on behalf of a client, even if you are not responsible for the order. Front-Running consists of executing a transaction based on the knowledge of the forthcoming transaction in the same or an underlying security, or other related securities, on behalf of a client. MISAPPROPRIATION OF ACCOUNT OPPORTUNITY NACM Portfolio Managers of Small and Micro cap products may not buy a security with a market capitalization of less than one billion ($1B) and that is eligible for purchase by any fund or account under their management except with the approval of the Chief Investment Officer or his designee upon a determination that the purchase is not appropriate for any such fund or account. 8 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] INSIDE INFORMATION - ------------------ You may not use material, non-public information about any issuer of securities, whether or not such securities are held in the portfolios of clients or suitable for inclusion in such portfolios, for personal gain or on behalf of a client. If you believe you are in possession of such information, please contact the Chief Compliance Officer immediately to discuss the information and the circumstances surrounding its receipt. This prohibition does not prevent you from contacting officers and employees of issuers or other investment professionals in seeking information about issuers that is publicly available. Refer to Appendix Four for more information. VII. VIOLATIONS OF THE CODE Any trading-related violation of this Code, including any pre-clearance violation, will be subject to the Fine Schedule and can result in additional penalties ranging from cancellation of the offending trade to termination of your employment. All fines will be paid to Volunteer San Diego or a charity of your choice. Checks will be submitted to the Legal/Compliance Department and forwarded to Volunteer San Diego or your selected charity. FINE SCHEDULE FIRST VIOLATION - --------------- o Disgorgement of profits; o A possible fine of half a percent of base salary up to $500; and o Meet with Department Head and the Chief Compliance Officer to discuss and re-sign the Code. SECOND VIOLATION (WITHIN 12 MONTHS) - ----------------------------------- o Disgorgement of profits; o A fine of one percent of base salary up to $1,000; o Meet with Department Head and the Chief Compliance Officer to discuss and re-sign the Code; and o Written warning to personnel file. THIRD VIOLATION (WITHIN 12 MONTHS) - ---------------------------------- o Disgorgement of profits; o A fine of two percent of base salary up to $2,000; o Meet with Department Head and the Chief Compliance Officer to discuss and re-sign the Code; o Written warning to personnel file; o Prohibition from trading personally for a specific period of time (e.g., six months to one year) except to close out current positions; and o May result in termination of employment with NACM or AGI. 9 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] VIII. BROKERAGE ACCOUNTS You must maintain your personal brokerage and trading accounts with a "Designated Broker" (currently Charles Schwab(13)). If you are a new hire, you must transfer your account(s) to the Designated Broker within a reasonable period of time from your initial commencement of employment. You are responsible for costs associated with transferring their personal brokerage account(s). If you are maintaining a brokerage account other than with a designated broker, you are required to immediately disclose this to the Legal/Compliance Department. Based upon the determination by the Legal/Compliance Department, certain exemptions may be granted that would allow the employee to continue maintaining his or her personal brokerage account(s) with a non-designated broker. All employees that are maintaining a brokerage or trading account with a non-designated broker must ensure that duplicate copies of account statements and transactional confirms are sent directly to the attention of the Legal/Compliance Department. This requirement does not apply to discretionary or accounts that hold Exempt Securities. Accounts that exclusively hold Exempt Securities or are fully discretionary may be maintained at any brokerage house/investment company. These discretionary managed accounts are not subject to the trading restrictions of the Code; however, you must inform the Legal/Compliance Department of these accounts. IX. PUBLIC OFFERINGS AND PRIVATE PLACEMENTS Your participation in a private placement or initial public or secondary offering must have the prior written approval of the Chief Compliance Officer or General Counsel. The form for requesting private transactions approval is found in Appendix Eight. In considering such approval, the Chief Compliance Officer or General Counsel will take into account, among other factors, whether the investment opportunity is available to and/or should be reserved for a client account, and whether the opportunity is being offered to you by virtue of your position. If you are approved to engage in a personal securities transaction in a private placement or public offering, you must disclose that investment if you play a part directly or indirectly in subsequent investment considerations of the security for a client account. In such circumstances, NACM's decision to purchase or sell securities of the issuer shall be subject to an independent review by a senior NACM member with no personal interest in the issuer. In addition, you may be limited from trading the security. X. SERVICE ON BOARDS OF OTHER COMPANIES Prior to accepting a position on the board of any company or other employment of a similar nature, employees must obtain the consent of their manager and pre-approval from the Chief Compliance Officer or General Counsel. It is not necessary to obtain approval to serve on the Board of Directors of entities such as schools, churches, industry organizations or associations, or similar non-profit boards. XI. CONSULTANTS Potential conflicts of interests are present when Nicholas-Applegate buys products and services from consultants who refer its clients to Nicholas-Applegate. Such products and services include: (1) attendance at consultant sponsored conferences; (2) software that analyzes and presents comparative performance data and portfolio characteristics for investment advisers; (3) analytical reports used for - ------------------------------------------- (13) See Appendix Five for details on Designated Brokerage relationship. 10 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] competitive analysis and marketing material; and (4) brokerage and execution. To address any signs of impropriety, Nicholas-Applegate will: (a) disclose in Form ADV Part II that it does purchase goods and services from consultants in the normal course of business. (b) have the representative of the Client Service and Sales responsible for consultant relations review with the General Counsel on an annual basis the goods and services that are budgeted and that they are appropriate. (c) have the representative of the Client Service and Sales responsible for consultant relations review with the General Counsel any new goods and services to be purchased in the interim and that they are appropriate. XII. GIFTS You may not actively seek any gift, favor, gratuity, or preferential treatment from any person or entity that: o Does business with or on behalf of NACM; o Is or may appear to be connected with any present or future business dealings between NACM and that person or organization; or o May create or appear to create a conflict of interest. A gift may be denied or required to be returned or reimbursed if you receive an excessive number of gifts, especially if received from a single source or if the total dollar value of gifts received during a single year is deemed excessive. You may not offer any gifts, favors or gratuities that could be viewed as influencing decision-making or otherwise could be considered as creating a conflict of interest on the part of the recipient. You must never give or receive gifts or entertainment that would be controversial to either you or NACM, if the information was made public. You should be aware that certain NACM clients might also place restrictions on gifts you may give to their employees. GIFTS IN CONNECTION WITH LABOR ORGANIZATIONS(14) - -------------------------------------------- The Labor-Management Reporting and Disclosure Act (LMRDA) requires NACM to file an annual report when employees make payments to Taft-Hartley union officials or union employees in excess of $250.00 on form LM-10. Payments are identified broadly to include meals, travel expenses and reimbursements, gifts, tickets, products or services, social events, fees paid to union sponsored events, and payments to charities including payments made from your personal funds. Effective March 2006, the LM-10 must be signed by the President and Treasurer under penalty of perjury. Criminal and monetary penalties apply for false filings or failure to file. In order to maintain accurate tracking of payments to Taft-Hartley union officials or union employees, NACM employees are required to disclose to the Legal/Compliance Department in advance any type of entertainment or any other activity that would give rise to the filing of form LM-10. - ------------------------------------------- (14) "Labor Organization" means a labor organization engaged in an industry affecting commerce and includes any organization of any kind, agency, or employee representation committee, group, association, or plan so engaged in which employees participate and which exists for the purpose, whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours, or other terms or conditions of employment, and any conference, general committee, joint or system board, or joint council so engaged which is subordinate to a national international labor organization, other than a State or local central body. 11 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] GIFTS IN CONNECTION WITH MUTUAL FUNDS DISTRIBUTION: NASD CONDUCT RULE 3060(15) Any gifts you make in connection with the distribution of the Mutual Funds shares may not in aggregate exceed $100 per person on an annual basis excluding an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment. GIFT REPORTING FOR ALL EMPLOYEES All employees must report all gifts, favors, or gratuities given or received by completing a Gift Report(16). Gift Reports are required to be submitted on a quarterly basis however, employees may submit a Gift Report at any time a gift is given or received. If the exact amount of the gift is not known, you must make a good faith estimate of the item's fair market value. GIFT VIOLATIONS FOR ACCESS PERSONS If you fail to properly report these items, the Executive Committee may require you to either donate the fair market value of the item (or the item itself) to charity or directly reimburse the person or entity responsible for giving the item. XIII. FORM 700, STATEMENT OF ECONOMIC INTERESTS As part of our contracts with various clients within the State of California, Designated Employees must annually file the Form 700, Statement of Economic Interests with the California Fair Political Practices Commission ("Commission"). We have identified the applicable Lead PMs as "Designated Employees." The list of Designated Employees and the portfolios to which this rule applies is available from the Legal/Compliance Department. The Form 700 is an annual statement requiring disclosure of personal financial information. Furthermore, the Form 700 stipulates that Designated Employees cannot accept more than $390 (effective January 1, 2007) in gifts in a calendar year from a single source. XIV. PAY-TO-PLAY Pay-to-Play is the practice of an investment adviser or its employees giving political contributions for the purpose of obtaining the award or retention of investment advisory contracts by government entities. NACM has adopted the following policies and procedures. Neither NACM nor any employee of NACM or NAS will engage, either directly or indirectly, in any "pay-to-play" activities. FIRM PRE-CLEARANCE: NACM does not normally make political contributions. However, if at any time NACM makes an exception to this policy and does choose to make a political contribution, the contribution must be pre-cleared via e-mail by the General Counsel or Chief Compliance Officer. In the e-mail, the person requesting the pre-clearance on behalf of NACM will be required to certify that the contribution is not for the purpose of obtaining or retaining NACM's engagement as an investment adviser to a government entity or plan. Other facts relevant to the reason for the contribution should be included. - ------------------------------------------- (15) NASD Rule 3060(a) states: No member or person associated with a member shall directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of one hundred dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind is considered a gratuity. (16) See Appendix Nine. 12 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] EMPLOYEE PRE-CLEARANCE: If you make contributions above $2,000 in any calendar year (each contribution individually, or contributions cumulatively at the point the particular contribution would cause total contributions for the year to exceed $2,000) to any government official (e.g., federal, state, or local) or candidate, that contribution must be pre-cleared via e-mail by the General Counsel or Chief Compliance Officer. In the e-mail, the person requesting the pre-clearance will be required to certify that the contribution is not for the purpose of obtaining or retaining NACM's engagement as an investment adviser to a government entity or plan. XV. REPORTING AND CERTIFICATION NAIF TRUSTEES AND OFFICERS - -------------------------- NAIF trustees and officers of NAIF are requested to complete the certification in Appendix Ten. NAIF trustees and officers of NAIF are required to submit a quarterly transaction report if they knew or should have known that during the 15 day period immediately before or after the trustee's transaction in a Covered Security, NAIF purchased or sold the Covered Security or had considered purchasing or selling the Covered Security. The quarterly transaction report for NAIF trustees and officers is found in Appendix Eleven. INITIAL REPORTING AND CERTIFICATION FOR NEW EMPLOYEES - ----------------------------------------------------- Within 10 days following the commencement of employment at NACM or NAS, all employees are required to complete and submit an INITIAL ACKNOWLEDGEMENT and INITIAL LISTING OF PERSONAL SECURITIES HOLDINGS MUTUAL FUNDS AND BROKERAGE(Appendix Twelve and Thirteen). This information supplied must be current as of a date no more than 45 days before becoming an employee. QUARTERLY TRANSACTIONAL REPORTING FOR NON-DESIGNATED BROKER ACCOUNT(S) - ---------------------------------------------------------------------- All employees of NACM and NAS that maintain a brokerage, Mutual Fund or trading account with a non-designated broker AND do not have duplicate copies of account statements and transactional confirms being sent directly to the attention of Legal/Compliance, must complete and submit a QUARTERLY TRANSACTION REPORT for all "Covered Securities" within 30 days following the end of each calendar quarter (Appendix Fourteen). ANNUAL REPORTING AND CERTIFICATION - ---------------------------------- All employees of NACM and NAS are required to complete and submit the ANNUAL LISTING OF SECURITIES HOLDINGS AND CERTIFICATION OF COMPLIANCE form to Legal/Compliance (Appendix Fifteen). The information supplied must be current as of a date no more than 45 days before the annual report is submitted. XVI. RECORDKEEPING REQUIREMENTS NACM shall maintain and preserve in an easily accessible place: A. A copy of this Code, or any other Code of Ethics, that was in effect within the previous 5 years. B. A record of any violation of this Code and of any action taken as a result of such violation for a period of 5 years following the end of the reporting year in which the violation occurs. C. A record of any decision, and the reasons supporting the decision, that were used to approve an employee's trade that was deemed an exception to the provisions of this Code. 13 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] D. A record of all written acknowledgements of receipt of the Code and amendments for each person covered under the Code within the past 5 years. These records must be kept for 5 years after the individual ceases to be an employee of NACM.. E. A copy of each report submitted under this Code for a period of 5 years. F. A list of all persons who are, or within the past 5 years were, subject to the reporting requirements of the Code. G. A record of any decision, and the reasons supporting the decision, that were used to approve an employee's investment in a private placement for at least 5 years after the reporting year in which approval was granted. H. A record of persons responsible for reviewing Access Persons' reports during the last 5 years. I. A copy of reports provided to a Fund's Board of Directors regarding the Code. XVII. ADMINISTRATION The Chief Compliance Officer or designate is responsible for administering and enforcing this Code, including reviewing each Access Person's personal securities holdings and transaction reports, and providing this Code, and any amendments to Covered Persons. If you have knowledge of misconduct relating to, or wish to express concern relating to, accounting, internal accounting controls or auditing matters and or a violation of any federal or state securities law or provisions of the Code, you must submit a written complaint expressing such facts and/or concerns to the Chief Compliance Officer. If an officer of NAIF or employee prefers or if such complaint implicates the Chief Compliance Officer, the complaint may be delivered in a sealed envelope marked "confidential" to the Chairman of the Audit Committee at Nicholas-Applegate Capital Management, 600 West Broadway, San Diego, CA 92101. Any complaint submitted will be held in the strictest of confidence. XVIII. ANNUAL BOARD REVIEW NACM annually prepares a report to the NAIF board summarizing existing procedures concerning personal trading (including any changes in the Code), highlights material violations of the Code requiring significant corrective action and identifies any recommended changes to the Code. XIX. AMENDMENTS AND MODIFICATIONS This Code may be amended or modified as deemed necessary by NACM or the officers of NAIF, with the advice of NAIF counsel, provided such amendments or modifications shall be submitted to the Board of Trustees of NAIF for ratification and approval at the next available meeting. This Code takes into account Rule 17j-1, as amended, under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act. 14 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX ONE: EXAMPLES OF BENEFICIAL OWNERSHIP For purposes of this Code, Beneficial Ownership shall be interpreted in the same manner as the definition contained in the provision of Section 16 of the Securities Exchange Act of 1934 under Rule 16a-1(a) (2). Generally, you are considered to have Beneficial Ownership of Securities if you have or share a direct or indirect PECUNIARY INTEREST in the Securities. You have a PECUNIARY INTEREST in Securities if you have the opportunity to directly benefit or share in any profit derived from a transaction in the Securities. THE FOLLOWING ARE EXAMPLES OF A PERSON HAVING BENEFICIAL OWNERSHIP OF SECURITIES: a. Securities held in the name of the officer or employee of NACM. b. Securities held by members of your IMMEDIATE FAMILY sharing the same household. IMMEDIATE FAMILY includes any spouse, domestic partner, child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law, sister-in-law, and any adoptive relationship.(17) c. Your interest as a general partner in Securities held by a general or limited partnership. d. Your interest as a manager-member in the Securities held by a limited liability company. e. Your ownership of Securities as a trustee where either you or members of your immediate family have a vested interest in the principal or income of the trust. f. Your ownership of a vested beneficial interest in a trust. g. Your status as a settler of a trust, unless the consent of all of the beneficiaries is required in order for you to revoke the trust. - -------------------------------------------------------------------------------- You do not have an indirect Pecuniary Interest in Securities held by a corporation, partnership, a limited liability company or other entity in which you hold an equity interest, UNLESS you are a controlling equity holder or you have (or share) investment control over the Securities held by the entity. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The final determination of Beneficial Ownership is a question to be determined in light of the facts for each particular case. If in doubt, employees should consult with the Legal/Compliance Department. - -------------------------------------------------------------------------------- - ------------------------------------------------ (17) Please direct any questions concerning the definition of "immediate family" to either Legal/Compliance or Human Resources. 15 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX TWO: INSTRUCTIONS FOR USING CTI ITRADE Welcome to iTrade, the automated software system that enables employees the ability to receive quick and efficient notification that their personal transaction request is permitted for trading. Pre-clearance for all employees is based upon requirements contained within the Code. It is important that each employee read and understand the Code of Ethics so that you are fully aware of what the Code requires. Below are instructions on how to begin using the iTrade system, and instructions on how to enter electronically Personal Securities Transaction Requests. A. LOGGING INTO ITRADE To begin using iTrade, you must first launch the NACM Insider. Under the Submissions section of the home page, select Trade Pre-Clearance. CTI-iTrade Pre-Clearance Form At the Login Screen, type your Employee Code and your Password. If you require assistance with a login or password, please contact the Legal/Compliance Department. (Graphic Omitted: CTI ITRADE LOG-IN SCREEN] B. TO CHANGE YOUR ITRADE PASSWORD Click on the CHANGE PASSWORD hyperlink on the left frame of the browser screen. Step 1: Enter the following information in the fields provided: Current Password; New Password; Verify New Password (to assure that you didn't enter it incorrectly). Step 2: Click on the [Change] button. You will either be informed that your password has been changed or you will be given a reason why it could not be changed. Once your correct Login Name and Password are entered, click on the [Login] button. If you receive the message "iTrade is currently unavailable", this indicates that iTrade is not available at the current time. Please call the CARE Hotline for assistance with your request. C. INITIAL BROKERAGE ACCOUNT CERTIFICATION 16 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] When you login to iTrade for the first time, you will be shown a list of brokerage account number(s) that have been associated to your name within iTrade. The list of account(s) represents all accounts that each employee has previously reported to Legal/Compliance, based upon the employee's determination that he or she has Beneficial Ownership. Beneficial Ownership is determined if the employee has an opportunity to directly benefit or share in any profit derived from any security transactions within the account, i.e. Accounts held in the name of the employee, and immediate family sharing the same household. All accounts where the employee is deemed to have Beneficial Ownership are subject to the requirements of the Code. You will be asked to review the list of accounts and submit a certification that all of your Brokerage Accounts have been properly identified within iTrade. YOU MUST SUBMIT THE ELECTRONIC CERTIFICATION WITHIN 10 DAYS FROM THE DATE OF YOUR FIRST TRANSACTION IS ENTERED INTO ITRADE. To certify the list of accounts, choose one of the following options: 1. If the information is complete and accurate, click the [Certify Now] button. 2. If the information is incorrect and/or needs to be revised click the [Certify Later] button and report any errors or additional brokerage accounts to the Legal/Compliance Department. [GRAPHIC OMITTED:CTI iTrade(tm) screen] D. SUBMITTING A TRADE REQUEST Once you have completed the Brokerage Account Certification, iTrade will bring you to the "Request screen". In order to submit a request for pre-clearance, all required fields must be completed. The required fields are as follows: 1. SELECTING THE SECURITY To enter a trade request, you must first enter a ticker symbol in the appropriate field for the security you wish to buy or sell. In order to identify the ticker in the security list, select the ticker for the trade request from the Security Lookup screen: This can be done several ways: (A) IF YOU KNOW THE TICKER OF THE SECURITY: STEP 1: Type in the ticker and then Click on the [Lookup] button to the right hand side of the field. The system will give you the choices that are close to, or match what you typed. STEP 2: Select the ticker of the security you wish to trade by clicking on the hyperlink. STEP 3: CTI iTrade will fill in the SECURITY NAME, SECURITY CUSIP and SECURITY TYPE 17 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] automatically on the Trade Request. (B) IF YOU DON'T KNOW THE FULL TICKER OF THE SECURITY YOU WOULD LIKE TO TRADE: STEP 1: Type in the first few letters followed by an asterisk* and then Click [Lookup]. For Example: If you want to buy shares of INTEL and all you remember are the first few letters, type in INT* then hit [Lookup]. STEP 2: If any tickers are found, they are displayed on a new screen. Select the hyperlink of the one you want. STEP 3: CTI iTrade will automatically fill in the SECURITY NAME, SECURITY CUSIP and SECURITY TYPE on the Trade Request. (C) IF YOU ONLY KNOW THE NAME OF THE SECURITY YOU WOULD LIKE TO TRADE: STEP 1: Go to the SECURITY NAME field, type in an asterisk *, a few letters of the name and another asterisk * (e.g. for AMERICAN BRANDS type in *AMER*). STEP 2: Any securities whose name have `AMER' in them will be displayed. Select the hyperlink of the one you want. STEP 3: CTI iTrade will automatically fill in the TICKER, SECURITY NAME, SECURITY CUSIP and Security TYPE on the Trade Request. 18 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] (D) IF THE SECURITY YOU WOULD LIKE TO TRADE IS NOT LOCATED IN THE [LOOKUP] SCREEN YOU WILL NEED TO CONTACT THE CARE HOTLINE AT (619) 744-5565. CARE WILL ADD THE SECURITY TO ITRADE, SO THAT IT CAN DETERMINE IF THE TRADE REQUEST IS PERMISSIBLE. [GRAPHIC OMITTED:CTI iTrade(TM) screen] 2. COMPLETING THE REQUEST ON ITRADE In order to complete the Request Screen, the following fields must be completed: (a) BROKERAGE ACCOUNT- Click on the dropdown arrow to the right of the field and select the account to be used for the trade. (b) TRANSACTION TYPE - Click on the dropdown arrow to the right of the field and select the type of transaction you wish to make: Buy, Sell, Cover Short, or Sell Short. (c) PRICE - Fill in THE ANTICIPATED PRICE at which you expect to execute the trade. [GRAPHIC OMITTED:CTI iTrade(TM) screen] 19 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] 3. SUBMITTING THE REQUEST ON ITRADE Once all the required fields on the iTrade Request Screen have been completed: STEP 1 : Click the [Submit Request] button to send the request through iTrade. STEP 2 : A grid displaying the transactional information will appear. Review the information and Click on the [Confirm] button if all appears correct. [GRAPHIC OMITTED:confirmation screen on iTrade] STEP 3 : Notify the CARE team that you have submitted your trade request. Investment Management Personnel must forward an e-mail with CIO, Trader or senior PM approval to CARE. STEP 4 : CARE will review your trade request and send an e-mail confirming whether or not the trade request has been pre-cleared/ approved for trading through your personal brokerage account. If you have any questions about a personal trade request, please contact the CARE Hotline at (619) 744-5565. 20 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] 4. EXITING WITHOUT SUBMITTING THE TRADE REQUEST If a decision is made to not submit the trade request BEFORE clicking the [Confirm] button, simply exit from the browser by clicking on the Logout hyperlink on the lower left side of the screen (or click the X button in the upper right corner of the screen). 5. STARTING OVER To clear everything on the screen and start over, click the [Cancel] button on the confirmation screen. This will bring you back to the trade request screen. Click the [Clear Screen] button and enter a new trade request. 6. VIEW CODE OF ETHICS To view the NACM Code of Ethics in iTrade, Click on the VIEW ETHICS CODE hyperlink on the left frame of your browser screen. If you have any questions please call the CARE Hotline at 619-744-5565. 21 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX THREE: OPTIONS DISCUSSION I. NAKED/SHORT PUTS (OBLIGATES SELLER TO BUY STOCK AT PRESCRIBED PRICE) o Functional equivalent of a stop/limit order to purchase stock o Violates the Code if you sell and buy back within 30 days (only applicable to investment management personnel) o No pre-approval required even if 2,000+ shares are put back to you. The reasoning is that the 20+ contract position (=2,000+ shares) has been pre-approved and decision to accept the risk of a put was made prior to and independent of NACM's decision to trade the underlying stock II. LONG PUTS (GRANTS BUYER RIGHT TO SELL STOCK AT A PRESCRIBED PRICE) o Used to protect long positions - the functional equivalent of an insurance policy o Violates the Code if you buy a put within 30 days of a purchase decision (only applicable to investment management personnel) o Pre-Approval required if employee, prior to expiration, puts 2,000+ shares/below market cap III. LONG CALLS (GIVES OWNER RIGHT TO BUY STOCK AT PRESCRIBED PRICE) o Used when stock price rises to buy at lower strike price o Pre-Approval required if you, prior to expiration calls 2,000+ shares/below market cap IV. COVERED CALLS (OBLIGATES SELLER TO SELL STOCK AT PRESCRIBED PRICE; SELLER OWNS UNDERLYING STOCK) o Used to hedge long position o Violates the Code if you write a covered call within 30 days of a purchase decision (only applies to investment management personnel) o Stock called within 30 days of its purchase of the stock violates Code (only applies to investment management personnel) o No pre-approval required if 2,000+ shares are called. The reasoning is that the 20+ contract position (=2,000+ shares) has been pre-approved and decision to accept the risk of a call was made prior to and independent of NACM's decision to trade the underlying stock V. NAKED CALLS (OBLIGATES SELLER TO SELL STOCK AT A PRESCRIBED PRICE; SELLER DOES NOT OWN UNDERLYING STOCK) o Pure speculation against price increase o Violates the Code if you write a naked call that expires in less than 30 days (only applies to investment management personnel) VI. CREDIT SPREADS, STRADDLES, COMBINATIONS (USE OF MULTIPLE CONTRACTS WITH DIFFERENT STRIKES/EXPIRATIONS/LONG-SHORT; VERY COMPLEX, TOO MANY VARIATIONS TO DESCRIBE; SELLER RECEIVES + PREMIUM) o Can be hedge and speculation o Pre-Approval required for every transaction o Pre-Approval denied where contracts expire within 30 days of opening the position (only applies to investment management personnel) VII. DEBIT SPREADS, STRADDLES, COMBINATIONS (USE OF MULTIPLE CONTRACTS WITH DIFFERENT STRIKES/EXPIRATIONS/LONG-SHORT; VERY COMPLEX, TOO MANY VARIATIONS TO DESCRIBE; SELLER PAYS + PREMIUM) o Speculation vs. hedge depends on facts and circumstances o Pre-Approval required for every transaction o Pre-Approval denied where it's determined the transaction is speculative in nature and contracts expire within 30 days of opening the position, or if NACM is active in the stock (only applies to investment management personnel) 22 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX FOUR: INSIDER TRADING POLICY AND PROCEDURES A. POLICY STATEMENT ON INSIDER TRADING ("POLICY STATEMENT") NACM's Policy Statement applies to every employee and extends to activities both within and outside the scope of their duties. NACM forbids any employee from engaging in any activities that would be considered "insider trading." The term "insider trading" is generally understood to mean: o Trading by an insider, while in possession of material non-public information; o Trading by a non-insider, while in possession of material non-public information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated; o Recommending the purchase or sale of securities while in possession of material non-public information; or o Communicating material non-public information to others (i.e., "tipping"). WHO IS AN INSIDER? The concept of "insider" is broad and it includes officers, partners and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs such as lawyers, accountants, and other vendors, and as a result, is given access to information. WHAT IS MATERIAL INFORMATION? Generally, information is considered material if: (i) there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions or (ii) it is reasonably certain to have a substantial effect on the price of a company's securities. Information that should be considered material includes, but is not limited to: o Dividend changes; o Earnings estimates; o Changes in previously released earnings estimates; o A joint venture; o The borrowing of significant funds; o A major labor dispute, merger or acquisition proposals or agreements; o Major litigation; o Liquidation problems; and o Extraordinary management developments. WHAT IS NON-PUBLIC INFORMATION? All information is considered non-public until it has been effectively communicated to the marketplace. Information found in a report filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications of general circulation would be considered public. Information in bulletins and research reports disseminated by brokerage firms are also generally considered to be public information. BASIS FOR LIABILITY In order to be found liable for insider trading, one must either (i) have a fiduciary relationship with the other party to the transaction and have breached the fiduciary duty owed to that other party, or (ii) have misappropriated material non-public information from another person. 23 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] PENALTIES FOR INSIDER TRADING - ----------------------------- Penalties for trading on, or communicating material non-public information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to several civil and criminal penalties, including fines, permanent bar from the industry, injunctions and jail time. In addition, any violation of this Policy Statement can be expected to result in serious sanctions by NACM, including dismissal of the persons involved. B. PROCEDURES TO IMPLEMENT NICHOLAS-APPLEGATE'S POLICY STATEMENT The following procedures have been established to aid NACM in preventing: IDENTIFYING INSIDER INFORMATION Before trading for yourself or others, including for any client accounts managed by NACM, in the securities of a company about which you may have potential insider information, or revealing such information to others or making a recommendation based on such information, you should ask yourself the following questions: o Is the information material? o Is this information that an investor would consider important in making an investment decision? o Is this information that would substantially affect the market price of the securities if generally disclosed? o Is the information non-public? o To whom has this information been provided? o Has the information been effectively communicated to the marketplace by being published in The Wall Street Journal or other publications of general circulation, or has it otherwise been made available to the public? If, after consideration of the above, you believe that the information is material and non-public, or if you have questions as to whether the information may be material and non-public, you should take the following steps: o Report the matter immediately to Legal/Compliance Department and disclose all information that you believe may bear on the issue of whether the information you have is material and non-public; o Refrain from purchasing or selling securities with respect to such information on behalf of yourself or others, including for client accounts managed by NACM; and o Refrain from communicating the information inside or outside NACM, other than to the Legal/Compliance Department. The Chief Compliance Officer and General Counsel will consult as to the appropriate course of action. RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION Information in your possession that you identify, or that has been identified to you as material and non-public, must not be communicated to anyone, except as provided above. In addition, you should make certain that such information is secure. 24 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] SUPERVISORY PROCEDURES The supervisory procedures set forth below are designed to prevent and detect insider trading. PREVENTION OF INSIDER TRADING In addition to the pre-approval and reporting procedures specified in the Code concerning personal securities transactions, the following measures have been implemented to prevent insider trading: 1. All employees will be provided with a copy of these policies and procedures regarding insider trading; 2. Legal/Compliance will, as deemed necessary, conduct educational seminars to familiarize employees with NACM's Policies and Procedures. Such educational seminars will target, in particular, persons in sensitive areas of NACM who may receive inside information more often than others; 3. Legal/Compliance will answer questions regarding NACM's Policies and Procedures; 4. Legal/Compliance will resolve issues of whether information received by an employee is material and non-public; 5. Legal/Compliance will review these policies and procedures on a regular basis and update as necessary; 6. Whenever it has been determined that an employee has possession of material non-public information, Legal/Compliance will (i) implement measures to prevent dissemination of such information, and (ii) restrict those from trading in the securities by placing such securities on NACM's Restricted List; and 7. Upon the request of any employee, Legal/Compliance will review any requests for clearance to trade in specified securities and either approve or disapprove. REPORTS TO MANAGEMENT Promptly upon learning of a potential violation of NACM's Policies and Procedures, Legal/Compliance will prepare a confidential written report to management, providing full details and recommendations for further action. 25 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX FIVE: NACM DESIGNATED BROKERAGE PROGRAM OFFERED BY CHARLES SCHWAB NICHOLAS-APPLEGATE CAPITAL MANAGEMENT Designated Brokerage Program Offered by Charles Schwab - -------------------------------------------------------------------------------- Nicholas-Applegate Capital Management has chosen Charles Schwab & Co., Inc. as our exclusive designated broker based upon their reputation for offering excellent customer support and innovative products. AS A NICHOLAS-APPLEGATE CAPITAL MANAGEMENT EMPLOYEE, YOUR SPECIAL BENEFITS INCLUDE: o Preferred pricing as low as $8 for online equity trades(1) o $39 transaction-fee mutual fund trades. Schwab also offers more than 1,000 mutual funds with no loads or transaction fees through its Mutual Fund OneSource(R) service(2) o Discounted pricing on Exchange Traded Funds(ETFs)(3) o A dedicated support team available by calling 1-888-621-3933 You can learn more about Schwab's wide range of investing services by visiting the customized website for Nicholas-Applegate Capital Management employees at HTTP://SCHWABEXCLUSIVE.COM/6226. HOW TO GET STARTED: You can open a Schwab account over the phone, in person or online. 1. Call the dedicated service team at 1-888-621-3933 and indicate you are a Nicholas-Applegate employee. 2. Visit a local SCHWAB INVESTOR CENTER and indicate you are a Nicholas-Applegate employee. 3. Go to the special Nicholas-Applegate website at WWW.SCHWABEXCLUSIVE.COM/6226 to download account forms. Then follow the OPENING AN ACCOUNT instructions below. OPENING AN ACCOUNT |X| Complete the ACCOUNT APPLICATION(S). To ensure you receive your special benefits, please indicate that you are an employee of Nicholas-Applegate when completing the securities industry regulations section of each account application. |X| You DO NOT need to send Schwab a Rule 407 letter. Schwab has a blanket Rule 407 letter on file for Nicholas-Applegate employees. |X| Complete the ACCOUNT TRANSFER FORM(S) if you are TRANSFERRING ASSETS to Schwab. |X| Sign all account applications and transfer forms. Schwab requires an original signature. |X| If transferring accounts, please include a copy of the latest statement from the account you are transferring. |X| Mail to: Charles Schwab & Co., Inc. Designated Brokerage P.O. Box 2976 Phoenix, AZ 85062-2976 ALL PAPERWORK MUST BE RECEIVED BEFORE YOUR ACCOUNT CAN BE ACTIVATED. 26 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] INVESTMENTS YOU CAN TRANSFER TO A SCHWAB ACCOUNT These assets can usually be transferred directly to a Schwab account: o Stocks and bonds o Any mutual fund available through Schwab o Unit investment trusts o Options (pre-approval is necessary to trade options at Schwab) o Registered limited partnerships and promissory notes (set up and maintenance fees apply) o Master limited partnerships and exchange-traded REITs o Ginnie Mae and Fannie Mae certificates o Certificate of deposit proceeds (cash) These assets cannot usually be transferred directly to a Schwab account: o Money market funds o Mutual funds not available at Schwab o Commodities o Foreign currency options o Most private placement limited partnerships o Investment products offered exclusively by other institutions o Annuities ALL INFORMATION AS OF JANUARY 2005. (1) Pricing only applies to U.S.-domiciled, dollar-based retail accounts held at Charles Schwab & Co., Inc. Prices do not apply to accounts held with independent investment advisors at Schwab, Schwab Private Client or U.S. Trust(R). Please see the CHARLES SCHWAB PRICING GUIDE for additional information on householding guidelines. Corporate-negotiated pricing supersedes retail pricing. Households with assets of more than $1,000,000 qualify for $8.00 trades. (2) Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling 800-435-8000. Please read the prospectus carefully before investing. (3) Exchange Traded Funds are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. Investments in foreign investments may incur greater risks than domestic investments. Past performance is no guarantee of future results. For information specific to ETFs refer to HTTP://WWW.AMEX.COM. 27 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX SIX: CLOSED-END FUND PRE-CLEARANCE FORM NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES CLOSED-END FUND PRE-CLEARANCE FORM Submit form to the Legal/Compliance Department (1) Name of employee requesting authorization: _______________________________ (2) If different from #1, name of the account where the trade will occur: ______________________________________________________________ (3) Relationship of (2) to (1): ______________________________________________ (4) Name of brokerage firm and account number: _______________________________ (5) Name of fund and type of security (e.g. common or preferred shares):______ (6) Ticker Symbol: ___________________________________________________________ (7) Intended number of shares: _______________________________________________ (8) Is the transaction being requested a purchase or sale?____________________ (NOTE: short sales are not permitted)
(9) Has the fund completed all its initial common and preferred shares offerings and is not otherwise engaged in an offering of its shares? ______ Yes ______ No (10) Does the requested transaction violate the Closed-End Dividend Blackout Calendar posted on the Compliance Tab of the Intranet? ______ Yes ______ No (11) Do you possess material non-public information regarding the security or the issuer of the security? ______ Yes ______ No (12) Are you a Section 16 Reporting Person with respect to the fund you wish to buy or sell? ______ Yes ______ No (13) If the requested transaction is a sale, has the required holding period been met? ______ Yes ______ No
NOTE: If you have any questions about how to complete this form please contact the Legal/Compliance Department. Approvals are valid until the close of business on the day approval has been granted. Accordingly, GTC (good till canceled) orders are prohibited. If a trade is not executed by the close of business, you must submit a new pre-clearance request. Obtaining pre-clearance satisfies the pre-clearance requirements of the Code of Ethics (the "Code") and does not imply compliance with the Code's other provisions. By signing below, the employee certifies the following: The employee agrees that the above requested transaction is in compliance with the Code of Ethics. ______________________________ Authorized _____ Not Authorized _____ Employee Signature By:______________________________ Date:___________________________ 28 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX SEVEN: ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT SPONSORED CLOSED-END FUNDS DIVIDEND BLACK OUT CALENDAR Employees are not permitted to trade within a three business day period before and a two business day period after the dividend declaration press release for each of the closed-end funds. Due to dividend declarations scheduled for 2007, you MAY NOT purchase or sell the applicable closed-end funds on the following dates:
------------------------------------------------------------------- ---------------------------------------- PIMCO MUNICIPAL INCOME FUND (PMF) PIMCO FLOATING RATE INCOME FUND (PFL) PIMCO CALIFORNIA MUNICIPAL INCOME FUND (PCQ) PIMCO FLOATING RATE STRATEGY FUND (PFN) PIMCO NEW YORK MUNICIPAL INCOME FUND (PNF) PIMCO MUNICIPAL INCOME FUND II (PML) January 2-9, 30-31 PIMCO CALIFORNIA MUNICIPAL INCOME FUND II (PCK) February 1-6, 27-28 PIMCO NEW YORK MUNICIPAL INCOME FUND II (PNI) March 1-6 PIMCO MUNICIPAL INCOME FUND III (PMX) April 2-10 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III (PZC) May 1-8, 29-31 PIMCO NEW YORK MUNICIPAL INCOME FUND III (PYN) June 1-5 PIMCO CORPORATE INCOME FUND (PCN) July 2-10, 31 PIMCO CORPORATE OPPORTUNITY FUND (PTY) August 1-7 PIMCO HIGH INCOME FUND (PHK) September 4-11 PIMCO GLOBAL STOCKSPLUS & INCOME FUND (PGP) October 2-9, 30-31 NICHOLAS-APPLEGATE CONVERTIBLE & INCOME FUND (NCV) November 1-6 NICHOLAS-APPLEGATE CONVERTIBLE & INCOME FUND II (NCZ) December 4-11 MUNICIPAL ADVANTAGE FUND (MAF) December (2006) 27-29 January 2-4, 29-31 February 2-5, 26-28 March 2-5, 28-30 April 2-4, 26-30 May 1-3, 29-31 June 1-5, 27-30 July 1-5, 27-31 August 1-3, 29-31 September 1-5, 26-30 October 1-3, 29-31 November 1-5, 28-30 December 1-5 ------------------------------------------------------------------- ---------------------------------------------------- NICHOLAS-APPLEGATE INTERNATIONAL & PREMIUM STRATEGY FUND (NAI) NICHOLAS-APPLEGATE EQUITY & CONVERTIBLE INCOME NFJ DIVIDEND, INTEREST & PREMIUM STRATEGY FUND (NFJ) FUND (NIE) March 13-20 April 26-30 June 12-19 May 1-3 September 11-18 September 11-18 December 11-18 December 11-18 ------------------------------------------------------------------- ----------------------------------------------------
If you have any questions regarding the blackout periods, please contact the Legal/Compliance Department. 29 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX EIGHT: PRIVATE PLACEMENT AND PRIVATE SECURITIES TRANSACTION FORM NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES PRIVATE PLACEMENT APPROVAL REQUEST FORM (ATTACH A COPY OF THE PRIVATE PLACEMENT MEMORANDUM, OFFERING MEMORANDUM OR ANY OTHER RELEVANT DOCUMENTS) Date Submitted: _______ Employee Name: ______________________________ Job Title: __________________________________ - -------------------------------------------------------------------------------- 1. Name of the Sponsor's corporation, partnership or other entity: ------------------------------------------------------------------------ Name of private placement: ______________________________________________ 2. The sponsor's corporation, partnership, or other entity is: ___Public ___Private 3. Describe the business to be conducted by the issuer of the private placement: ------------------------------------------------------------------------ 4. Nature of your participation: ___ Stockholder ___Selling Agent ___General Partner ___limited partner Other: ________________________ 5. Have you received, or will you receive "selling compensation" in connection with the transaction? ___YES ___NO If yes, describe the nature of your compensation: - ------------------------------------------------------------------------ 6. Size of offering (if a fund-provide size of fund): ________________________________________________________________________________ 7. Size of your participation as a percentage of total shares or units outstanding: ________ 8. Have you or do you intend to recommend, refer, or solicit others in any way in connection with this investment? ___YES ___NO If Yes, please describe: __________________________________________________ 9. Has this private placement been made available to any client account where either you, or the person you report to, exercise investment discretion? ___YES ___NO ___Not Applicable If no, state why: ________________________________________________________________________ 10. Describe how you became aware of this private placement: ------------------------------------------------------------------------ 11. To the best of your knowledge, will this private placement result in an IPO within the next 12-18 months? ___YES ___NO - -------------------------------------------------------------------------------- Approved____ Disapproved____ _______________________ Date: __________ Chief Investment Officer Approved____ Disapproved____ _______________________ Date: __________ Chief Compliance Officer IF THE COMPANY YOU ARE INVESTING IN PRIVATELY DECIDES TO GO PUBLIC, YOUR ACTIVITIES IN THE IPO WILL BE RESTRICTED. IN ADDITION, THIS PRIVATE PLACEMENT WILL BE PLACED ON NACM'S RESTRICTED SECURITY LIST. ADDITIONAL INVESTMENTS MUST ALSO BE APPROVED. 30 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX NINE: QUARTERLY GIFT REPORT NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES QUARTERLY GIFT REPORT This form is required to be completed by any employee who gives or receives a gift. EMPLOYEE NAME: --------------------------------- I confirm that the gift/event described below is consistent with the policies described in the Code of Ethics and Conduct and that I have made no commitments on behalf of NACM, NAIF or NAS in exchange for the gift/event. TITLE: ---------------------------------- DEPARTMENT: ---------------------------------- GENERAL DESCRIPTION OF GIFT OR EVENT: ---------------------------------- ---------------------------------- DATE OF RECEIPT OR EVENT: ---------------------------------- FAIR MARKET VALUE: ---------------------------------- NAME OF SOURCE OR HOST: ---------------------------------- ---------------------------------- ATTENDEES: ---------------------------------- ---------------------------------- ADDRESS: ---------------------------------- ---------------------------------- ---------------------------------- COMPLIANCE APPROVAL: ---------------------------------- DATE: ---------------------------------- TAFT HARTLEY CLIENT: ___YES ___NO IS GIFT OR SPONSORSHIP RELATED TO THE DISTRIBUTION OF NAIF? ___YES ___NO FORM 700 FILER? ___YES ___NO (GIFT LIMIT $390) 31 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX TEN: NAIF CODE OF ETHICS CERTIFICATION NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS CODE OF ETHICS CERTIFICATION I acknowledge that I have received and understand the attached Nicholas-Applegate Code of Ethics and Conduct which includes the Insider Trading Policy and Procedures (the "Code"). I agree to abide by the provisions of the Code as it relates to my tenure as an officer of the Nicholas-Applegate Institutional Funds. Signature ________________________________ Print Name _______________________________ Date __________ 32 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX ELEVEN: NAIF QUARTERLY TRANSACTION REPORT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS As a NAIF Trustee or officer of NAIF, you are required to report your personal security transactional information to Legal/Compliance NO LATER THAN 30 CALENDAR DAYS AFTER THE END OF EACH CALENDAR QUARTER, if you knew or should have known that during the 15 day period immediately before or after the trustee's transaction in a Covered Security, NAIF purchased or sold the Covered Security or had considered purchasing or selling the Covered Security. ___ To my knowledge, I did not transact in any security during the 15 day period immediately before or after NAIF purchased or sold such security or considered purchasing or selling such security. The following are my Covered Securities transactions that are required to be reported in accordance with the Code:
- ------------ --------------- -------------------------- ------------------------- --------------- ---------------- ---------------- SECURITY NAME AND TICKER NUMBER OF SHARES AND OR CUSIP (IF APPLICABLE, PRINCIPAL AMOUNT (IF DATE BUY/SELL INTEREST & MATURITY DATE) APPLICABLE) UNIT PRICE BROKER NAME ACCOUNT NUMBER - ------------ --------------- -------------------------- ------------------------- --------------- ---------------- ---------------- - ------------ --------------- -------------------------- ------------------------- --------------- ---------------- ---------------- - ------------ --------------- -------------------------- ------------------------- --------------- ---------------- ---------------- - ------------ --------------- -------------------------- ------------------------- --------------- ---------------- ----------------
By signing this document, I am certifying that I have met the quarterly reporting requirements pursuant to the Code in regards to disclosing any securities transactions that were effected in my account(s) for this quarterly reporting period. Date:___________ Signature:____________________________ Print Name:___________________________ 33 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX TWELVE: INITIAL ACKNOWLEDGEMENT FORMS NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES INITIAL ACKNOWLEDGEMENT CERTIFICATION CODE OF ETHICS AND CONDUCT I hereby certify that I have read and understand the attached Nicholas-Applegate Code of Ethics and Conduct, which includes the Insider Trading Policy and Procedures (the "Code"). Pursuant to such Code, I recognize that I must disclose or report all personal securities holdings and transactions required to be disclosed or reported hereunder and comply in all other respects with the requirements of the Code. I understand that any failure to comply in all aspects with the foregoing and these policies and procedures may lead to sanctions including dismissal. I hereby agree to abide by all of the Code's requirements and all applicable federal securities laws as they relate to my employment, or otherwise association with NACM, NAIF,NAS or AGI. Date:______________________ Signature:__________________________________ Print Name:_________________________________ 34 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX THIRTEEN: INITIAL LISTING OF PERSONAL SECURITIES HOLDINGS NICHOLAS -APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES INITIAL LISTING OF PERSONAL SECURITIES HOLDINGS, MUTUAL FUND AND BROKERAGE ACCOUNTS I hereby certify that the following is a complete and accurate listing as of the date hereof, of all beneficially owned brokerage accounts or accounts holding Covered Securities(25),including shares of the Mutual Funds held therein. I understand that I must provide this information to my local compliance department no later than ten (10) calendar days after my start date, or date of association with NACM, NAIF,NAS or AGI. I further certify that the following information is current as of a date no more than 45 days prior to the date this report is submitted. Failure to comply within this time period will be considered a violation of the Nicholas-Applegate Code of Ethics and Conduct. I. BROKERAGE AND MUTUAL FUND ACCOUNTS MAINTAINED: Check the applicable box. ___ I do not maintain a personal brokerage account or any account holding Covered Securities including shares of the Mutual Funds. ___ I maintain the following brokerage accounts or accounts holding Covered Securities, including shares of the Mutual Funds. List or attach a recent account statement containing all information required below. Use additional sheets if necessary.
Relationship Name on Account Name of Brokerage Firm Account Number(s) to Account Holder - ------------------------------------- ----------------------------- --------------------------- ---------------------------------- - ------------------------------------- ----------------------------- --------------------------- ---------------------------------- - ------------------------------------- ----------------------------- --------------------------- ---------------------------------- - ------------------------------------- ----------------------------- --------------------------- ---------------------------------- - ------------------------------------- ----------------------------- --------------------------- ---------------------------------- SECURITIES OWNED: List each Covered Security, including shares of the Mutual Funds, other than Exempt Securities, in the account(s) listed above or attach the most recent brokerage or other account statement(s) containing all information required below. Security Type Market Value or Security Name /Ticker/Cusip (CS, Bond, MF, etc.) # of Shares Principal Amount Date Acquired - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------ - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------ - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------ - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------ - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------ - --------------------------------------- -------------------------- -------------- ----------------------- ------------------------
- ------------------------------------------ (25) Covered Securities means any security as defined in Section 202 (a) (18) of the Investment Advisers Act. "Security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. 35 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] Except where exceptional circumstances exist, accounts are required to be held with a Designated Broker. Accordingly, unless I am granted approval to maintain accounts outside of a Designated Broker, I agree to transfer them as soon as possible (generally thirty days or less) to a Designated Broker. Pending transfer of these accounts to a Designated Broker, I will not effect any brokerage transactions in these accounts and I will arrange for the Legal/Compliance Department to receive a duplicate copy of monthly statements for each such account. II. Request to maintain a non-designated brokerage account (not with Charles Schwab): I hereby request approval to maintain one or more of the brokerage accounts listed in Section I above, based on the following: Please check all that apply. ___ The account is independently managed and I am not involved in investment selections through recommendation, advice, prior review or otherwise, or I am a passive beneficiary of the account and am not involved in the investment decisions. List account(s): ================================================================= Name of Investment Manager and/or family relationship: ================================================================= ___ A participant in the account is employed by another asset management firm or brokerage firm that requires the account to be maintained at such firm. I will arrange for duplicate confirmations and monthly statements to be sent to the Legal/Compliance Department. List account(s): ______________________________________________________________________ ______________________________________________________________________ ___ Other (explain) ______________________________________________________ List account(s): ______________________________________________________________________ ______________________________________________________________________ By signing this form, I acknowledge that I have received and understand the Nicholas-Applegate Code of Ethics and Conduct, which includes the Insider Trading Policy and Procedures. I agree to abide by the provisions of the Code and to promptly notify the Legal/Compliance Department of any changes to the above information. ---------------------------------------- ------------- Signature Date ---------------------------------------- Print Name ----------------------------------------- Title LEGAL/COMPLIANCE: ____ Approved ____ Not Approved Signature:__________________________ Date:______________________ 36 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX FOURTEEN: QUARTERLY TRANSACTION REPORT As a NACM or AGI employee, you are required to report your personal security transactional information to Legal/Compliance NO LATER THAN 30 CALENDAR DAYS AFTER THE END OF EACH CALENDAR QUARTER unless the personal security transaction(s), executed in your brokerage or other account(s), meets one of the following criteria: 1) Your account is maintained with a designated broker whereby Legal/Compliance is aware of and has access to your personal security transactions via confirms and personal account statements; 2) Your account is maintained with a non-designated broker that has been approved by Legal/Compliance whereby the Legal/Compliance department is receiving duplicate copies of your transactional confirms and personal account statements; or 3) Your quarterly security transactions involved securities that are exempt(1) from the reporting provisions pursuant to the Code even though such security transactions were executed in an account maintained with an approved non-designated broker that is unable to provide duplicate confirms or personal account statements. Complete the section of this Form if you have effected a Covered Security(26) transaction in your beneficially owned brokerage, Mutual Fund or trading account that does not meet any of the above criteria. You must provide this information on such security transactions to Legal/Compliance no later than the 30th calendar day following the end of the calendar quarter. The following are my Covered Securities transactions that have not been reported to Legal/Compliance:
- ---------------- ------------- ---------------------- -------------------- ------------- ------------- --------------- SECURITY NAME AND NUMBER OF SHARES TICKER OR CUSIP (IF AND PRINCIPAL APPLICABLE, INTEREST AMOUNT (IF DATE BUY/SELL & MATURITY DATE) APPLICABLE) UNIT PRICE BROKER NAME ACCOUNT NUMBER - ---------------- ------------- ---------------------- -------------------- ------------- ------------- --------------- - ---------------- ------------- ---------------------- -------------------- ------------- ------------- --------------- - ---------------- ------------- ---------------------- -------------------- ------------- ------------- --------------- - ---------------- ------------- ---------------------- -------------------- ------------- ------------- --------------- - ---------------- ------------- ---------------------- -------------------- ------------- ------------- ---------------
By signing this document, I am certifying that I have met the quarterly reporting requirements pursuant to the Code in regards to disclosing my beneficially owned brokerage account(s) and any securities transactions that were effected in such account(s) for this quarterly reporting period. Date:____________ Signature:_____________________________________ (1) You do not have to report any transactions that were executed in the following securities: 1) U.S. Government Securities, 2) Bank Certificates of Deposit, 3) Banker's Acceptances, 4) Commercial Paper, 5) High Quality Short-Term Debt Instruments (including repurchase agreements), 6) U.S. Government Agency Securities, 7) SPDRS, QQQs, MDYs, DIAs, WEBS, Diamonds and iShares Funds(27), 8) Money Market Funds, and 9) currency futures traded on a commodity exchange. - ----------------------------------------------------- (26) Covered Securities means any security as defined in Section 202 (a) (18) of the Investment Advisers Act. "Security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. (27) The iShares Funds are registered with the SEC under the Investment Company Act of 1940 as iShares,Inc. and iShares Trust. 37 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] APPENDIX FIFTEEN: ANNUAL CERTIFICATION FORMS NICHOLAS-APPLEGATE CAPITAL MANAGEMENT NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS NICHOLAS-APPLEGATE SECURITIES ANNUAL LISTING OF SECURITIES HOLDINGS AND CERTIFICATION OF COMPLIANCE I hereby acknowledge that I have read and understand the Nicholas-Applegate Code of Ethics and Conduct, which includes the Insider Trading Policy and Procedures (the "Code") and recognize the responsibilities and obligations incurred by my being subject to the Code. Furthermore, I certify that I have complied with the requirements of the Code and all applicable federal securities laws for the year ended December 31, 2006, and that I have disclosed or reported all personal securities holdings and transactions required to be disclosed or reported hereunder, and complied in all other respects with the requirements of the Code. For personal securities account(s) held at Charles Schwab & Co. or a pre-approved non-designated broker(s), I hereby authorize delivery of transactional confirms and account statement(s) in such account(s) to the Legal/Compliance Department as deemed necessary pursuant to Rule 204-2(a)(12) of the Investment Advisors Act of 1940. I certify that all information relating to my personal securities account is current as of a date no more than 45 days prior to the date this report is submitted. I acknowledge that all of my personal securities accounts are reflected completely and accurately as shown below and all Covered Securities(28) beneficially owned by me are reflected accurately in such accounts (see below). I also agree to cooperate fully with any investigation or inquiry as to whether a possible violation of the Code has occurred. A. BROKERAGE AND MUTUAL FUND ACCOUNTS MAINTAINED: Check the applicable box. ___ I do not maintain a personal brokerage account or any account holding Covered Securities including the Mutual Funds. ___ I maintain the following brokerage account(s) or account(s) holding Covered Securities, including the Mutual Funds. List or attach a recent account statement containing all information required below.
Relationship Name of Account Name of Brokerage Firm Account Number to Account Holder - --------------------------------- --------------------------- ----------------------------- ----------------------------- - --------------------------------- --------------------------- ----------------------------- ----------------------------- - --------------------------------- --------------------------- ----------------------------- ----------------------------- - --------------------------------- --------------------------- ----------------------------- -----------------------------
Use additional sheets if necessary. B. Brokerage and Mutual Fund Statements: Check the applicable box. - -------------------------------------------------- (28) Covered Securities means any security as defined in Section 202 (a) (18) of the Investment Advisers Act. "Security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. 38 [GRAPHIC OMITTED: Nicholas Applegate Logo] NICHOLAS-APPLEGATE CODE OF ETHICS] ___ I do not maintain a personal brokerage account or any account holding Covered Securities including the Mutual Funds. ___ The Legal/Compliance Department has access to my transactions in Covered Securities, including the Mutual Funds, other than Exempt Securities, that are held and traded in my personal securities account(s) with Charles Schwab & Co. or with any other brokerage firm that is providing duplicate copies of transactional confirmations and account statements for my personal securities account(s) to Legal/Compliance Department as shown above. These statements are a complete and accurate representation of my securities holdings and transactional information for my beneficially owned accounts. ___ The Legal/Compliance Department does not receive any securities holdings or transactional information on my beneficially owned account(s). Therefore, I have attached a list of all Covered Securities including the Mutual Funds, other than Exempt Securities, that are beneficially owned by me in such account(s) that are shown above C. PRIVATE SECURITIES TRANSACTIONS: Check the applicable box. ___ I have not engaged in any private securities activities. ___ I have not received any compensation for any private securities activities. ___ Yes, I do presently engage in and/or receive compensation for private securities activity, details which are listed below. ================================================================= D. OUTSIDE BUSINESS ACTIVITY: Check the applicable box. ___ I have not accepted any outside employment or compensation. ___ I have accepted employment and/or compensation at the following: Name of Company/Entity: ________________________________________________ General Description of Company/Entity:_______________________________________ Main Responsibilities: _____________________________________________________ Compensation (if any): _____________________________________________________ Start Date: ________________________________________________________________ E. EMPLOYEE CERTIFICATION Date: __________ Signature:_______________________________________ Print Name:_______________________________________ ================================================================================ LEGAL/COMPLIANCE USE ONLY: - -------------------------- Permission from Legal/Compliance Approved___ Declined___ Legal/Compliance Approval: __________________________ Date: _________ NAS Principal: ______________________________________ Date: _________ ================================================================================ 39 EX-99.P.19 17 file017.txt OPPENHEIMER FUNDS COE AMENDED AND RESTATED CODE OF ETHICS OF THE OPPENHEIMER FUNDS, OPPENHEIMERFUNDS, INC. (INCLUDING AFFILIATES AND SUBSIDIARIES) AND OPPENHEIMERFUNDS DISTRIBUTOR, INC. DATED AS OF NOVEMBER 30, 2007 TABLE OF CONTENTS 1. INTRODUCTION AND PURPOSE OF THE CODE OF ETHICS.....................2 - -- ----------------------------------------------- 2. STATEMENT OF GENERAL PRINCIPLES....................................3 - -- ------------------------------- 3. STANDARDS OF BUSINESS CONDUCT......................................3 - -- ----------------------------- 4. DEFINITIONS........................................................6 - -- ----------- 5. RESTRICTIONS ON OUTSIDE BUSINESS ACTIVITIES.......................10 - -- ------------------------------------------- 6. RESTRICTIONS ON GIFTS FROM BUSINESS ASSOCIATES....................10 - -- ---------------------------------------------- 7. INVESTMENTS IN OPPENHEIMER FUNDS..................................10 - -- --------------------------------- 8. REQUIREMENTS FOR PERSONAL ACCOUNTS................................11 - -- ---------------------------------- 9. ACCESS PERSONS--PROHIBITED TRANSACTIONS IN SECURITIES.............11 - -- ----------------------------------------------------- 10. INVESTMENT PERSONS--PROHIBITED TRANSACTIONS IN SECURITIES.........12 - --- ---------------------------------------------------------- 11. REPORTING REQUIREMENTS............................................15 - --- ---------------------- 12. CERTIFICATIONS....................................................19 - --- -------------- 13. INDEPENDENT DIRECTORS.............................................19 - --- --------------------- 14. PENALTIES AND SANCTIONS...........................................20 - --- ----------------------- 15. DUTIES OF THE CODE OF ETHICS OVERSIGHT COMMITTEE..................20 - --- ------------------------------------------------ 16. DUTIES OF THE CODE ADMINISTRATOR..................................20 - --- -------------------------------- 17. RECORDKEEPING.....................................................22 - --- ------------- 18. AMENDMENTS........................................................22 - --- ---------- 1. INTRODUCTION AND PURPOSE OF THE CODE OF ETHICS. As an investment management firm, OppenheimerFunds, Inc., its affiliates and subsidiaries (collectively defined below as "OFI"), owe a fiduciary responsibility to our clients, including the Oppenheimer funds. Accordingly, OFI and every Employee of OFI owe those clients a duty of undivided loyalty. Our clients entrust us with their financial well-being and expect us to act in their best interests at all times. OFI seeks to maintain a reputation for fair dealing, honesty, candor, objectivity and unbending integrity by conducting our business on a set of shared values and principles of trust. This Code of Ethics ("Code") establishes standards of conduct expected of all Employees and addresses conflicts that arise from Employees' personal trading and other activities. EVERY EMPLOYEE OF OFI IS EXPECTED TO FULLY UNDERSTAND AND ADHERE TO THE POLICIES AND PROCEDURES SET FORTH IN THIS CODE. As each Employee must be aware, we work in a highly regulated industry and are governed by an ever-increasing body of federal, state, and international laws and numerous rules and regulations which, if not observed, can subject OFI and/or its Employees to regulatory sanctions. The investment companies for which OFI or Centennial Asset Management Corporation ("CAMC") acts as investment adviser (collectively referred to as the "Oppenheimer Funds"), OFI, CAMC, OppenheimerFunds Distributor, Inc., the principal underwriter of the Oppenheimer Funds ("OFDI), and certain of OFI's other subsidiaries or directly controlled affiliates(1) (hereinafter, these entities are collectively referred to as "OFI") have adopted this Code in compliance with Rule 17j-1 under the Investment Company Act of 1940, as amended ("Investment Company Act"), or Rule 204A-1 under the Investment Advisers Act of 1940, as amended ("Advisers Act"). The Code is designed to establish procedures for the detection and prevention of activities by which persons having knowledge of the holdings, recommended investments and investment intentions of the Oppenheimer Funds, other investment companies and other clients for which OFI acts as adviser or sub-adviser (collectively, "Advisory Clients") may abuse their fiduciary duties, and otherwise to deal with the type of conflict of interest situations addressed by Rule 17j-1 and Rule 204A-1. Although the Code is intended to provide each Employee with guidance and certainty as to whether or not certain actions or practices are permissible, it does not cover every issue an Employee may face. In this regard, OFI also maintains other compliance-oriented policies and procedures (including among others, a Code of Conduct, a Gift Policy, a Policy to Detect and Prevent Insider Trading and a Policy Governing Dissemination of Fund Portfolio Holdings) that __________________________________ (1) As of the date of adoption of this Code, in addition to CAMC, the other subsidiaries or directly controlled affiliates of OFI (for purposes of this Code) include: OFI Institutional Asset Management, Inc.; HarbourView Asset Management Corporation, Trinity Investment Management Corporation; OFI Private Investments, Inc., OFI Trust Company, and Oppenheimer Real Asset Management, Inc. Tremont Partners, Inc. is not subject to this Code. 2 may be directly applicable to an Employee's specific responsibilities and duties. (Those other policies and this Code are available to all OFI employees through OFI's internal employee website (OPnet).) Nevertheless, this Code should be viewed as a guide for each Employee and OFI with respect to how we jointly must conduct our business to live up to our guiding tenet that the interests of our clients and customers must always come first. If you have any questions about this Code, you should discuss them with the Code Administrator as soon as possible to ensure that you remain in compliance with the Code at all times. In the event that any provision of this Code conflicts with any other OFI policy or procedure, the provisions of this Code shall apply. Please understand that you are expected to adhere to all company policies at all times. ALL OFI EMPLOYEES ARE EXPECTED TO READ THE CODE CAREFULLY AND OBSERVE AND ADHERE TO ITS GUIDANCE AT ALL TIMES. All OFI Employees have an obligation to provide notice to the Code Administrator on a timely basis if there is a change to their duties, responsibilities or title which affects their reporting status under this Code. 2. STATEMENT OF GENERAL PRINCIPLES. In general, every Employee must observe the following fiduciary principles with respect to his or her personal investment activities: (a) At all times, each Employee must place the interests of Advisory Clients first; (b) All personal securities transactions of each Employee must be conducted consistent with this Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of the Employee's position of trust and responsibility; and (c) No Employee should take inappropriate advantage of his or her position at OFI. 3. STANDARDS OF BUSINESS CONDUCT Although the reporting requirements in Section 11 of this Code apply to all Employees, the specific trading and pre-approval provisions in sections 9 and 10 are concerned primarily with those investment activities of an "Access Person" and an "Investment Person" (as defined in Section 4) who may benefit from or interfere with the purchase or sale of portfolio securities by Advisory Clients. However, all Employees are prohibited from using information concerning the investment intentions of Advisory Clients for personal gain or in a manner detrimental to the interests of any Advisory Client. In this regard, each Employee also should refer to the separate Code of Conduct which governs certain other activities of Employees. In addition to this Code and the separate Code of Conduct, all Employees must comply with the following general standards of business conduct: 3 (a) COMPLIANCE WITH LAWS AND REGULATIONS. All Employees must comply with all federal, state and local laws, rules and regulations applicable to the business or operations of OFI, including, but not limited to, the federal securities laws.(2) In particular, Employees (including all Access or Investment Persons) are not permitted, in connection with the purchase or sale, directly or indirectly, of a Security Held or to Be Acquired by an Advisory Client, to: (i) employ any device, scheme or artifice to defraud such Advisory Client; (ii) make to such Advisory Client any untrue statement of a material fact or omit to state to such Advisory Client a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (iii) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any such Advisory Client; or (iv) engage in any manipulative practice with respect to such Advisory Client. (b) CONFLICTS OF INTEREST. As a fiduciary, OFI has an affirmative duty of care, loyalty, honesty, and good faith to act in the best interests of its clients. Compliance with this duty can be achieved by trying to avoid conflicts of interest and by fully disclosing all material facts concerning any conflict that does arise with respect to any client. All Employees must try to avoid situations that have even the appearance of conflict or impropriety. (See also the section titled "Conflicts of Interest" in the separate Code of Conduct.) (c) CONFLICTS AMONG CLIENT INTERESTS. Conflicts of interest may arise when OFI or its Employees have reason to favor the interests of one client over another client (E.G., larger accounts over smaller accounts, accounts compensated by performance fees over accounts not so compensated, accounts in which Employees have made material personal investments, accounts of close friends or relatives of Employees). Such inappropriate favoritism of one client over another client would constitute a breach of fiduciary duty and is expressly prohibited. (See also the section titled "Conflicts of Interest" in the separate Code of Conduct.) (d) COMPETING WITH CLIENT TRADES. All Employees are prohibited from using knowledge about pending or currently considered securities transactions for clients to profit personally, directly or indirectly, as a result of such transactions, including by purchasing or selling such securities. This means that no Employee may purchase or sell a security for his or her personal account with actual knowledge that an order to buy or sell the same security has been made for an Advisory Client or is being considered for an Advisory Client until such information is made publicly available. Conflicts _______________________________ (2) For purposes of this Code, "federal securities laws" means the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act, the Advisers Act, Title V of the Gramm-Leach-Bliley Act (privacy), any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury (anti-money laundering). 4 raised by personal securities transactions also are addressed more specifically in Sections 7-10 of this Code. (e) CONFIDENTIALITY OF ADVISORY CLIENT TRANSACTIONS. Until disclosed in a public report to shareholders or to the SEC in the normal course, all information concerning Securities "Being Considered for Purchase or Sale" by any Advisory Client shall be kept confidential by all Employees and disclosed by them only on a need to know basis in accordance with Policy Governing Dissemination of Fund Portfolio Holdings or any other related policies adopted by OFI from time to time. (See also the section titled "Confidentiality" in the Code of Conduct.) (f) DISCLOSURE OF OPPENHEIMER FUNDS PORTFOLIO HOLDINGS. Until publicly disclosed, an Oppenheimer Fund's portfolio holdings are proprietary, confidential business information. All Employees are subject to OFI's and the Funds' separate "Policy Governing Dissemination of Fund Portfolio Holdings" which sets forth the conditions under which an Employee may disclose information about an Oppenheimer Fund's portfolio holdings. In general, the policy is designed to assure that information about portfolio holdings is distributed in a manner that conforms to applicable laws and regulations and to prevent that information from being used in a manner that could negatively affect a fund's investment program or otherwise enable third parties to use that information in a manner that is not in the best interests of a Fund. Generally, any non-public portfolio holding information may only be distributed pursuant to a confidentiality agreement approved by OFI's Legal Department. (g) INSIDER TRADING. All Employees are subject to OFI's separate insider trading policies and procedures which are considered an integral part of this Code. In general, all Employees are prohibited from trading, either personally or on behalf of others, while in possession of material, nonpublic information. Employees are also prohibited from communicating material nonpublic information to others in violation of the law. (h) PERSONAL SECURITIES TRANSACTIONS. All Employees must strictly comply with OFI's policies and procedures regarding personal securities transactions. As explained in further detail throughout this Code, the Code sets forth the certain standards for personal trading by persons subject to its provisions. For example, no Employee may purchase or sell a security for his or her personal account with actual knowledge that an order to buy or sell the same security has been made for an Advisory Client or is being considered for an Advisory Client until such information is made publicly available. In general, persons who may have greater access to investment and trading information (I.E., Access Persons and Investment Persons) are subject to greater restrictions on their trading. (See also the section titled "Personal Investments" in the Code of Conduct.) (i) INTERNAL REPORTING OF VIOLATIONS. All Employees must report matters involving violations of this Code promptly to the Code Administrator (and to OFI's Chief Compliance Officer if different than the Code Administrator). You can report a violation on a confidential or anonymous basis. OFI does not permit retaliation against employees for reports submitted in good faith. Reports of violations will be investigated and appropriate actions will be taken by the Code Administrator or the Code of Ethics Oversight Committee. Please refer to the separate Code of Conduct and "Whistleblower" procedures for additional information. 5 4. DEFINITIONS - As used herein: "ADVISORY CLIENT" means any Oppenheimer Fund, other investment company or other client for which OFI act as adviser or sub-adviser. "ACCESS PERSON" means any officer, director, general partner, Investment Person, trustee or certain other Employees (as described immediately below) of: OFI, OFDI, CAMC, OFI Institutional Asset Management, Inc.; HarbourView Asset Management Corporation, Trinity Investment Management Corporation; OFI Private Investments, Inc., Oppenheimer Real Asset Management, Inc., any of the Oppenheimer Funds, any other entity adopting this Code; or any persons directly controlled by OFI who directly or indirectly control (as defined in the Investment Company Act) the activities of such persons. An Access Person also means any natural person in a control (as defined in the Investment Company Act) relationship to any Oppenheimer Fund or OFI (or any company in a control relationship to an Oppenheimer Fund or OFI) who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of Securities by the Fund. Notwithstanding the definitions above, for purposes of the personal account requirements under Section 8, the reporting requirements under Section 11 and the certification requirements under Section 12 of this Code, an "Independent Director" (or a non-independent director who is not otherwise an employee of OFI or an Access Person) of an Oppenheimer Fund is NOT considered an Access Person. An Employee also is an Access Person if: (i) in connection with his or her regular functions or duties, that Employee makes, participates in, or obtains information regarding, the purchase or sale of a Security by an Advisory Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales. (ii) the Employee has access to timely information relating to investment management activities, research and/or client portfolio holdings and those who in the course of their employment regularly receive access to trading activity of Advisory Clients; or (iii) the Employee has been notified in writing by the Code Administrator (or a designee) that the Employee has been designated as an Access Persons by the Code Administrator by virtue of the nature of the Employee's duties and functions. "BENEFICIAL INTEREST" means the opportunity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to share at any time in any economic interest or profit derived from an ownership of or a transaction in a Security. You are deemed to have a Beneficial Interest in the following: (i) Any Security owned individually by you; 6 (ii) Any Security owned jointly by you with others (for example, joint accounts, spousal accounts, partnerships, trusts and controlling interests in corporations); (iii) Any Security in which a Family Member has a Beneficial Interest if the Security is held in an account over which you have decision making authority (for example, you act as trustee, executor, or guardian or you provide investment advice); (iv) Accounts held by a Family Member. This presumption may be rebutted by convincing evidence that the profits derived from transactions in the Securities will not provide you with any economic benefit; (v) Your interest as a general partner or manager/member in Securities held by a general or limited partnership or a limited liability company; (vi) Your interest as a member of an "investment club" or an organization that is formed for the purpose of investing a pool of monies in Securities; (vii) Your ownership of Securities as trustee in which either you or a Family Member has a vested interest in the principal of income of the trust or your ownership of a vested interest in a trust; You do not have a beneficial interest in Securities held by a corporation, partnership, limited liability company or other entity in which you hold an equity interest unless you are a controlling equity holder or you have or share investment control over the Securities held by the entity. If you are unsure if an account is within the definition of Personal Account or whether you would be deemed to have a beneficial interest in an account, please contact the Code Administrator. "CAMC" means Centennial Asset Management Corporation. ---- "CODE ADMINISTRATOR" is the person appointed by OFI as responsible for the day-to-day administration of the Code. "CODE OF CONDUCT" is a separate set of guidelines that defines the standards to which all Employees of OFI and its subsidiaries and affiliates are expected to adhere during the course of their employment with, and when conducting business on behalf of, OFI. "CODE OF ETHICS OVERSIGHT COMMITTEE" is the committee of senior officers of OFI having the responsibilities described in sections 14 and 15 of this Code. The membership of the Code of Ethics Oversight Committee shall consist of the: General Counsel of OFI, Chief Investment Officer of OFI and Chief Compliance Officer of OFI and/or the Oppenheimer Funds, or their designees. "DISCRETIONARY ACCOUNT" means a Personal Account in which you have completely turned over decision-making authority to a professional money manager (who is not a Family Member or not otherwise covered by this Code) and you have no direct or indirect influence or control over the account. (Such Discretionary 7 Accounts are often referred to as "professionally managed," "controlled" or "managed" accounts.) "EMPLOYEE" means any person deemed to be an employee of OFI or a "supervised person" of OFI for purposes of the Advisers Act. "FAMILY MEMBER" means your spouse, minor children and other members of your immediate family (children, stepchildren, grandchildren, parents, step parents, grandparents, siblings, in-laws and adoptive relationships) who share your household. In addition, you are deemed to have a Beneficial Interest in accounts maintained by your domestic partner (an unrelated adult with whom you share your home and contribute to each other's support). In a situation in which the status of a "Family Member" is in question, the person shall be presumed to be a "Family Member" for purposes of this Code. It is the Employee's burden to affirmatively rebut the presumption to the Code Administrator that the person should not be deemed to be a "Family Member" within this definition. "INDEPENDENT DIRECTOR" means any director or trustee of an Oppenheimer Fund who is not an "interested person" (as that term is defined by Section 2(a)(19) of the Investment Company Act) of the Fund. Notwithstanding the definition of an Access Person above, for purposes of this Code, an Independent Director is NOT considered an Access Person. "INITIAL PUBLIC OFFERING" means an offering of securities registered under the Securities Act of 1933, as amended ("1933 Act"), the issuer of which immediately before the registration was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934. "INVESTMENT PERSON" means an Access Person who also is (i) a Portfolio Manager, (ii) a securities analyst or trader who provides information and advice to a Portfolio Manager or who helps execute a Portfolio Manager's decisions, (iii) any other person who, in connection with his or her duties, makes or participates in making recommendations regarding an Advisory Client's purchase or sale of securities, (iv) any Employee who works directly with a Portfolio Manager or in the same department as the Portfolio Manager or (v) any natural person in a control relationship to an Oppenheimer Fund or OFI who obtains information concerning recommendations made to the Oppenheimer Fund with regard to the purchase or sale of Securities by the Oppenheimer Fund. In addition to the above definitions, an Employee is an "Investment Person" if the Employee has been notified in writing by the Code Administrator (or a designee) that the Employee has been designated as an "Investment Person" by the Code Administrator by virtue of the nature of the Employee's duties and functions. "OFI" means (for purposes of this Code) Oppenheimer Funds, Inc.; CAMC; certain of OFI's other subsidiaries or directly controlled affiliates that are registered investment advisers (including OFI Institutional Asset Management, Inc.; HarbourView Asset Management Corporation; Trinity Investment Management Corporation; OFI Private Investments, Inc.; and Oppenheimer Real Asset Management, Inc.); and OppenheimerFunds Distributor, Inc. 8 "OPPENHEIMER FUND" means any investment company registered under the Investment Company Act for which OFI or CAMC serves as the investment adviser or for which OFDI serves as the principal underwriter. "PERSONAL ACCOUNT" means any account owned by, or in the name of, an OFI Employee or Access Person in which Securities may be held or any such account in which an Employee (including an Access or Investment Person) has a Beneficial Interest. "PORTFOLIO MANAGER" means an Access Person who has direct responsibility and authority to make investment decisions affecting a particular Advisory Client. "PRIVATE PLACEMENT" means an offering that is exempt from registration pursuant to Section 4(2) or Section 4(6) of the 1933 Act or pursuant to rules 504, 505 or 506 under the 1933 Act. "SECURITY" means, except as noted below, generally any investment, instrument, asset or holding , whether publicly or privately traded, and any option, future, forward contract or other obligation involving securities or index thereof, including an instrument whose value is derived or based on any of the above ("derivative"). A security also includes any instrument that is convertible or exchangeable into a security or which confers a right to purchase a security. For purposes of the Code, the term "Security" specifically includes shares of any Oppenheimer Fund or an exchange-traded fund (or ETF). For purposes of this Code, the term "Security" does NOT include: (i) Shares of a registered open-end investment company (other than an Oppenheimer Fund), shares of a money market fund that holds itself out as a money market fund under Rule 2a-7 of the Investment Company Act, or shares of unit investment trusts that invest exclusively in registered open-end investment companies; (ii) Direct obligations of the U.S. government (E.G., Treasury securities) or any derivative thereof; (iii) Investment grade short-term debt instruments, such as bank certificates of deposit, banker's acceptances, repurchase agreements, and commercial paper; (iv) Insurance contracts, including life insurance or annuity contracts; (v) Direct investments in real estate, private business franchises or similar ventures; or (vi) Physical commodities (including foreign currencies) or any derivatives thereof. "SECURITY HELD OR TO BE ACQUIRED" by an Advisory Client means any Security that, within the most recent 15 days (i) is or has been held by the Advisory Client or (ii) is being considered by the Advisory Client or its investment adviser for purchase by the Advisory Client. A "Security Held or to Be Acquired" also includes any option to purchase or sell, and any security convertible into or exchangeable for, a Security. 9 A security is "BEING CONSIDERED FOR PURCHASE OR SALE" from the time an order is given by or on behalf of the Portfolio Manager to the order room of an Advisory Client until the time all orders with respect to that security are completed or withdrawn. "SUB-ADVISER" means an investment adviser that acts as an investment sub-adviser to a portfolio advised by OFI and is not affiliated with OFI. "SUPERVISED PERSON" means any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of OFI, or other person who provides investment advice on behalf of OFI and is subject to the supervision and control of OFI. 5. RESTRICTIONS ON OUTSIDE BUSINESS ACTIVITIES Outside business activities may create a potential conflict of interest with the best interests of OFI or their Advisory Clients or may interfere with an Employee's duties and responsibilities to OFI. Accordingly, no Employee may serve as a director, trustee, officer, owner or partner of any other for-profit business organization or as a director, trustee or officer of a non-profit organization (E.G., school board, hospital, professional or social organization), without prior written approval of the Employee's department manager or supervisor AND the prior written approval of the General Counsel of OFI, the Code Administrator or the General Counsel's or Code Administrator's designees. (See also the section titled "Conflicts of Interest" in the Code of Conduct for additional information on Outside Business Activities.) 6. RESTRICTIONS ON GIFTS FROM BUSINESS ASSOCIATES All Employees are subject to OFI's separate Gift Policy which is considered an integral part of this Code. In general, no Employee may accept gifts or anything else of more than a nominal amount in value (not exceeding $100 per individual on an annual basis) from any person or entity that does business with or on behalf of OFI or an Advisory Client. (See also the Gift Policy for additional guidelines and information.) 7. INVESTMENTS IN OPPENHEIMER FUNDS A. Except as noted below, any Employee or Family Member who holds shares of an Oppenheimer Fund must hold those shares in an account identified as an "OFI 401(k) account," "OFI Retirement account," "OFI Deferred Compensation account" or "OFI Employees Account." Notwithstanding the sentence above: (i) A.G. EDWARDS SWEEP ACCOUNT. An Employee or Family Member with a Personal Account with A.G. Edwards may hold shares of a Centennial money market fund if the Centennial fund is the "sweep account" option for that Personal Account. (ii) DISCRETIONARY ACCOUNTS. An Employee may hold shares of Oppenheimer Funds in a Discretionary Account. B. REQUIREMENT TO TRANSFER ACCOUNT. Except as noted above, any Employee or Family Member who holds shares of Oppenheimer Funds in a non-OppenheimerFunds' account must arrange to transfer those holdings into one of the accounts described in section A above. Notwithstanding the prior sentence however, an 10 Employee who holds shares in an Oppenheimer Fund in a retirement account or other qualified retirement account with another employer that cannot be transferred to one of the accounts identified above is not required to transfer those shares to one of the accounts identified above PROVIDED the Employee provides a written explanation and non-transfer request to the Code Administrator describing the circumstances that prevent the transfer and the Code Administrator has approved the request. C. SHORT-TERM TRADING. OFI's policy is to prevent disruptive short-term trading in the Oppenheimer Funds. Accordingly, when purchasing, exchanging, or redeeming shares of Oppenheimer Funds, all Employees must comply in all respects with the policies and standards set forth in the funds' prospectuses, including specifically the restrictions on market timing activities, exchanges and redemption policies. Any Employee who redeems shares of an Oppenheimer Fund purchased within the preceding 30 days (a "short-term trade") must report that short-term trade to the Code Administrator no more than two business days after the redemption. The Employee may be required to relinquish any profit made on a short-term trade and will be subject to disciplinary action if the Employee fails to report the short-term trade or the Code Administrator determines that the short-term trade was detrimental to the interests of the Oppenheimer Fund or its shareholders. For purposes of this paragraph, a redemption includes a redemption by any means, including an exchange from the Fund. This policy does not cover purchases, redemptions or exchanges (i) into or from money market funds, or (ii) effected on a regular periodic basis by automated means, such as monthly redemptions to a checking or savings account. 8. REQUIREMENTS FOR ALL PERSONAL ACCOUNTS Every Employee must obtain pre-approval before opening a new Personal Account with a financial firm or institution (E.G., broker, dealer, adviser, or any other professional money manager), including accounts opened by Family Members. Pre-approval is not required prior to opening any account that does not have the ability to hold Securities (I.E., a traditional checking account) or an internal OppenheimerFunds accounts described in section 7. An Employee may maintain Personal Accounts with the financial firm of his or her choice, provided the firm is able to provide copies of the Employee's account statements to the Code Administrator as required by this Code and such statements are being provided. However, the Code of Ethics Oversight Committee reserves the right in its sole discretion to require any Employee to maintain his or her Personal Accounts with firms designated by the committee or to prohibit any Employee from maintaining his or her Personal Accounts with specified firms. 9. ACCESS PERSONS--PROHIBITED TRANSACTIONS IN SECURITIES (NOTE: Any profits realized on trades prohibited by this Section 9 shall be subject to disgorgement.) A. AN ACCESS PERSON IS PROHIBITED FROM: 11 (i) purchasing any Security in an Initial Public Offering or Private Placement, without pre-approval from the Code Administrator. If an Access Person seeks pre-approval for the acquisition of a Security in a Private Placement or an Initial Public Offering, the Access Person shall set forth in detail the rationale for the transaction. (ii) purchasing or selling any interest in a collective investment vehicle that is exempt from registration under the 1933 Act, including, but not limited to, hedge funds, private funds or similar investment limited partnerships, without pre-approval from the Code Administrator; (iii) selling a security short, except a short sale as a hedge against a long position in the same security if such short sale has been pre-approved by the Code Administrator; and (iv) purchasing or selling in his or her Personal Account options or futures, other than options and futures related to broad-based indices, U.S. Treasury securities, currencies and long portfolio positions in the same or a substantially similar security. B. TRANSACTIONS EXEMPT FROM THESE PROHIBITIONS. The following transactions by Access Persons are exempt from the prohibitions of this Section 9: (i) Purchases or sales of Securities made in a Discretionary Account; (ii) Involuntary purchases or sales of Securities in a Personal Account, such as Securities received pursuant to a dividend reinvestment plan or a stock split or through a gift or bequest; or (iii) Purchases of Securities in a Personal Account that result from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer and the sale of such rights. C. LENGTH OF PRE-APPROVALS. Pre-approval remains in effect until the end of the next business day on which such pre-approval is granted or as otherwise specified by the Code Administrator. 10. INVESTMENT PERSONS--PROHIBITED TRANSACTIONS IN SECURITIES. (NOTE: Any profits realized on trades prohibited by this Section 10 shall be subject to disgorgement.) A. AN INVESTMENT PERSON IS PROHIBITED FROM: (i) purchasing any Security in an Initial Public Offering or Private Placement, without pre-approval from the Code Administrator. Any Investment Person who has purchased a Security in a Private Placement or an Initial Public Offering for his or her Personal Account must disclose that investment to the Code Administrator before he or she participates in the subsequent consideration of an investment in Securities of the same or a related issuer for an Advisory Client. An independent review of the proposed investment by the Advisory Client 12 shall be conducted by Investment Persons who do not have an interest in the issuer and by the Code Administrator. (ii) purchasing or selling any interest in a collective investment vehicle that is exempt from registration under the 1933 Act, including, but not limited to, hedge funds, private funds or similar investment limited partnerships, without pre-approval from the Code Administrator; (iii) selling a security short, except a short sale as a hedge against a long position in the same security if such short sale has been pre-approved by the Code Administrator; and (iv) purchasing or selling in his or her Personal Account options or futures, other than options and futures related to broad-based indices, U.S. Treasury securities, currencies and long portfolio positions in the same or a substantially similar security. B. TRANSACTIONS EXEMPT FROM THESE PROHIBITIONS. The following transactions by an Investment Person are exempt from the prohibitions of this Section 10: (i) Purchases or sales of Securities made in a Discretionary Account; (ii) Involuntary purchases or sales of Securities in a Personal Account, such as Securities received pursuant to a dividend reinvestment plan or a stock split or through a gift or bequest; or (iii) Purchases of Securities in a Personal Account that result from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer and the sale of such rights. C. PRE-APPROVAL. In addition, except as noted below, every Investment Person must obtain pre-approval of every Securities transaction in his or her Personal Account. D. PRE-APPROVAL NOT REQUIRED. (i) DISCRETIONARY ACCOUNT. Purchases or sales of Securities made in a Discretionary Account do not require pre-approval. PROVIDED, HOWEVER, that the Investment Person claiming to have a Discretionary Account must first provide a written explanation to the Code Administrator describing the circumstances or arrangements of the Discretionary Account and reasons why the Investment Person believes the account should be considered a Discretionary Account. The Code Administrator, however, reserves the right to require pre-approval of any Discretionary Account. (ii) TRANSACTIONS OF ANY OPEN-END NON-OPPENHEIMER FUND. A purchase or sale of shares of any open-end non-Oppenheimer Fund or open-end Oppenheimer Fund that the Investment Person does not serve in the capacity, or perform the functions that warrant him or her to be identified as an Investment Person do not require pre-approval. 13 Pre-approval is required for transactions in: (a) an open-end investment company for which OFI serves as the investment sub-adviser and for whom the Investment Person serves in the capacity, or perform the functions, that warrant him or her to be identified as an Investment Person; and (b) exchange-traded funds (ETFs); (iii) Securities issued by the U.S. government, its agencies, instrumentalities and government-sponsored enterprises do not require pre-approval; (iv) Bankers' acceptances, bank certificates of deposit, commercial paper, and short-term debt instruments (including repurchase agreements), provided such debt instruments have a maturity at the date of issuance of less than 366 days are and rated in one of the two highest rating categories by a nationally recognized statistical rating organization do not require pre-approval; (v) Involuntary purchases or sales of Securities in a Personal Account, such as Securities received pursuant to a dividend reinvestment plan or a stock split or through a gift or bequest do not require pre-approval; or (vi) Purchases of Securities in a Personal Account that result from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer and the sale of such rights do not require pre-approval. E. 15-DAY BLACKOUT PERIOD. No Investment Person may purchase or sell any Security for his or her Personal Account within fifteen (15) calendar days before or fifteen (15) calendar days after the same Security is purchased or sold by an Advisory Client for whom the Investment Person serves in the capacity, or performs the functions, that warrant him or her to be identified as an Investment Person. Provided however, the Code Administrator may exclude from this provision trades for an Advisory Client that are programmatic in nature and do not represent a substantive investment decision with respect to any particular Security (E.G., a program trade to sell pro-rata portions of each Security in an Advisory Client's portfolio). The Code Administrator shall maintain a record of such transactions. If an Investment Person obtains pre-approval pursuant to this Section 10 for a transaction in a Security, and a transaction in the same Security for an Advisory Client for which that Investment Person acts as an Investment Person takes place within a period of fifteen (15) calendar days following the Investment Person's transaction, the Investment Person's transaction may be reviewed further by the Code of Ethics Oversight Committee to determine the appropriate action, if any. For example, the Committee may recommend that the Investment Person be subject to a price adjustment to ensure that he or she did not receive a better price than the Advisory Client. F. SHORT-TERM TRADING (60 DAYS). No Investment Person may purchase and sell, or sell and purchase, in his or her Personal Account any Security within any period of sixty (60) calendar days, except: (i) the instruments listed in section 10.A. above provided they are used for bona fide hedging purposes and the trade has been pre-approved by the Code Administrator; or 14 (ii) a Security sold at a loss, if the trade has been pre-approved by the Code Administrator. G. LENGTH OF PRE-APPROVALS. Pre-approval remains in effect until the end of the next business day on which such pre-approval is granted or as otherwise specified by the Code Administrator. 11. REPORTING REQUIREMENTS All OFI Employees have an obligation to provide notice to the Code Administrator on a timely basis if there is a change to their duties, responsibilities or title which affects their reporting status under this Code. A. ALL EMPLOYEES. (i) DUPLICATE CONFIRMS. Each Employee shall arrange for duplicate copies of confirmations of all transactions and/or periodic account statements of all Personal Accounts to be sent directly to the Code Administrator. Account statements are not required if a Personal Account does not have the ability to hold Securities (I.E., a traditional checking account). (ii) INITIAL AND ANNUAL REPORTS. Each Employee must initially and on an annual basis thereafter, report in writing to the Code Administrator all holdings and all transactions in Securities occurring in his or her Personal Account and any new Personal Account established during the most recent year (such information to be current as of a date no more than 45 days before the report is submitted). Each initial and annual report must contain the following information: o Name(s) in which the Personal Account is registered and the date the Personal Account was established; o Title and type of security, number of shares, principal amount, interest rate and maturity (as applicable) of each security held in the Personal Account; o Name of the broker, dealer or bank with which the Personal Account is maintained; and o The date the report is submitted. Reports submitted pursuant to this Code may contain a statement that the report is not to be construed as an admission that the Employee or Access Person has or had any direct or indirect Beneficial Interest in any Security to which the report relates. B. ACCESS PERSONS (i) DUPLICATE CONFIRMS. Each Access Person shall arrange for duplicate copies of confirmations of all transactions and/or periodic account statements of all Personal Accounts to be sent directly to the Code Administrator. Account statements are not required if a Personal Account does not have the ability to 15 hold Securities (I.E., a traditional checking account). (ii) QUARTERLY REPORTS. Each Access Person must report in writing to the Code Administrator, within 30 days after the end of each calendar quarter, all transactions in Securities occurring in the quarter in his or her Personal Account and any new Personal Account established during the most recent calendar quarter. If there were no such transactions or new accounts, the report should state "None". An Access Person is deemed to be in compliance with these reporting requirements if all the information required is contained in trade confirmations and/or periodic account statements previously provided to the Code Administrator for the time period covered by the quarterly report. Each quarterly report must contain the following information with respect to each reportable transaction: o Name(s) in which the Personal Account is registered and the date the Personal Account was established; o Date and nature of the transaction (purchase, sale or any other type of acquisition or disposition); o Title and type of security, number of shares, principal amount, interest rate and maturity (if applicable) of each Security and the price at which the transaction was effected; o Name of the broker, dealer or bank with or through whom the Account was established or through which the transaction was effected; and o The date the report is submitted. (iii) INITIAL AND ANNUAL REPORTS. Each Access Persons shall, within 10 days after becoming an Access Person, and at least annually thereafter, provide a written holdings report to the Code Administrator with the following information (such information to be current as of a date no more than 45 days before the report is submitted): o Name(s) in which the Personal Account is registered and the date the Personal Account was established; o Title and type of security, number of shares, principal amount, interest rate and maturity (as applicable) of each security held in the Personal Account; o Name of the broker, dealer or bank with which the Personal Account is maintained; and o The date the report is submitted. 16 Reports submitted pursuant to this Code may contain a statement that the report is not to be construed as an admission that the Employee or Access Person has or had any direct or indirect Beneficial Interest in any Security to which the report relates. (iv) SECURITIES EXEMPT FROM REPORTING REQUIREMENTS. Holdings of and transactions in the types of Securities listed below are exempt from the reporting requirements of the Code and do not have to be included in reports submitted to the Code Administrator. (a) Involuntary purchases or sales of Securities in a Personal Account, such as Securities received pursuant to a dividend reinvestment plan or a stock split or through a gift or bequest; or (b) Purchases of Securities in a Personal Account that result from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer and the sale of such rights. (c) Securities issued by the U.S. government, its agencies, instrumentalities and government-sponsored enterprises; (d) Bankers' acceptances, bank certificates of deposit, commercial paper,short-term debt instruments (including repurchase agreements) provided such debt instruments have a maturity at the date of issuance of less than 366 days and are rated in one of the two highest rating categories by a nationally recognized statistical rating organization; or (e) Shares of any open-end non-Oppenheimer fund except an open-end investment company for which OFI serves as the investment sub-adviser or any exchange-traded fund (ETF). C. INVESTMENT PERSONS (i) DUPLICATE CONFIRMS. Each Investment Person shall arrange for duplicate copies of confirmations of all transactions and/or periodic account statements of all Personal Accounts to be sent directly to the Code Administrator. Account statements are not required if a Personal Account does not have the ability to hold Securities (i.e., a traditional checking account). (ii) QUARTERLY REPORTS. Each Investment Person must report in writing to the Code Administrator, within 30 days after the end of each calendar quarter, all transactions in Securities occurring in the quarter in his or her Personal Account and any new Personal Account established during the most recent calendar quarter. If there were no such transactions or new accounts, the report should state "None". An Investment Person is deemed to be in compliance with these reporting requirements if all the information required is contained in trade confirmations and/or periodic account statements previously provided to the Code Administrator for the time period covered by the quarterly report. 17 Each quarterly report must contain the following information with respect to each reportable transaction: o Name(s) in which the Personal Account is registered and the date the Personal Account was established; o Date and nature of the transaction (purchase, sale or any other type of acquisition or disposition); o Title and type of security, number of shares, principal amount, interest rate and maturity (if applicable) of each Security and the price at which the transaction was effected; o Name of the broker, dealer or bank with or through whom the Account was established or through which the transaction was effected; and o The date the report is submitted. (iii) INITIAL AND ANNUAL REPORTS. Each Investment Person shall, within 10 days after becoming an Investment Person, and at least annually thereafter, provide a written holdings report to the Code Administrator with the following information (such information to be current as of a date no more than 45 days before the report is submitted): o Name(s) in which the Personal Account is registered and the date the Personal Account was established; o Title and type of security, number of shares, principal amount, interest rate and maturity (as applicable) of each security held in the Personal Account; o Name of the broker, dealer or bank with which the Personal Account is maintained; and o The date the report is submitted. Reports submitted pursuant to this Code may contain a statement that the report is not to be construed as an admission that the Investment Person has or had any direct or indirect Beneficial Interest in any Security to which the report relates. (iv) SECURITIES EXEMPT FROM REPORTING REQUIREMENTS. Holdings of and transactions in the types of Securities listed below are exempt from the reporting requirements of the Code and do not have to be included in reports submitted to the Code Administrator: (a) Involuntary purchases or sales of Securities in a Personal Account, such as Securities received pursuant to a dividend reinvestment plan or a stock split or through a gift or bequest; 18 (b) Purchases of Securities in a Personal Account that result from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer and the sale of such rights; (c) Securities issued by the U.S. government, its agencies, instrumentalities and government-sponsored enterprises; (d) Bankers' acceptances, bank certificates of deposit, commercial paper, short-term debt instruments (including repurchase agreements) provided such debt instruments have a maturity at the date of issuance of less than 366 days and are rated in one of the two highest rating categories by a nationally recognized statistical rating organization; or (e) Shares of any open-end non-Oppenheimer fund except an open-end investment company for which OFI serves as the investment sub-adviser or any exchange-traded fund (ETF). 12. CERTIFICATIONS (FOR ALL EMPLOYEES (INCLUDING ACCESS AND INVESTMENT PERSONS)) a) Every Employee shall acknowledge that he or she has received the Code of Ethics and understands that he or she is subject to its requirements. b) Every Employee shall certify at least annually that he or she has read and understands the Code of Ethics, recognizes that he or she is subject to its requirements and has complied with the requirements of the Code of Ethics. c) Every Employee shall certify annually that he or she has reported all transactions in and holdings of Securities in Personal Accounts required to be reported pursuant to the Code. 13. INDEPENDENT DIRECTORS An Independent Director (or any non-Independent Director who is not otherwise an Employee of OFI or an Access Person) is required to report only those transactions in his or her Personal Account in a Security (excluding, for purposes of this subparagraph, open-end Oppenheimer Funds) that at the time such Director knew, or in the ordinary course of fulfilling his or her duties would have had reason to know, was purchased or sold or was Being Considered for Purchase or Sale by an Advisory Client during the fifteen (15) calendar day period immediately before or after the date of the Independent Director's transaction. No report will be required for any quarter in which an Independent Director has only exempt transactions to report. Sanctions for any violation of this Code of Ethics by an Independent Director of an Oppenheimer Fund will be determined by a majority vote of other Independent Directors of such Fund. 19 14. PENALTIES AND SANCTIONS a) DISGORGEMENT. Any profits realized or losses avoided on trades prohibited by Sections 8-10 shall be subject to disgorgement. b) SANCTIONS. Any violation of this Code shall be subject to the imposition of such sanctions by the Code Administrator as the Code Administrator deems appropriate under the circumstances to achieve the purposes of this Code, provided, however, if the sanctions includes suspension or termination of employment , such suspension or termination must be approved by the Code of Ethics Oversight Committee. Such sanctions may include, but will not necessarily be limited to, one or more of the following: a letter of censure; restitution of an amount equal to the difference between the price paid or received by the affected Advisory Client(s) and the more advantageous price paid or received by the offending person; the suspension or termination of personal trading privileges; or the suspension or termination of employment. c) LEGAL ACTION. OFI reserves the right to take any legal action it deems appropriate against any Employee who violates any provision of this Code and to hold Employees liable for any and all damages (including, but not limited to, all costs and attorney fees) that OFI may incur as a direct or indirect result of any such Employee's violation of this Code or related law or regulation. d) REVIEW PROCESS. An Employee may request review by the Code of Ethics Oversight Committee of a decision or determination made by the Code Administrator pursuant to this Code. The Committee, in its sole discretion, may elect to consider or reject the request for review. 15. DUTIES OF THE CODE OF ETHICS OVERSIGHT COMMITTEE The Code of Ethics Oversight Committee is responsible for establishing policies and procedures for the administration of the Code, considering and approving amendments to the Code, and reviewing and considering any decisions made by the Code Administrator upon request of an Employee or involving suspension or termination of employment. The Committee may be assisted by counsel in fulfilling its duties if deemed appropriate. 16. DUTIES OF THE CODE ADMINISTRATOR The Code Administrator shall have the following responsibilities: a) Maintaining a current list of the names of all Access Persons and Investment Persons with an appropriate description of their title or employment; b) Furnishing all Employees and Access Persons with a copy of this Code and initially and periodically informing them of their duties and obligations thereunder; c) Designating, as desired, appropriate personnel to review transaction and holdings reports submitted by Access Persons; 20 d) Reviewing and considering pre-approval requests from Access Persons and Investment Persons and setting forth in detail the rationale for any approvals granted to such Access Persons or Investment Persons; e) Maintaining or supervising the maintenance of all records required by this Code; f) Preparing listings of all transactions effected by any Access Person within fifteen (15) days of the date on which the same security was held, purchased or sold by an Advisory Client; g) Issuing any interpretation of this Code that may appear consistent with the objectives of this Code; h) Conducting such investigations, including scrutiny of the listings referred to in this Section 17(f) above, as shall reasonably be required to detect and report any apparent violations of this Code to the Code of Ethics Oversight Committee and to the Directors of the affected Oppenheimer Funds; i) Submitting a quarterly report to the Board of Directors of each potentially affected Oppenheimer Fund of any violations of this Code and the sanction imposed as a result; any transactions suggesting the possibility of a violation; any interpretations issued by and any exemptions or waivers found appropriate by the Code Administrator; and any other significant information concerning the appropriateness of this Code. j) Submitting a written report at least annually to the Board of Directors of each Oppenheimer Fund that: (i) describes any issues arising under the Code since the last report to the Board, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations; (ii) summarizes existing procedures concerning personal investing and any changes in the procedures made during the previous year; (iii) identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices or developments in applicable laws or regulations; (iv) reports with respect to the implementation of this Code through orientation and training programs and on-going reminders; and (v) certifies that the each Oppenheimer Fund, OFI, CAMC, any OFI subsidiary or directly-controlled affiliate (as applicable), and OFDI, as applicable, has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. 21 17. RECORDKEEPING The Code Administrator shall maintain and cause to be maintained in an easily accessible place, the following records: a) A copy of any Code adopted pursuant to Rule 17j-1 under the Investment Company Act or Rule 204A-1 under the Advisers Act which has been in effect during the most recent five (5) year period; b) A record of any violation of any such Code, and of any action taken as a result of such violation, within five (5) years from the end of the fiscal year of OFI in which such violation occurred; c) A copy of all acknowledgements by Access Persons during the most recent five (5) year period; d) A copy of each report made by a Access Person, as well as trade confirmations and/or account statements that contain information not duplicated in such reports, within five (5) years from the end of the fiscal year of OFI in which such report is made or information is provided, the first two (2) years in an easily accessible place; e) A copy of each report made by the Code Administrator within five (5) years from the end of the fiscal year of OFI in which such report is made or issued, the first two (2) years in an easily accessible place; f) A list, in an easily accessible place, of all persons who are, or within the most recent five (5) year period have been Access Persons or were required to make reports pursuant to Rules 17j-1 and 204A-1 and this Code or who are or were responsible for reviewing these reports; and g) A record of any decision, and the reasons supporting the decision, to permit an Access Person or Investment Person to acquire a Private Placement or Initial Public Offering security, for at least five (5) years after the end of the fiscal year in which permission was granted. 18. AMENDMENTS Any material changes to this Code must be approved by the Board of Directors or Trustees of each Oppenheimer Fund, including a majority of the Independent Directors or Trustees, within six months after the change has been adopted by OFI. - ------------------------------------------------------------------------- 22 This AMENDED AND RESTATED CODE OF ETHICS DATED NOVEMBER 30, 2007, has been adopted by: Boards I, II and III of the Oppenheimer Funds OppenheimerFunds, Inc. OppenheimerFunds Distributor, Inc. Centennial Asset Management Corporation Oppenheimer Real Asset Management, Inc. OFI Institutional Asset Management, Inc. HarbourView Asset Management Corporation Trinity Investment Management Corporation OFI Private Investments, Inc. OFI Trust Company 23 EX-99.P.23 18 file018.txt TURNER COE TURNER INVESTMENT PARTNERS, INC. TURNER INVESTMENT MANAGEMENT LLC CODE OF ETHICS AND PERSONAL TRADING POLICY Dated February 1, 2005 STANDARDS OF BUSINESS CONDUCT: Turner Investment Partners, Inc. and Turner Investment Management LLC ("Turner") each owes a fiduciary duty to all of its clients. All Turner employees have an affirmative duty of utmost good faith to deal fairly, to act in our clients' best interests at all times, and to make full and fair disclosure of material facts. To fulfill this duty: 1. We shall conduct business in a fair, lawful, and ethical manner; 2. We at all times shall furnish individualized, competent, disinterested, and continuous advice to our clients regarding the sound management of their investments; 3. We shall develop a reasonable, independent basis for our investment advice; 4. We shall offer our clients only those pre-approved products/services that have been determined to be appropriate for their specific needs and which provide fair value; 5. We shall respect and protect the right to privacy of all our clients by keeping all information about clients (including former clients) in strict confidence; 6. We shall seek to obtain best execution on behalf of each client, and brokers are selected with a view to obtaining best execution. Turner believes that best execution is typically achieved not by negotiating the lowest commission rate, but by seeking to obtain the best overall result (including price, commission rate and other relevant facts) for the client, all as more fully set forth in Turner's Best Execution Policy in its Compliance Manual; 7. We shall avoid and eliminate all actual or apparent conflicts of interest because we owe our clients undivided loyalty. When a conflict cannot be avoided or eliminated, full and fair disclosure of the conflict shall be made to the parties involved; 8. Management of Turner shall lead by example, creating an environment encouraging honesty and fair play by all employees in the conduct of his or her duties; and 9. Management of Turner shall review (and find acceptable) the qualifications, experience and training of all individuals prior to assigning any supervisory responsibilities. COMPLIANCE WITH FEDERAL SECURITIES LAWS: Employees must comply with all applicable federal securities laws. Employees shall have and maintain sufficient knowledge of all laws that govern their duties and profession. Compliance with applicable federal securities laws is an essential part of upholding our fiduciary duty to our clients. Employees are not permitted in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by a client: 1. To defraud such client in any manner; 2. To mislead such client, including by making a statement that omits material facts; 3. To engage in any act, practice or course of conduct which operates or would operate as a fraud or deceit upon such client; 4. To engage in any manipulative practice with respect to such client; or 5. To engage in any manipulative practice with respect to securities, including price manipulation. PREVENTION OF MISUSE OF MATERIAL NONPUBLIC INFORMATION: To guarantee professional, candid, and confidential relationships to our clients, employees shall maintain the confidentiality of all information entrusted to us by our clients. Material, nonpublic information about Turner's securities recommendations and about client securities holdings and transactions shall not be misused in violation of the Securities Exchange Act of 1934 or the Investment Advisers Act of 1940, or the rules and regulations thereunder. This information is not to be used for personal gain or to be shared with others for their personal benefit. Turner's policy and procedures for the prevention of insider trading set forth elsewhere in its Compliance Manual are incorporated into this Code of Ethics. REPORTING OF PERSONAL INVESTMENTS AND TRADING (PERSONAL TRADING POLICY): A. Personal investments: An employee should consider himself the beneficial owner of those securities held by him, his spouse, his minor children, a relative who shares his house, or persons by reason of any contract, arrangement, understanding or relationship that provides him with sole or shared voting or investment power. B. Employees are barred from purchasing any securities (to include Common Stock and related Options, Convertible securities, Options, or Futures on Indexes) in which the firm has either a long or short position. If an employee owns a position in any security, he must get written pre-clearance from the Chairman or President to add to or sell the position. ALL SECURITY TRANSACTIONS (BUY OR SELL) REQUIRE WRITTEN CLEARANCE IN ADVANCE. Approval is good for 48 hours; if a trade has not been executed, subsequent approvals are necessary until the trade is executed. The Exception Committee (the Chairman, Vice Chairman, President, and Director of Compliance) must approve any exceptions to this rule. C. Employees may not purchase initial public offerings. Transactions in private placements/limited partnerships and exchange traded funds (regardless of legal structure) require written pre-clearance. Mutual fund transactions are excluded from pre-clearance, but must be reported (including in particular all mutual funds for which Turner serves as investment adviser or sub-adviser). Transactions in individual securities in IRA's, and Rollover IRA's that are self-directed (i.e. stocks or bonds, not mutual funds), and ESOP's (employee stock ownership plans) require pre-clearance. Pre-clearance is not required for non-volitional transactions, including automatic dividend reinvestment and stock purchase plan acquisitions, gifts of securities over which an employee has no control of the timing of the gift, and transactions that result from corporate action applicable to all similar security holders (such as stock splits, tender offers, mergers, stock dividends, etc.). Non-volitional transactions should be reported. D. Blackout Restrictions: Employees are subject to the following restrictions when their purchases and sales of securities coincide with trades of Turner Clients (including investment companies): 1. Purchases and sales within three days FOLLOWING a client trade. Employees are prohibited from purchasing or selling any security within three calendar days after a client transaction in the same (or a related) security. The Exception Committee must approve exceptions. If an employee makes a prohibited transaction without an exception the employee must unwind the transaction and relinquish any gain from the transaction to charity. 2. Purchases within seven days BEFORE a client purchase. An employee who purchases a security within seven calendar days before a client purchases the same (or a related) security is prohibited from selling the security for a period of six months following the client's trade. The Exception Committee must approve exceptions. If an employee makes a prohibited sale without an exception within the six-month period, the employee must relinquish any gain from the transaction to charity. 3. Sales within seven days BEFORE a client sale. An employee who sells a security within seven days before a client sells the same (or a related) security must relinquish to charity the difference between the employee's sale price and the client's sale price (assuming the employee's sale price is higher). The Exception Committee must approve exceptions. 4. These restrictions do not apply to proprietary investment partnerships for which the firm acts as an adviser in which the officers and employees of the adviser have an equity interest of less than 50%. E. Short Term Trading Rule - Employees may not take PROFITS in any individual security in less than 60 days (includes Options, Convertibles and Futures). If an individual must trade with in this period, the Exception Committee must grant approval or the employee must relinquish such profits to charity. The closing of positions at a loss is not prohibited. Options that are out of the money may be exercised in less than 60 days. Turner's proprietary partnerships may take profits in less than 60 days. Mutual fund transactions are excluded from this rule. F. Reporting: Consistent with the requirements of the Investment Advisers Act of 1940 - Rules 204-2 (a)(2) and (a)(3), and with the provisions of Rule 17j-1 of the Investment Company Act of 1940, all employees are considered access persons and must submit the following: 1. INITIAL HOLDINGS REPORT - within ten (10) days of hire, all new employees are required to file a signed and dated Initial Holdings Report, setting forth the title, type of security and exchange ticker symbol or CUSIP number, the number of shares, and the principal amount of each covered security in which they have any direct or indirect beneficial ownership; and the name of any broker, dealer, or bank with whom an account is maintained in which any covered securities are held for their direct or indirect benefit. The information must be current as of a date no more than 45 days prior to the date the person becomes an employee. 2. ANNUAL HOLDINGS REPORT - on an annual basis, all employees are required to file within thirty (30) days of year-end a signed and dated Annual Holdings Report listing all securities beneficially owned as of December 31st. Within this Report, all employees must list the title and exchange ticker symbol or CUSIP number, the number of shares, and the principal amount of each covered security in which they had any direct or indirect beneficial ownership; and the name of any broker, dealer, or bank with whom an account was maintained in which any covered securities were held for their direct or indirect benefit. The information must be current as of a date no more than 45 days prior to the date the report was submitted. 3. QUARTERLY TRANSACTION REPORTS - All employees must submit within ten (10) days following the end of each calendar quarter a signed and dated report listing all transactions executed during that preceding calendar quarter, along with duplicate statements/confirmations. For each transaction, employees are required to list the date of the transaction, the title, type of security, and exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each covered security involved; the nature of the transaction (i.e., purchase, sale, or other type of acquisition/disposition); the price at which the transaction was effected; the name of any broker, dealer, or bank through which the transaction was effected; and the date the employee submits the report. Statements are reviewed by one of the firm's Series 24 principals. Brokerage, IRA's, Rollover IRA's (which are self-directed), ESOP's, private placements, and limited partnerships must all be reported as personal trading. 4. ANNUAL CERTIFICATION - All employees are required to certify annually to the Compliance Department that: (i) they have read and understand the Personal Trading Policy/Code of Ethics; (ii) they have complied with all requirements of the Personal Trading Policy/Code of Ethics; and (iii) they have reported all transactions required to be reported under the Personal Trading Policy/Code of Ethics. G. Violation of the Personal Investments/Code of Ethics policy may result in disciplinary action, up to and including termination of employment. CFA INSTITUTE CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT: Turner has incorporated the CFA Institute Code of Ethics and Standards of Professional Conduct into its Code of Ethics. The CFA Institute Code and Standards can be found at: HTTP://WWW.CFAINSTITUTE.ORG/PDF/STANDARDS/ENGLISH_CODE.PDF ---------------------------------------------------------- CODE VIOLATIONS AND REPORTING OF CODE VIOLATIONS: Violation of the Code of Ethics may result in disciplinary action, up to and including termination of employment. Employees shall promptly report any violations of the Code of Ethics to Turner's Chief Compliance Officer. Such reports will be treated confidentially to the extent permitted by law and investigated promptly and appropriately. The sooner the Compliance Department learns of a violation, the sooner Turner can take corrective measures. ACKNOWLEDGED RECEIPT OF CODE OF ETHICS: Turner will make available to all employees a copy of its Code of Ethics and any material amendments. Employees are required to acknowledge, in writing, their receipt of the code and any material amendments. ANNUAL REVIEW: The Chief Compliance Officer will review, at least annually, the adequacy of the Code and the effectiveness of its implementation. TRADING DISCLOSURES AND HOLDINGS REPORT POLICY AS YOU ARE AWARE, TURNER MUST COMPLY WITH THE INDUSTRY'S ETHICS RULES. WE MAY HAVE TAKEN A BROADER STANCE THAN OTHER COMPANIES REGARDING TRADING DISCLOSURES AND HOLDINGS REPORTING, BUT IT IS THIS STRICT CODE OF ETHICS AND ATTENTION TO DETAIL THAT HAS MADE TURNER WHAT IT IS TODAY, AN EMPLOYER OF CHOICE AND LEADER WITHIN OUR INDUSTRY. AS EMPLOYEES OF TURNER, WE AGREE TO ABIDE BY INTERNAL POLICIES AND PROCEDURES. WE MUST BE AWARE THAT QUARTERLY TRADING DISCLOSURES AND HOLDINGS REPORTING IS A REQUIREMENT OF OUR EMPLOYMENT AT TURNER. IT IS YOUR INDIVIDUAL RESPONSIBILITY TO PROVIDE THIS INFORMATION, WITHIN 10 DAYS OF THE CLOSE OF THE QUARTER END. WE HOLD SPECIAL APPRECIATION FOR THOSE INDIVIDUALS WHO HAVE COMPLIED STRICTLY AND CONSISTENTLY, AND SUPPORT THEIR GOOD EFFORTS IN THAT REGARD. WE WILL NOT TOLERATE A VIOLATION OF THIS POLICY; THEREFORE A PENALTY MUST BE SET FOR THOSE WHO CONSCIOUSLY DISREGARD THIS POLICY. ANY EMPLOYEE WHO HAS NOT MET THE REQUIREMENTS OF THE TRADING DISCLOSURES AND HOLDINGS REPORT POLICY AND PROVIDED SUCH INFORMATION TO THE COMPLIANCE DEPARTMENT BY THE CLOSE OF BUSINESS ON THE 10TH DAY AFTER QUARTER END WILL BE SUBJECT TO DISCIPLINARY ACTION. SUCH DISCIPLINARY ACTION MAY INCLUDE A WRITTEN DISCIPLINARY LETTER TO BE INCLUDED IN THE EMPLOYEE'S PERMANENT EMPLOYMENT RECORDS OR A REQUIREMENT THAT THE EMPLOYEE LEAVE THE PREMISES AND STAY AWAY WITHOUT PAY UNTIL THE REPORT HAS BEEN FILED. FUTURE DISREGARD OF THIS POLICY BY ANY INDIVIDUAL WILL RESULT IN FURTHER DISCIPLINARY ACTION (INCLUDING THE POSSIBILITY OF TERMINATION), THE SEVERITY DEPENDING ON THE LIABILITY SUCH DISREGARD PLACES UPON TURNER, AMONG OTHER FACTORS. LAST AMENDED: FEBRUARY 1, 2005 EX-99.Q 19 file019.txt POWERS OF ATTORNEY POWER OF ATTORNEY Each of the undersigned constitutes Jeffrey W. Kletti, Brian Muench, H. Bernt von Ohlen, and Stewart W. Gregg, individually, as his or her true and lawful attorney, with full power to each of them to sign for him or her, in his or her name and in his or her capacity as a trustee, any registration statement on Form N-1A or Form N-14 (file no. 333-83423) (the "Registration Statement") and any and all amendments thereto, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940 for the purpose of complying with the registration or other filing requirements set forth therein. This Power of Attorney authorizes the above individuals to sign the name of each of the undersigned and will remain in full force and effect until specifically rescinded by the undersigned. Each of the undersigned specifically permits this Power of Attorney to be filed, as an exhibit to the Registration Statement, any amendment to the Registration Statement, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940. IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand as of this 13th day of July, 2007. /s/ Peter R. Burnim Peter R. Burnim /s/ Peggy L. Ettestad Peggy L. Ettestad /s/ Roger A Gelfenbien Roger A. Gelfenbien /s/ Dickson W. Lewis Dickson W. Lewis /s/ Claire R. Leonardi Claire R. Leonardi /s/ Peter W. McClean Peter W. McClean /s/ Arthur C. Reeds III Arthur C. Reeds III POWER OF ATTORNEY The undersigned constitutes Brian Muench, H. Bernt von Ohlen, and Stewart W. Gregg, individually, as his true and lawful attorney, with full power to each of them to sign for him, in his name and in his capacity as a trustee, any registration statement on Form N-1A or Form N-14 (file no. 333-83423) (the "Registration Statement") and any and all amendments thereto, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940 for the purpose of complying with the registration or other filing requirements set forth therein. This Power of Attorney authorizes the above individuals to sign the undersigned's name and will remain in full force and effect until specifically rescinded by the undersigned. The undersigned specifically permits this Power of Attorney to be filed, as an exhibit to the Registration Statement, any amendment to the Registration Statement, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 13th day of July, 2007. /s/ Jeffrey W. Kletti Jeffrey W. Kletti POWER OF ATTORNEY ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST Each of the undersigned constitutes Jeffrey W. Kletti, Brian Muench, H. Bernt von Ohlen, and Stewart W. Gregg, individually, as his or her true and lawful attorney, with full power to each of them to sign for him or her, in his or her name and in his or her capacity as a trustee, any registration statement on Form N-1A or Form N-14 (file no. 333-83423) (the "Registration Statement") and any and all amendments thereto, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940 for the purpose of complying with the registration or other filing requirements set forth therein. This Power of Attorney authorizes the above individuals to sign the name of each of the undersigned and will remain in full force and effect until specifically rescinded by the undersigned. Each of the undersigned specifically permits this Power of Attorney to be filed, as an exhibit to the Registration Statement, any amendment to the Registration Statement, and any other filing of the Allianz Variable Insurance Products Trust filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940. IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand as of this 9th day of April, 2008. /s/ Robert DeChellis ______________________ Robert DeChellis EX-99.R 20 file020.txt ORGANIZATIONAL CHART PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT ALLIANZ SE AFFILIATED COMPANIES as of 12-31-2007 The numbers in the list below indicate levels of ownership. Each company is either wholly-owned or majority-owned by the company that numerically proceeds it on the list. For example, a level (2) company either wholly-owns or majority-owns all the level (3) companies listed below it. Therefore, Allianz of America, Inc. either wholly-owns or majority-owns Allianz Investment Company, LLC; Allianz Private Equity Partners, Inc; Allianz Technical Service, Inc.; Allianz Life Insurance Company of North America, etc. The state or other sovereign power under which each company is organized is listed in parenthesis at the end of the company name unless the state or sovereign power is not part of the name. If a company is organized in the United States, only the abbreviated state code is included in the parenthesis. (1) Allianz SE (European Company) Allianz Finanzbeteiligungs GmbH Allianz-Agros 6 Vermogensverwaltungsgesellschaft mbH Allianz Global Investors Aktiengesellschaft Allianz Global Investors of America Holdings Inc. (2) Allianz of America, Inc. (DE) (2) Allianz Finance Corporation Delaware (2) Allianz Foundation of North America (3)Allianz Investment Company, LLC (DE) (3)Allianz Private Equity Partners, Inc (DE) (3)Allianz Technical Service, Inc (DE) (3)Allianz Life Insurance Company of North America (MN) (4) Allianz Advisers, LLC (MN)** (4) Allianz Life Financial Services LLC (MN)* (4) AZL PF Investments, Inc. (MN)** (4) Associated Group Benefits, Ltd. (Canadian Federal Corp)** (4) North American London Underwriters, Ltd. (Bermuda)** (4) Allianz Life and Annuity Company (MN)** (4) Allianz Individual Insurance Group, LLC (MN)** (5)CFC Insurance Marketing, LLC (CA) ** (5)Personalized Brokerage Services, LLC (KS)** (5)Sunderland Insurance Services, Inc. (ND)** (5)Roster Financial, LLC (NJ)** (5)The Annuity Store Fin. & Ins. Services, LLC (CA)** (5)AdvisorsIG, LLC (FL)** (5)Pinnacle USA, LLC (NJ)** (5)Ann Arbor Annuity Exchange, LLC (MI)** (5)Professional Planners Marketing Group, LLC (FL)** (5)American Financial Marketing, LLC (MN)** (5)Game Plan Financial Marketing, LLC (GA)** (4) Yorktown Financial Companies, Inc. (IN)** (5)Questar Capital Corporation (MN)** (5)Questar Asset Management (MI)** (5)Questar Agency, Inc. (MN)** (5)Questar Agency of Colorado, Inc. (CO)** (5)Questar Agency of Alabama, Inc. (AL)** (5)Questar Agency of Texas, Inc. (TX)** (5)Questar Agency of Ohio, Inc. (OH)** (5)Questar Agency of Wyoming, Inc. (WY)** (5)Questar Agency of Massachusetts, Inc.(MA)** (5)Questar Agency of New Mexico, Inc, (NM)** (4) Allianz Life Insurance Company of New York (NY)* (4) Delaware Valley Financial Services, LLC (PA)** (4) 5557 Green Farms Road, LLC (DE)** (4) Turnpike Crossing I, LLC (DE)** (4) Turnpike Crossing II, LLC (DE)** (4) Turnpike Crossing III, LLC (DE)** (3)Allianz Income Management Services, Inc. (MN) (3)Allianz of America Corporation (NY) (3)Allianz Global Risks US Insurance Company (CA) (4) Allianz Underwriters Insurance Company (CA) (4) 1738778 Ontario, Inc. (A Canadian Corporation) (4) AIM Underwriting Ltd (A Canadian Corporation) (4) Fireman's Fund Insurance Company (CA) (5)Fireman's Fund Foundation (5)Allianz Cash Pool, LLC (DE) (5)Par Holdings LTD (Bermuda) (5)Life Sales LLC (CA) (5)International Film Guarantors, LLC (CA) (5)International Film Guarantors Reinsurance LTD (Bermuda) (5)International Film Guarantors LTD (UK) (5)Wm. H. McGee & Co. Inc. (NY) (5)Wm. H. McGee & Company of Puerto Rico, Inc. (Puerto Rico) (5)Wm. H. McGee & Company LTD (Bermuda) (5)Fireman's Fund Insurance Company Bermuda (SAC)Limited(Bermuda) (5)Interstate Fire & Casualty Company (IL) (5)Interstate Indemnity Company (IL) (5)Chicago Insurance Company(IL) (5)Fireman's Fund Plus, LLC (DE) (5)Fireman's Fund Financial Services, LLC (DE) (5)The American Insurance Company (OH) (6) Fireman's Fund Insurance Company of Georgia (GA) (6) Fireman's Fund Insurance Company of Hawaii, Inc. (HI) (6) Fireman's Fund Insurance Company of Louisiana (LA) (6) Fireman's Fund Insurance Company of Ohio (OH) (5)American Yonkers Realty Development, Inc. (NY) (5)Fireman's Fund Indemnity Corporation (NJ) (5)American Automobile Insurance Co. (MO) (6) Associated Indemnity Corporation (CA) (5)Vintage Insurance Company (CA) (5)San Francisco Reinsurance Company (CA) (5)National Surety Corporation (IL) (5)Standard General Agency, Inc. (TX) (6) Fireman's Fund County Mutual Insurance Co. (TX) (6) American Standard Lloyds Insurance Co. (TX) (4) Allianz Risk Consultants, LLC (CA) (4) Allianz Aviation Managers, LLC (NY) (3)Allianz Mexico, S.A. Compania De Seguros (Mexico) (3)Allianz Global Investors of America LLC (DE) (4) Allianz Global Investors U. S. Holding LLC (4) Allianz Global Investors U. S. Partners G. P. (5)Allianz-PacLife Partners LLC (6) Pacific Mutual Holding Company (6) Pacific Life Insurance Company (6) Pacific Asset Management LLC (6) Pacific Financial Products, Inc. (5)Allianz Global Investors of America L.P. (6) Allianz Global Investors U.S. Equities LLC (7) Vision Holdings LLC (8) Alpha Vision LLC (9) Alpha Vision Capital Advisors LLC (9) Alpha Vision Capital Management LLC (7) NFJ Management Inc. (8) NFJ Investment Group L.P. (7) Nicholas-Applegate Holdings LLC (8) Nicholas-Applegate Capital Management LLC (9) Nicholas-Applegate Capital Management Limited (8) Nicholas-Applegate Securities LLC (7) Allianz Global Investors NY Holdings LLC (8) Oppenheimer Capital LLC (8) OpCap Advisors LLC (7) Allianz Hedge Fund Partners Holding L.P. (8) Allianz Hedge Fund Partners (8) AHFP Capital (9) Allianz Hedge Fund Partners (Caymen) LLC (6) Allianz Global Investors U.S. Retail LLC (7) Allianz Global Investors Managed Accounts LLC (7) Allianz Global Investors Distributors LLC (8) Allianz Global Investors Advertising Agency Inc. (7) Allianz Global Investors Fund Management LLC (6) PIMCO Japan Ltd. (6) PIMCO Global Advisors (Ireland) Limited (6) PIMCO Global Advisors LLC (7) PIMCO Global Advisors (Resources) Limited (7) PIMCO Australia PTY Ltd. (7) PIMCO Asia PTE Ltd. (7) PIMCO Europe Limited (7) PIMCO Asia Limited (Hong Kong) (6) Pacific Investment Management Company LLC (7) StocksPLUS Management Inc. (7) PIMCO Partners LLC (7) PIMCO Canada Management Inc. (7) PIMCO Canada Holding LLC (8) PIMCO Canada Corp. (6) PIMCO Luxembourg SA (6) Oppenheimer Group, Inc. * Filed separate financial statements with the SEC. ** Not required to file financial statements with the SEC because they to not sell securities products. -----END PRIVACY-ENHANCED MESSAGE-----