Registration Nos. 33-15464
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 18
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
ALLIANZ LIFE VARIABLE ACCOUNT A
- -------------------------------
(Exact Name of Trust)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403-2195
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Name and Address of Agent for Service
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Title and amount of securities being registered:
Individual Single Premium Variable Life Insurance Policies.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on October 1, 1997 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) 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.
Registrant has declared that it has registered an indefinite number or amount of
securities in accordance with Rule 24f-2 under the Investment Company Act of
1940. Registrant filed a Rule 24f-2 Notice for the most recent fiscal year on or
about February 24, 1997.
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
<S> <C>
N-8B-2 Item Caption in Prospectus
1 The Company, The Variable Account
2 The Company
3 Not Applicable
4 Distribution of the Policy
5 The Variable Account
6(a) Not Applicable
(b) Not Applicable
9 Not Applicable
10 Premium Payments
11 Franklin Valuemark Funds
12 Franklin Valuemark Funds
13 Deductions and Charges
14 Premium Payments
15 The Variable Account
16 Franklin Valuemark Funds
17 Account Value, Cash Surrender
Value and Transfer Rights
18 Premium payments
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company
</TABLE>
CROSS REFERENCE TO ITEMS REQUIRED (cont'd)
BY FORM N-8B-2
<TABLE>
<CAPTION>
<S> <C>
N-8B-2 Item Caption in Prospectus
26 The Company
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company
37 Not Applicable
38 Distribution of the Policy
39 Distribution of the Policy
40 Not Applicable
41(a) Distribution of the Policy
42 Not Applicable
43 Not Applicable
44 Premium Payments
45 Not Applicable
46 Account Value, Cash Surrender
Value and Transfer Rights
47 Not Applicable
48 Not Applicable
</TABLE>
CROSS REFERENCE TO ITEMS REQUIRED (cont'd)
BY FORM N-8B-2
<TABLE>
<CAPTION>
<S> <C>
N-8B-2 Item Caption in Prospectus
49 Not Applicable
50 Not Applicable
51 The Company
52 Franklin Valuemark Funds
53 Tax Status
54 Financial Statements
55 Not Applicable
</TABLE>
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Issued By:
Allianz Life Insurance Company
of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
(800) 542-5427
Administered By:
Valuemark Service Center
300 Berwyn Park, P.O. Box 3031
Berwyn, PA 19312
(800) 624-0197
This Prospectus describes a single premium variable life insurance policy
("Policy" or "Valuemark Life") offered by Allianz Life Insurance Company of
North America ("Company"). The Policy has been designed to be used in connection
with estate planning and other insurance needs of individuals.
Upon acceptance, premiums will be allocated to Allianz Life Variable Account A
("Variable Account"), a separate account of the Company. The Variable Account
invests in shares of Franklin Valuemark Funds (the "Trust"). The Trust is a
series fund with twenty-three Funds: the Money Market Fund, the High Income
Fund, the Templeton Global Income Securities Fund, the U.S. Government
Securities Fund, the Zero Coupon Funds -2000, 2005, and 2010, the Growth and
Income Fund, the Income Securities Fund, the Mutual Shares Securities Fund, the
Real Estate Securities Fund, the Rising Dividends Fund, the Templeton Global
Asset Allocation Fund, the Utility Equity Fund, the Capital Growth Fund, the
Mutual Discovery Securities Fund, the Natural Resources Securities Fund, the
Small Cap Fund, the Templeton Developing Markets Equity Fund, the Templeton
Global Growth Fund, the Templeton International Equity Fund, the Templeton
International Smaller Companies Fund and the Templeton Pacific Growth Fund.
Prior to May 1, 1997, the Natural Resources Securities Fund was known as the
Precious Metals Fund. See "Highlights" and "Tax Status" for a discussion of
owner control of the underlying investments in a variable life policy.
It may not be advantageous to purchase the Policy as a replacement for another
type of life insurance.
The Policy's single premium requirement is such that Policies issued on or after
June 21, 1988 are modified endowment contracts. Loan proceeds and/or surrenders
from modified endowment contracts are fully taxable to the extent of income in
the Policy and may be subject to an additional 10% federal income tax penalty.
(See "Tax Status.")
The Company assesses a sales load through the Deferred Issue Charge. (See
"Deductions and Charges".)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, COUNTRY, OR JURISDICTION IN WHICH THE OFFERING IS UNAUTHORIZED. NO SALES
REPRESENTATIVE, DEALER OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY A CURRENT PROSPECTUS FOR
FRANKLIN VALUEMARK FUNDS. In the State of Oregon, all references to "Franklin
Valuemark Life" refer to "Valuemark Life."
Dated: October 1, 1997
Table of Contents Page
DEFINITIONS....................................... 3
SUMMARY........................................... 3
THE COMPANY....................................... 5
THE VARIABLE ACCOUNT.............................. 6
FRANKLIN VALUEMARK FUNDS ......................... 6
General.......................................... 7
Substitution of Securities....................... 7
PREMIUM PAYMENTS ................................. 7
Single Premium................................... 7
Grace Period..................................... 7
Reinstatement.................................... 7
Allocation of Premium............................ 8
DEDUCTIONS AND CHARGES............................ 8
Mortality and Expense Risk Charge ............... 8
Administrative Charge............................ 8
Cost of Insurance ............................... 8
Deferred Issue Charge ........................... 9
Income Tax Charge ............................... 9
Transfer Fee..................................... 9
Trust Annual Expenses ........................... 10
DEATH BENEFIT..................................... 11
Death Benefit.................................... 11
Variable Insurance Amount ....................... 11
Guaranteed Death Benefit ........................ 11
ACCOUNT VALUE, CASH SURRENDER
VALUE AND TRANSFER RIGHTS ....................... 11
Account Value ................................... 11
Method of Determining
Sub-Account Values ............................. 11
Cash Surrender Value ............................ 11
Transfer Rights ................................. 12
LOAN PROVISIONS .................................. 12
Policy Loan ..................................... 12
Effect of a Loan ................................ 12
Payment of Interest, Loan Repayment
and Policy Lapsation ........................... 13
OWNERSHIP......................................... 13
Owner............................................ 13
Transfer of Ownership............................ 13
Assignment....................................... 13
Page
BENEFICIARY PROVISIONS ........................... 13
Beneficiary...................................... 13
Change of Beneficiary............................ 13
Death of Beneficiary............................. 13
DELAY OF PAYMENTS................................. 13
MANAGEMENT OF THE COMPANY ........................ 14
ADMINISTRATION OF THE POLICIES.................... 14
TAX STATUS ....................................... 15
Introduction..................................... 15
Diversification ................................. 15
Tax Treatment of the Policy ..................... 16
Policy Proceeds.................................. 16
Tax Treatment of Loans and Surrenders............ 16
Multiple Policies................................ 17
Tax Treatment of Assignments .................... 17
Qualified Plans.................................. 17
VARIABLE ACCOUNT VOTING
PRIVILEGES....................................... 17
Disregard of Voting Instructions ................ 18
DISTRIBUTION OF THE POLICY........................ 18
REPORTS TO OWNERS ................................ 18
LEGAL PROCEEDINGS ................................ 19
EXPERTS........................................... 19
LEGAL OPINIONS.................................... 19
FINANCIAL STATEMENTS ............................. 19
APPENDIX A
Illustration of Policy Values ................... 109
APPENDIX B
Table of Net Single Premium Factors.............. 116
<PAGE>
Definitions
ACCOUNT VALUE - The sum of the Sub-Account values and the Loan Account value
attributable to the Policy.
ATTAINED AGE - Age last birthday as of the most recent Policy Anniversary.
BENEFICIARY, CONTINGENT BENEFICIARY - The person or persons who will receive any
death benefit. The Contingent Beneficiary, if any, will become the Beneficiary
should the Beneficiary die prior to the date of death of the Insured.
CASH SURRENDER VALUE - The Account Value of the Policy less the sum of the
uncollected portion of any Deductions or accrued Deductions and any
Indebtedness.
DEDUCTIONS - Charges levied by the Company in connection with the Policy.
ELIGIBLE FUNDS - Those investments available under the Policy.
GENERAL ACCOUNT - The general investment account of the Company which contains
all of the Company's assets, except for the Variable Account and other separate
accounts.
GUARANTEED DEATH BENEFIT - The Company guarantees that the Policy will remain in
force regardless of investment experience, unless the Indebtedness exceeds the
Account Value less uncollected Deductions. If there is no Indebtedness, the
Policy cannot lapse even if the Account Value is $0.
INDEBTEDNESS - The amount of any existing Policy loans plus the pro-rata portion
of any accrued interest.
INSURED - The person whose life is covered by the Policy.
ISSUE AGE - Attained Age on the Policy Date.
ISSUE DATE - The month, day and year that underwriting is completed and the
Company issues the Policy.
LOAN ACCOUNT - That portion of the Company's General Account that contains
Account Values attributable to Policy loans.
OWNER, JOINT OWNER, CONTINGENT OWNER - The Owner is the person having all rights
under the Policy. Joint Owners are two or more natural persons who own the
Policy equally with a right of survivorship. The Contingent Owner is the person
or persons who will own the Policy following the Owner's death or upon the death
of all the Joint Owners.
POLICY DATE - The date when the Insured's life is covered under the Policy.
POLICY PROCESSING DATE - The Policy Date and the same day of the month as the
Policy Date at the end of each successive 3-month period, (or, if that day
should fall on a day beyond the end of any month, then the first day of the next
month). The Policy Processing Date is when the Company deducts charges and
recalculates the death benefit.
POLICY PROCESSING PERIOD - A period of time commencing on any Policy Processing
Date and ending on the day preceding the next Policy Processing Date.
POLICY YEAR, POLICY ANNIVERSARY - The first Policy Year starts on the Policy
Date. Future Policy Years start on the same month and day in each subsequent
year, known as a Policy Anniversary.
SERVICE OFFICE - The Company's Valuemark Service Center shown on the cover page.
SUB-ACCOUNT - A segment of the Variable Account. Each Sub-Account is invested in
shares of a Fund of an Eligible Investment.
VALUATION DATE - The Variable Account will be valued each day that the New York
Stock Exchange is open for trading which is Monday through Friday, except for
normal business holidays.
VALUATION PERIOD - The period commencing at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate account maintained by the Company into which
premiums for the Policy and certain other policies are allocated. The Variable
Account has been designated "Allianz Life Variable Account A."
Summary
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The Policy
The Policy is a single premium variable life insurance policy. Upon acceptance,
the premium is allocated to the Variable Account. During the Free-Look Period,
the premium will be allocated to the Money Market Sub-Account (see "Free-Look
Period").
The Policy provides life insurance coverage on the Insured. The Company
guarantees that the Policy will remain in force regardless of investment
experience, unless Indebtedness exceeds the Account Value less the uncollected
Deductions. If there is no Indebtedness, the Policy cannot lapse even if the
Account Value is $0.
While the Policy is in force, the Account Value and, under certain
circumstances, the death benefit, will vary with the investment experience of
the Variable Account. However, as long as the Policy is in force without loan,
the death benefit will never be less than the face amount of insurance at issue.
During the life of the Insured, the Owner can surrender the Policy for the Cash
Surrender Value. The Company does not guarantee any minimum Cash Surrender
Value.
The Policy has been designed to comply with the definition of life insurance
contained in Section 7702 of the Internal Revenue Code of 1986, as amended (the
"Code"). However, the law in this regard is very complex and unclear. While
every attempt has been made to comply, there is the risk that the Internal
Revenue Service will not concur with the Company's interpretations of Section
7702 that were made in determining such compliance. For a further discussion,
see "Tax Status - Tax Treatment of the Policy."
Limitations on Surrenders and Loans
The Code alters the tax treatment accorded to loans and certain distributions
from life insurance policies which are deemed to be "modified endowment
contracts."
The Policy's single premium requirement is such that Policies issued on or after
June 21, 1988 are modified endowment contracts.
For modified endowment contracts, partial or full surrenders and/or loan
proceeds are taxable to the extent of income in the Policy. Such distributions
are deemed to be on a last-in, first-out basis, which means the taxable income
is distributed first. Loan proceeds and/or surrender payments will also be
subject to an additional 10% federal income tax penalty applied to the income.
The penalty shall not, however, apply to any distribution: (1) made on or after
the date on which the taxpayer reaches age 591/2; (2) which is attributable to
the taxpayer becoming disabled (within the meaning of Section 72(m)(7) of the
Code); or (3) which is part of a series of substantially equal periodic payments
made (not less frequently than annually) for the life (or life expectancy) of
the taxpayer or the joint lives (or joint life expectancies) of such taxpayer
and his beneficiary. Policy Owners should consult a tax adviser regarding the
possible tax consequences of loans and/or surrenders from the Policy. (See "Tax
Status - Tax Treatment of Loans and Surrenders.") The Code further provides that
multiple modified endowment contracts which are issued within a calendar year
period to the same policy owner by one company or its affiliates are treated as
one modified endowment contract for purposes of determining the taxable portion
of any loans or distributions. Such treatment may result in adverse tax
consequences including more rapid taxation of the loans or distributed amounts
from such combination of contracts.
For Policies issued prior to June 21, 1988, material modification of the Policy
may result in the Policy being deemed to be a modified endowment contract.
Policy Owners should seek competent tax advice on the tax consequences of
purchasing additional Policies, taking loans, surrendering any Policy issued, or
making any material modification to their Policies. (See "Tax Status".)
THE COST OF INSURANCE CHARGE IS BASED UPON THE COMMISSIONERS 1980 STANDARD
ORDINARY MALE AND FEMALE, SMOKER AND NON-SMOKER MORTALITY TABLES ("1980 CSO
TABLE"). THE MAXIMUM RATE IS 100% OF THE 1980 CSO TABLE AND THE CURRENT RATE IS
APPROXIMATELY 75% OF THE 1980 CSO TABLE.
The Variable Account
The Variable Account is a separate account of the Company which was established
to hold the investments which underlie the Policy. The Variable Account is
divided into Sub-Accounts. Each of the Sub-Accounts is invested solely in the
shares of one of the twenty-three Funds of the Trust. (See "Franklin Valuemark
Funds.")
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable life insurance policy will not be treated as life insurance for
tax purposes if the owner of the policy has excessive control over the
investment underlying the policy. The issuance of such guidelines may require
the Company to impose limitations on the Owner's right to control the
investment. It is not known whether any such guidelines would have a retroactive
effect. (See "Tax Status Diversification.")
Deductions and Charges
The Company makes certain Deductions from the assets of the Variable Account and
the Account Value of the Policy. These Deductions are made for mortality and
expense risks, for premium taxes, for Policy issue costs, for administrative
expenses, for sales charges and for providing life insurance protection.
Mortality and Expense Risk Charge - This risk charge is equal, on an annual
basis, to 0.60% of the average daily net assets of each Sub-Account and is
deducted on each Valuation Date from the Sub-Account.
Administrative Charge - This charge is equal, on an annual basis, to 0.15% of
the average daily net assets of each Sub-Account and is deducted on each
Valuation Date from the Sub-Account.
Deferred Issue Charge - When the single premium is received by the Company, a
Deferred Issue Charge is accrued. It is for premium taxes (2.5% of the single
premium), sales charge (4.0% of the single premium) and Policy issue charge
(0.5% of the single premium). For Policies issued in the state of California
only, the Deferred Issue Charge is for premium taxes (2.35% of the single
premium); sales charge (4.15% of the single premium); and Policy issue charge
(0.5% of the single premium). This charge is deducted in ten equal annual
deductions on succeeding Policy Anniversaries for the first ten Policy Years. If
the Policy is surrendered before the full amount is deducted, the uncollected
portion of this charge will be deducted from the proceeds.
Cost of Insurance - On each Policy Processing Date, the Company deducts from the
Policy's Account Value the cost of insurance for the past Policy Processing
Period. This charge provides death benefit protection for the period.
Transfer Fee - Under certain circumstances, there may be assessed a transfer fee
when an Owner transfers values from one Sub-Account to another (see "Transfer
Fee").
Trust Annual Expenses - The Managers and Fund Administrators for the Trust are
paid fees for their services based upon each Fund's net assets. (See "Deductions
and Charges - Trust Annual Expenses" in this Prospectus and the Prospectus for
the Trust.)
Surrenders
The Owner may surrender the Policy for its Cash Surrender Value at any time.
(See "Account Value, Cash Surrender Value and Transfer Rights.")
Free-Look Period
The Policy may be returned within 10 days after it is received (or for a longer
period in states where required) ("Free-Look Period"). In states where required,
the Policy may be returned on the later of 45 days from the date on the
application or 10 days from the date of receipt of the Policy. It can be mailed
or delivered to either the Company or the agent who sold it. Return of the
Policy by mail is effective on being postmarked, properly addressed and postage
prepaid. The returned Policy will be treated as if the Company had never issued
it. The Company will promptly refund the greater of the Policy's Account Value
as of the date the Company received the Policy or the premium paid. Any amounts
refunded by the Company will include all Policy fees and charges, including
charges assessed against the Variable Account assets. The Company will allocate
monies to the Money Market Sub-Account until the expiration of the Free-Look
Period. Upon the expiration of the Free-Look Period, the Sub-Account value of
the Money Market Sub-Account will be allocated to the Sub-Account(s) in
accordance with the selection made by the Owner.
Exchange Provisions
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The Policy may be exchanged for a policy with benefits that do not vary with the
investment results of a separate account. The exchange must be elected within 24
months from the Issue Date. No evidence of insurability will be required as long
as the benefits under the new policy are equal to or less than the benefits
under the Policy at the time of exchange.
The Company
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Allianz Life Insurance Company of North America (the "Company") is a stock life
insurance company organized under the laws of the state of Minnesota in 1896.
The Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets
throughout the world. The Company offers fixed and variable life insurance and
annuities, and group life, accident and health insurance.
NALAC Financial Plans, LLC is a wholly-owned subsidiary of the Company. It
provides marketing services for the Company and is the principal underwriter of
the Policy. NALAC Financial Plans, LLC is reimbursed for expenses incurred in
the distribution of the Policies.
Administration for the Policy is provided at the Company's Service Office:
Valuemark Service Center, 300 Berwyn Park, P.O. Box 3031, Berwyn, Pennsylvania
19312,
(800) 624-0197.
The Variable Account
- -------------------------------------------------------------------------------
The Board of Directors of the Company established the Variable Account on May
31, 1985. The Variable Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940,
as amended (the "1940 Act").
The assets of the Variable Account are the property of the Company. However, the
assets of the Variable Account equal to the reserves and other policy
liabilities with respect to the Variable Account are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the Policies,
credited to or charged against the Variable Account without regard to other
income, gains or losses of the Company. The Company's obligations arising under
the Policies are general corporate obligations.
The Variable Account meets the definition of a "separate account" under the
federal securities laws.
The Variable Account is divided into Sub-Accounts with the assets of each
Sub-Account invested in one Fund of Franklin Valuemark Funds. Franklin Valuemark
Funds is comprised of twenty-three Funds.
Franklin Valuemark Funds
- --------------------------------------------------------------------------------
Each of the twenty-three Sub-Accounts of the Variable Account is invested solely
in the shares of one of the Funds of Franklin Valuemark Funds ("Trust"). The
Trust is an open-end management investment company registered under the 1940
Act. The investment objectives of each Fund and a discussion of potential risks
are found in the accompanying prospectus for the Trust, which is included with
this Prospectus.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS FOR THE
TRUST CAREFULLY BEFORE INVESTING.
Franklin Advisers, Inc. serves as each Fund's (except the Rising Dividends Fund,
the Templeton Global Growth Fund, the Templeton Developing Markets Equity Fund,
the Templeton Global Asset Allocation Fund, the Templeton International Smaller
Companies Fund, the Mutual Shares Securities Fund and the Mutual Discovery
Securities Fund) investment manager. The investment manager for the Templeton
Global Growth Fund and the Templeton Global Asset Allocation Fund is Templeton
Global Advisors Limited. The investment manager for the Templeton Developing
Markets Equity Fund is Templeton Asset Management Ltd. The investment manager
for the Templeton International Smaller Companies Fund is Templeton Investment
Counsel, Inc. The investment manager for the Mutual Shares Securities Fund and
the Mutual Discovery Securities Fund is Franklin Mutual Advisers, Inc. Franklin
Advisory Services, Inc. is the investment manager for the Rising Dividends Fund.
All investment managers and subadvisers are referred to collectively as
"Managers."
The Managers are direct or indirect wholly-owned subsidiaries of Franklin
Resources, Inc., a publicly-owned holding company. The Managers, subject to the
overall policies, control, direction, and review of the Board of Trustees of the
Trust, are responsible for recommending and providing advice with respect to
each Fund's investments, and for determining which securities will be purchased,
retained or sold as well as for execution of portfolio transactions. Certain
Managers have retained one or more subadvisers.
Franklin Templeton Services, Inc. ("Fund Administrator") provides certain
administrative facilities and services for the Funds.
Franklin Templeton Investor Services, Inc., also a wholly-owned subsidiary of
Franklin Resources, Inc., maintains the records of the Trust's shareholder
accounts, processes purchases and redemptions of shares, and serves as each
Fund's dividend paying agent.
The following Funds are available:
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
FUNDS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005, 2010
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
FUNDS SEEKING CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities Fund
Natural Resources Securities Fund
(formerly, Precious Metals Fund)
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
General
There is no assurance that the investment objectives of any of the Funds will be
met. Owners bear the complete investment risk for Account Values allocated to a
Sub-Account.
Additional Funds and/or additional Eligible Funds may, from time to time, be
made available as investments to underlie the Policy. However, the right to make
such selections will be limited by the terms and conditions imposed on such
transactions by the Company (See "Premium Payments - Allocation of Premium").
Trust shares are issued and redeemed only in connection with variable annuity
contracts and variable life insurance policies issued through separate accounts
of the Company and its affiliates. The Trust does not foresee any disadvantage
to Owners arising out of the fact that the Trust may be made available to
separate accounts which are used in connection with both variable annuity and
variable life insurance products. Nevertheless, the Trust's Board of Trustees
intends 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 thereto. If such a conflict were to occur, one of the
separate accounts might withdraw its investment in the Trust. This might force
the Trust to sell portfolio securities at disadvantageous prices.
Substitution of Securities
- --------------------------------------------------------------------------------
If the shares of any Fund of the Trust should no longer be available for
investment by the Variable Account or, if in the judgment of the Company, the
substitution of shares of any Fund for another would be in the best interests of
Owners in view of the purpose of the Policy, the Company may substitute shares
of another Eligible Fund (or Fund within the Trust). No substitution of
securities in any Sub-Account may take place without prior approval of the
Securities and Exchange Commission and under such requirements as it may impose.
Premium Payments
- --------------------------------------------------------------------------------
Single Premium
The single premium is due on the Policy Date. Before the Policy will take
effect, the application and the premium must be in good order as determined by
the Company's administrative rules. The minimum single premium which the Company
will accept is $20,000.
Grace Period
The Policy will lapse if the total Indebtedness exceeds the Account Value less
the uncollected Deductions. If there is no Indebtedness, the Policy cannot lapse
even if the Account Value equals $0. If the Policy lapses, a grace period of 31
days shall be allowed for the Owner to repay the loan by at least an amount
which provides sufficient Cash Surrender Value to keep the Policy in force for
three Policy Processing Periods. If such loan repayment is not made by the end
of the grace period, the Policy will lapse and all coverage under the Policy
will terminate without value. The Company will mail the notice that the grace
period is in effect to the Owner and any assignee of record to the last known
addresses. The Policy will continue in force during the grace period. If the
Insured dies during the grace period, the death benefit will be the death
benefit in effect immediately prior to the start of the grace period less any
accrued Deductions and less any Indebtedness.
Reinstatement
Subject to the following conditions, the Policy may be reinstated during the
lifetime of the Insured, unless it was surrendered for cash. The requirements
for reinstatement are:
1. the Service Office must receive a properly executed application for
reinstatement;
2. evidence of insurability satisfactory to the Company must be submitted;
3. a minimum premium sufficient to keep the Policy in force for three Policy
Processing Periods must be paid; and
4. any Indebtedness must be paid.
The Policy Date of a reinstated Policy will be the Policy Processing Date on or
next following the date the Company approves the reinstatement application.
For those states that allow it, the suicide and incontestability provisions will
apply from the Policy Date of reinstatement. Otherwise, the suicide and
incontestability provisions will only apply from the initial Policy Date. If the
Policy has been in force for two years during the lifetime of the Insured, it
will be contestable only as to statements made in the reinstatement application.
Allocation of Premium
The premium is allocated to one or more of the Sub-Accounts of the Variable
Account. During the Free-Look Period, the single premium is allocated to the
Money Market Sub-Account.
At the end of the Free-Look Period, the Account Value will be allocated to one
or more of the Sub-Accounts in accordance with the premium allocation on record.
This allocation is not deemed to be a transfer subject to the transfer fee
provision (see "Transfer Fee"). The Company reserves the right to limit the
number of allocations that an Owner can have at any one time. Currently, the
Owner may be invested in up to ten Sub-Accounts initially, and at any one time
throughout the life of the policy.
Deductions and Charges
- --------------------------------------------------------------------------------
The Deductions under the Policy will be made as follows:
Mortality and Expense Risk Charge
The Company deducts a Mortality and Expense Risk Charge from each Sub-Account on
each Valuation Date. This risk charge is equal, on an annual basis, to 0.60% of
the average daily net assets of the Sub-Account. This risk charge compensates
the Company for assuming the mortality and expense risks under the Policy. The
mortality risk assumed by the Company is that the Insureds, as a group, may not
live as long as expected. The expense risk assumed by the Company is that actual
expenses may be greater than those assumed. The Company is responsible for all
administration of the Policies and the Variable Account. The Company expects to
profit from this charge.
Administrative Charge
The Company deducts an Administrative Charge from each Sub-Account on each
Valuation Date. This risk charge is equal, on an annual basis, to 0.15% of the
average daily net assets of the Sub-Account. This charge reimburses the Company
for expenses incurred in the administration of the Policies and the Variable
Account. Such expenses include but are not limited to: confirmations, annual
reports and account statements, maintenance of Policy records, maintenance of
Variable Account records, administrative personnel costs, mailing costs, data
processing costs, legal fees, accounting fees, filing fees, the costs of other
services necessary for Policy Owner servicing and all accounting, valuation,
regulatory and updating requirements.
Cost of Insurance
On each Policy Processing Date, the Company deducts a charge for the Cost of
Insurance for the past Policy Processing Period. This charge is deducted from
the Account Value and provides death benefit protection for the Policy
Processing Period.
This charge is deducted from each Sub-Account in the same proportion that the
Policy's Account Value in the Sub-Account bears to the Policy's non-loaned
Account Value.
The current cost of insurance for a Policy Processing Period is:
1. the current cost of insurance rate, multiplied by
2. the net amount at risk for the Policy Processing Period.
The Company intends to use a current cost of insurance rate which may vary from
time to time. The current rate is approximately 75% of the Commissioners
Standard 1980 Ordinary Male and Female, Smoker and Non-smoker Mortality Tables
("1980 CSO Table"). The current rate varies according to the age of the Insured.
The cost of insurance rate will never be more than the guaranteed maximum cost
of insurance rates. The guaranteed maximum cost of insurance rates vary by sex
(in states where permitted), Attained Age and underwriting class. The guaranteed
maximum cost of insurance rates are shown in the Policy Schedule and are equal
to 100% of the 1980 CSO Table. Owners will be notified of any change, prior to
implementation, in the current rates to be charged.
The net amount at risk is approximately equal to the death benefit minus the sum
of the Cash Surrender Value and the Loan Account Value attributable to the
Policy.
Insurance underwriting is designed to group applicants of the same age and sex
(in states where permitted) into classifications which can be expected to
produce mortality experience consistent with the actuarial structure for that
class.
Deferred Issue Charge
When the single premium is received at the Company, a Deferred Issue Charge is
accrued. The Company deducts this charge in ten equal annual deductions on
succeeding Policy Anniversaries for the first ten Policy Years. If the Owner
surrenders the Policy before the full amount is deducted, the uncollected
portion of this charge is deducted from the Account Value. The Deferred Issue
Charge is for premium taxes (2.5% of the single premium); sales charge (4.0% of
the single premium); and Policy issue charge (0.5% of the single premium). For
policies issued in the state of California only, the Deferred Issue Charge is
for premium taxes (2.35% of the single premium); sales charge (4.15% of the
single premium); and Policy issue charge (0.5% of the single premium).
Premium Taxes - All states and certain jurisdictions, such as cities and
counties, tax premium payments. Premium taxes vary from state to state and are
generally in the range of 2% to 3%.
Sales Charge - This sales charge reimburses the Company for expenses incurred in
connection with the promotion, sale and distribution of the Policy. This charge
from the single premium is not expected to cover the distribution costs. To the
extent that this charge is insufficient to cover the distribution costs, the
Company may make up the difference from the general assets of the Company
including the profit it expects from the Mortality and Expense Risk Charge.
Policy Issue Charge - This charge is designed to cover the administrative
expenses incurred in connection with issuing a Policy. Such expenses include
initial underwriting review, medical examinations, inspection reports, attending
physicians' statements, insurance underwriting costs, Policy issuance costs,
establishing permanent Policy records, preparation of illustrations, preparation
of riders and the initial confirmation of the transaction.
Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the Sub-Accounts of the Variable
Account. The Company reserves the right to assess a charge for such taxes
against the Sub-Accounts if the Company determines that such taxes will be
incurred.
Transfer Fee
Currently, the Company permits twelve transfers per Policy Year without the
imposition of any charge. For transfers in excess of that number the Company
currently charges $25 per transfer (or 2% of the amount transferred, if less).
The transfer fee at any given time will not be set at a level greater than its
cost and will contain no element of profit.
<PAGE>
<TABLE>
<CAPTION>
Trust Annual Expenses
There are deductions from and expenses paid out of the assets of the Funds which are summarized below. The Management and Fund
Administration Fees for each Fund are based on a percentage of that Fund's net assets. See "Franklin Valuemark Funds" in this
Prospectus and "Management" in the Trust prospectus.
The "Management and Fund Administration Fees" below include investment advisory and other management and administrative fees not
included as "Other Expenses" that were paid to the Managers and Fund Administrators to the Trust for the 1996 calendar year except
for Funds with fee waivers or newer Funds without a full year of operations as of December 31, 1996 (see explanatory footnotes
below).
Management
and Fund Other Total Annual
Administration Fees1 Expenses Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund2..................................................... .51% .02% .53%
Growth and Income Fund ................................................ .48% .02% .50%
Natural Resources Securities Fund3..................................... .60% .05% .65%
Real Estate Securities Fund ........................................... .55% .02% .57%
Utility Equity Fund ................................................... .47% .03% .50%
High Income Fund ...................................................... .52% .02% .54%
Templeton Global Income Securities Fund ............................... .56% .05% .61%
Income Securities Fund ................................................ .47% .03% .50%
U.S. Government Securities Fund ....................................... .49% .02% .51%
Zero Coupon Fund - 20004............................................... .38% .02% .40%
Zero Coupon Fund - 20054............................................... .38% .02% .40%
Zero Coupon Fund - 20104............................................... .38% .02% .40%
Rising Dividends Fund ................................................. .75% .01% .76%
Templeton International Equity Fund ................................... .81% .08% .89%
Templeton Pacific Growth Fund ......................................... .89% .10% .99%
Templeton Global Growth Fund .......................................... .88% .05% .93%
Templeton Developing Markets Equity Fund............................... 1.25% .24% 1.49%
Templeton Global Asset Allocation Fund ................................ .80% .06% .86%
Small Cap Fund......................................................... .75% .02% .77%
Templeton International Smaller Companies Fund5........................ 1.00% .16% 1.16%
Capital Growth Fund5................................................... .75% .02% .77%
Mutual Discovery Securities Fund6...................................... .95% .10% 1.05%
Mutual Shares Securities Fund6......................................... .75% .10% .85%
<FN>
1The Fund Administration Fee is a direct expense for the Templeton Global Asset Allocation Fund, the Templeton International
Smaller Companies Fund, the Mutual Discovery Securities Fund and the Mutual Shares Securities Fund; other Funds pay for similar
services indirectly through the Management Fee. See "Management" in the Trust Prospectus for further information regarding
Management and Fund Administration Fees.
2Franklin Advisers, Inc. agreed in advance to waive a portion of its Management Fee and to make certain payments to reduce
expenses of the Money Market Fund during 1996 and is currently continuing this arrangement in 1997. This arrangement may be
terminated at any time. With this reduction, actual Management Fees and Total Annual Expenses of the Money Market Fund for 1996
were 0.41% and 0.43%, respectively of the average daily net assets of the Fund.
3Prior to May 1, 1997, the Natural Resources Securities Fund was known as the Precious Metals Fund.
4Net of management fees waived. Although not obligated to, Franklin Advisers, Inc. has agreed in advance to waive a portion of its
management fees and to make certain payments to reduce expenses of the three Zero Coupon Funds through at least December 31, 1997
such that the aggregate expenses of each Zero Coupon Fund will not exceed 0.40% of each Fund's net assets. Absent the management
fee waivers, for the year ended December 31, 1996, the Total Annual Expenses and Management and Fund Administration Fees
respectively would have been as follows: Zero Coupon Fund - 2000, .62% and .60%; Zero Coupon Fund - 2005, .65% and .63%; and Zero
Coupon Fund - 2010, .65% and .63%. There were no expense reimbursements during 1996 for the Zero Coupon Funds.
5The Templeton International Smaller Companies Fund and the Capital Growth Fund commenced operations May 1, 1996. The expenses
shown are estimated expenses for the Funds for 1997.
6The Mutual Discovery Securities Fund and the Mutual Shares Securities Fund commenced operations November 8, 1996. The expenses
shown are estimated expenses for the Funds for 1997.
</FN>
</TABLE>
<PAGE>
Death Benefit
Death Benefit
The death benefit is the greater of the face amount at the Policy Date or the
variable insurance amount as of the date the Service Office receives proof of
death of the Insured. The death benefit will be paid to the Beneficiary upon
receipt of due proof of the Insured's death. The amount payable will be the
death benefit reduced by any Indebtedness and any accrued Deductions, and
increased by amounts due from riders.
Variable Insurance Amount
The variable insurance amount on the Policy Date equals the face amount.
Thereafter, the variable insurance amount will be the Account Value of the
Policy less the uncollected Deductions multiplied by the net single premium
factor for the Insured's Attained Age and sex (in states where permitted) as of
such date. Appendix B is a Table of Net Single Premium Factors as is also
contained in the Policy.
The amount of insurance purchased by $1.00 decreases with the age of an Insured.
Therefore, the death benefit under such a Policy will decrease unless the
Account Value has increased during the period. Therefore, when divided into the
Account Value of a Policy, it will reduce the death benefit under such a Policy
unless the Account Value has increased at a greater rate than the increase in
the applicable net single premium factor.
Guaranteed Death Benefit
If there is no Indebtedness under the Policy, it will not lapse even if the
Account Value is $0. The Policy will terminate without value, as described in
the Grace Period provision, if Indebtedness on the Policy is greater than the
Account Value less the uncollected Deductions.
Account Value, Cash Surrender Value
and Transfer Rights
- --------------------------------------------------------------------------------
Account Value
On any Valuation Date, the Account Value of the Policy is equal to the sum of
the Sub-Account values and the Loan Account attributable to the Policy.
Method of Determining Sub-Account Values
Sub-Account values will fluctuate in accordance with the investment experience
of the applicable underlying Fund held within the Sub-Account. In order to
determine these Sub-Account values, the Company utilizes Sub-Account valuation
units. The value of a unit applicable during any Valuation Period is determined
at the end of that Period.
When the first shares of the Funds were purchased for the Sub-Accounts, each
Sub-Account valuation unit was valued at $10. The value of a unit within each
Sub-Account on any Valuation Date thereafter is determined by dividing (a) by
(b), where:
(a) is equal to:
1. total value of the net assets in the Sub-Account; minus
2. the daily charge for assuming the mortality and expense risks; minus
3. the daily charge for administrative expenses; plus or minus
4. a charge or credit for any tax provision established for the Sub-Account.
and (b) is the total number of units applicable to that Sub-Account at the end
of the Valuation Period.
A valuation unit may increase or decrease in value from Valuation Date to
Valuation Date.
Cash Surrender Value
- -------------------------------------------------------------------------------
The Policy may be surrendered for its Cash Surrender Value by submitting a
written request to the Service Office. The Cash Surrender Value is equal to the
Account Value of the Policy less the sum of:
1. the uncollected portion of any Deductions or accrued Deductions; and
2. any Indebtedness.
Surrendering the Policy will cancel it. There are no partial surrenders allowed
under the Policy.
This Policy is considered to be a modified endowment contract under the code.
Surrender payments are fully taxable to the extent of income in the Policy and
may further be subject to an additional 10% tax penalty. The penalty shall not
apply, however, to any distribution: (a) made on or after the date on which the
taxpayer reaches age 591/2; (b) which is attributable to the taxpayer becoming
disabled (within the meaning of Section 72(m)(7) of the Code); or (c) which is
part of a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
the joint lives (or joint life expectancies) of such taxpayer and his or her
beneficiary.
Transfer Rights
The Owner may transfer by telephone or written request non-loaned Account Values
among the Sub-Accounts subject to the following:
1. the minimum value that may be transferred from any Sub-Account is $500 (or
the total value if it is less than $500);
2. the deduction from the Account Value of any transfer fee charge that the
Company may assess. The Company currently allows twelve (12) free transfers per
Policy Year. For additional transfers there is a $25 transfer fee (or 2% of the
amount transferred, if less);
3. any limit on the number of transfers per Policy Year that the Company may
impose. Currently the only limits are as set out in 2 above.
Neither the Variable Account nor the Trust is designed for professional market
timing organizations, other entities, or persons using programmed, large or
frequent transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Fund and may be refused. Accounts under common
ownership or control may be aggregated for purposes of transfer limits. In
coordination with the Trust, the Company reserves the right to restrict the
transfer privilege or reject any specific premium allocation request for any
person whose transactions seem to follow a timing pattern.
An Owner may elect to make transfers by telephone. To elect this option the
Owner must do so in writing to the Company. If there are Joint Owners, unless
the Company is informed to the contrary, instructions will be accepted from
either one of the Joint Owners. The Company will use reasonable procedures to
confirm that instructions communicated by telephone are genuine. If it does not,
the Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company tape records all telephone transactions.
Loan Provisions
- --------------------------------------------------------------------------------
Policy Loan
The Owner may borrow money from the Company while the Policy is in effect. The
Policy will be the only security the Company will require for the Policy loan.
The minimum loan amount is $1,000 where permitted by state law. The maximum loan
value is 90% of the Cash Surrender Value. The Company calculates the Cash
Surrender Value as of the end of the Valuation Period during which the loan
request is received in good order at the Service Office. Any existing loan will
be added to the new loan to determine the total loan.
This Policy is considered to be a modified endowment contract under the Code.
Loan payments are fully taxable to the extent of income in the Policy and may
further be subject to an additional 10% tax penalty. The penalty shall not
apply, however, to any distribution: (a) made on or after the date on which the
taxpayer reaches age 591/2; (b) which is attributable to the taxpayer becoming
disabled (within the meaning of Section 72(m)(7) of the Code); or (c) which is
part of a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
the joint lives (or joint life expectancies) of such taxpayer and his or her
beneficiary.
The Code also provides that multiple modified endowment contracts that are
issued within a calendar year period to the same owner by one company or its
affiliates are treated as one modified endowment contract for purposes of
determining the tax consequences of any loans or distributions. Such treatment
may result in adverse tax consequences including more rapid taxation of the
loans or distributed amounts from such combination of policies. Owners should
consult a tax adviser prior to purchasing more than one modified endowment
contract in any calendar year period.
Effect of a Loan
A Policy loan will result in valuation units being redeemed from the
Sub-Accounts and the proceeds being transferred to the Loan Account. The Company
will pay interest on the Loan Account at an annual rate of 4.0%. If the Owner
does not specify from which Sub-Account(s) the loan is to be made, the loan will
be made from the Sub-Accounts in the same proportion as the value in each
Sub-Account bears to the non-loaned Account Value.
A Policy loan, whether or not repaid, will have a permanent effect on the death
benefits and Policy values, because the amount of the Policy loan will not share
in the investment results of the Sub-Accounts in which it had been invested. If
not repaid, the Policy loan will reduce the amount of death benefit and Cash
Surrender Value.
Payment of Interest, Loan Repayment
and Policy Lapsation
The interest rate for a Policy loan is 4.75% annually. The interest is payable
in arrears on each Policy Anniversary for the past Policy Year. If interest is
not paid when it is due, it will be added to the Policy loan and charged the
same interest rate as the Policy loan. The additional interest will be deducted
from the Sub-Accounts in the proportion that the value of each Sub-Account bears
to the non-loaned Account Value.
An Owner may repay all or part of the Policy loan at any time while the Insured
is living. The minimum permissible amount of repayment is $1,000. The repayment
will be transferred from the Loan Account to the Sub-Accounts in accordance with
the Policy Owner's instructions. If no such instructions are on record, the
repayment will be allocated in the proportion that the value of each Sub-Account
bears to the non-loaned Account Value as of the date of repayment.
If the Indebtedness exceeds the Account Value less the uncollected Deductions,
the Company will terminate the Policy. The Company will not do this, however,
until 31 days after it mails notice of intent to terminate. The Company will
notify, at the last known address, the Owner and anyone who holds the Policy as
collateral.
Ownership
- --------------------------------------------------------------------------------
Owner
The Policy is available to Owners age 30 to 80. However, Allianz Life may, at
its sole discretion, waive the age requirement and issue policies to Owners
younger than age 30 or older than age 80. The Owner, any Joint Owner and any
Contingent Owner are named in the application. If more than one person is named
as Owner or Contingent Owner and the designation does not state otherwise, the
Company will treat such persons as Joint Owners with rights of survivorship. Any
designations may be changed by the Owner.
While the Insured is alive, the Owner may exercise all the rights of the Policy
subject to the rights of:
1. any assignee under an assignment filed with the Service Office; and
2. any irrevocably named Beneficiary.
If the Owner dies, the Owner's rights will pass to any surviving Joint Owner(s);
otherwise to any Contingent Owner(s) then alive; otherwise to the Owner's
estate.
Transfer of Ownership
While the Insured is living, the Owner may transfer ownership of the Policy. A
written request, dated and signed by the Owner, must be sent to the Service
Office. The Company may require that the Policy be returned for an endorsement.
The transfer will take effect as of the date the request was signed.
Any transfer of ownership terminates the interest of any existing Contingent
Owner. It does not change the Beneficiary, nor transfer the Beneficiary's
interest. Any change or transfer of ownership is subject to any benefit payment
made by the Company before endorsement.
Assignment
The Owner may assign the Policy. A copy of any assignment must be filed with the
Service Office. The Company is not responsible for the validity of any
assignment. If the Owner assigns the Policy, the Owner's rights and those of any
revocably-named person will be subject to the assignment. An assignment will not
affect any payments the Company may make or actions it may take before such
assignment has been recorded at the Service Office.
Beneficiary Provisions
Beneficiary
The Beneficiary and any Contingent Beneficiary are named in the application.
They may be changed by the Owner.
Change of Beneficiary
While the Insured is living, the Owner may change the Beneficiary. A written
request, dated and signed by the Owner, must be filed at the Service Office.
After the change is recorded, it will take effect as of the date the request was
signed. If the request reaches the Service Office after the Insured dies but
before any benefit payment is made, the change will be valid.
Death of Beneficiary
If all of the named Beneficiaries die prior to the Insured's death, the Company
will pay the death benefit in one sum to the Owner's estate.
Delay of Payments
- --------------------------------------------------------------------------------
The Company will generally pay Policy proceeds within seven business days of
receipt of a completed request for such payment. The Company reserves the right
to suspend or postpone any type of payment from the Variable Account for any
period when:
a. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
b. trading on the New York Stock Exchange is restricted;
c. an emergency exists as a result of which disposal of securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
d. the Securities and Exchange Commission, by order, so permits delay for the
protection of Owners.
The applicable rules of the Securities and Exchange Commission will govern as to
whether the conditions described in (b) and (c) exist.
Management of the Company
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of September 1, 1997, the directors and executive officers of the Company and
their principal occupations for the past 5 years are as follows:
Principal Occupations
Name During the Past Five Years
- --------------------------------------------------------------------------------
<S> <C>
Lowell C. Anderson Chairman, President and Chief Executive Officer
of the Company since October, 1988. From 1985 to
1988, Mr. Anderson was President and Chief Operating
Officer of the Company.
Herbert F. Hansmeyer Chairman of the Board of Allianz of America Corp.
Member of the Board of Management of Allianz -AG,
Munich, Germany, since 1986; formerly Chief Executive
Officer of Allianz Insurance Company, Los Angeles,
California; formerly President and Chief Executive
Officer of FFIC.
Dr. Jerry E. Robertson Former Executive Vice President, 3M/Life Sciences
Sector since November 1988.
Dr. Gerhard Rupprecht Chairman of the Board of Management - Allianz
Lebensversicherungs since 1979.
Michael P. Sullivan President, Chief Executive Officer and Director of
International Dairy Queen, Inc. since 1987.
Michael T. Westermeyer Vice President - Corporate Legal Officer and
Secretary of the Company since April 1997. Formerl
Second Vice President, Senior Counsel and Assistant
Secretary of the Company.
J. Ward Hamlin Vice President - Underwriting of the Company since
1981.
Robert S. James President - Individual Marketing Division of the
Company since March 31, 1995. Previously President
of Financial Markets Division.
Edward J. Bonach Senior Vice President - Chief Financial Officer and
Treasurer of the Company since 1993. Senior Vice
President and Chief Actuary previously.
Ronald L. Wobbeking President - Mass Marketing Division of the Company
since September 1991. Previously Senior Vice
President Mass Marketing.
Rev. Dennis J. Dease President, University of St. Thomas, St. Paul since
July 1991.
James R. Campbell Executive Vice President of Norwest Corporation
since February 1988.
</TABLE>
Administration of the Policies
- --------------------------------------------------------------------------------
While the Company has primary responsibility for all administration of the
Policies and the Variable Account, it has retained the services of Delaware
Valley Financial Services, Inc. ("DVFS" or "Valuemark Service Center") pursuant
to an Administrative Agreement. Such administrative services include issuance of
the Policies and maintenance of Policy Owners' records. The Company pays all
charges and fees assessed by DVFS. DVFS serves as the administrator to various
insurance companies offering variable and fixed annuity and variable life
insurance contracts. The Company's ability to administer the Policies could be
adversely affected should DVFS elect to terminate the Agreement.
Tax Status
- --------------------------------------------------------------------------------
NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to life insurance in general. The
Company cannot predict the probability that any changes in such laws will be
made. Purchasers are cautioned to seek competent tax advice regarding the
possibility of such changes. Section 7702 of the Internal Revenue Code of 1986,
as amended ("Code"), defines the term "life insurance contract" for purposes of
the Code. The Company believes that the Policies to be issued will qualify as
"life insurance contracts" under Section 7702. The Company does not guarantee
the tax status of the Policies. Purchasers bear the complete risk that the
Policies may not be treated as "life insurance" under federal income tax laws.
Purchasers should consult their own tax advisers. It should be further
understood that the following discussion is not exhaustive and that special
rules not described in this Prospectus may be applicable in certain situations.
Introduction
The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. Moreover, the
discussion herein is based upon the Company's understanding of current federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current federal income tax
laws or of the current interpretations by the Internal Revenue Service.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company and its operations form a part of the Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable life insurance policies. The Code provides that a
variable life insurance policy will not be treated as life insurance for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the Policy
as a life insurance contract would result in imposition of federal income tax to
the Owner with respect to earnings allocable to the Policy prior to the receipt
of payments under the Policy. The Code contains a safe harbor provision which
provides that life insurance policies such as the Policies meet the
diversification requirements if, as of the close of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five (55%) percent of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies. There is an exception for securities issued by the U.S. Treasury in
connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (i) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (ii) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that each Fund of the Trust underlying the Policies will be
managed by the Managers for the Trust in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Variable Account will cause the Owner to be treated as the
owner of the assets of the Variable Account, thereby resulting in the loss of
favorable tax treatment for the Policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policy owner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the Owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered as the owner of the assets of the Variable Account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the owner of the assets of the Variable Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Policy in an attempt to maintain favorable tax treatment.
Tax Treatment of the Policy
The Policy has been designed to comply with the definition of life insurance
contained in Section 7702 of the Code. Although some interim guidance has been
provided and proposed regulations have been issued, final regulations have not
been adopted. Section 7702 of the Code requires the use of reasonable mortality
and other expense charges. In establishing these charges, the Company has relied
on the interim guidance provided in IRS Notice 88-128 and proposed regulations
issued on July 5, 1991. Currently, there is even less guidance as to a Policy
issued on a substandard risk basis and thus it is even less clear whether a
Policy issued on such basis would meet the requirements of Section 7702 of the
Code.
While the Company has attempted to comply with Section 7702, the law in this
area is very complex and unclear. There is a risk, therefore, that the Internal
Revenue Service will not concur with the Company's interpretations of Section
7702 that were made in determining such compliance. In the event the Policy is
determined not to so comply, it would not qualify for the favorable tax
treatment usually accorded life insurance policies. Owners should consult their
tax advisers with respect to the tax consequences of purchasing the Policy.
Policy Proceeds
Loan proceeds and/or surrender payments from the Policies are fully taxable to
the extent of income in the Policy and may further be subject to an additional
10% federal income tax penalty. (See "Tax Treatment of Loans and Surrenders.")
Otherwise, the Policy should receive the same federal income tax treatment as
any other type of life insurance. As such, the death benefit thereunder is
excludable from the gross income of the Beneficiary under Section 101(a) of the
Code. Also, the Owner is not deemed to be in constructive receipt of the Account
Value or Cash Surrender Value, including increments thereon, under a Policy
until surrender thereof.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Owner or Beneficiary.
Tax Treatment of Loans and Surrenders
The Code alters the tax treatment accorded to loans and certain distributions
from life insurance policies which are deemed to be "modified endowment
contracts." The Policy's single premium requirement is such that Policies issued
on or after June 21, 1988 are modified endowment contracts. A Policy received in
exchange for a modified endowment contract is also a modified endowment contract
regardless of whether it meets the 7-pay test.
However, an exchange under Section 1035 of the Code of a life insurance policy
entered into before June 21, 1988 for the Policy will not cause the Policy to be
treated as a modified endowment contract if no additional premiums are paid.
A Policy that was entered into prior to June 21, 1988 may be deemed to be a
modified endowment contract if it is materially changed and fails to meet the
7-pay test. A Policy fails to meet the 7-pay test when the cumulative amount
paid under the Policy at any time during the first 7 Policy Years exceeds the
sum of the net level premiums which would have been paid on or before such time
if the Policy provided for paid-up future benefits after the payment of seven
(7) level annual premiums. A material change would include any increase in the
future benefits provided under a policy unless the increase is attributable to:
(1) the payment of premiums necessary to fund the lowest death benefit and
qualified additional benefits payable in the first seven policy years; or (2)
the crediting of interest or other earnings (including policyholder dividends)
with respect to such premiums.
Assuming that the Policy is treated as a modified endowment contract, surrenders
and/or loan proceeds are taxable to the extent of income in the Policy. Such
distributions are deemed to be on a last-in, first-out basis, which means the
taxable income is distributed first. Loan proceeds and/or surrender payments may
also be subject to an additional 10% federal income tax penalty applied to the
income portion of such distribution. The penalty shall not apply, however, to
any distribution: (1) made on or after the date on which the taxpayer reaches
age 591/2; (2) which is attributable to the taxpayer becoming disabled (within
the meaning of Section 72(m)(7) of the Code); or (3) which is part of a series
of substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or the joint lives (or joint
life expectancies) of such taxpayer and his or her beneficiary. Furthermore,
only under limited circumstances will interest paid on Policy loans be tax
deductible.
If a Policy is not classified as a modified endowment contract, then any
surrenders shall be treated first as a recovery of the investment in the Policy
which would not be received as taxable income. However, if a distribution is the
result of a reduction in benefits under the Policy within the first fifteen
years after the Policy is issued in order to comply with Section 7702, such
distribution will, under rules set forth in Section 7702, be taxed as ordinary
income to the extent of income in the Policy.
Any loans from a Policy which is not classified as a modified endowment
contract, will be treated as indebtedness of the Owner and not a distribution.
Upon complete surrender or when Maturity Benefits are paid, if the amount
received plus the policy debt exceeds the total premiums paid that are not
treated as previously surrendered by the Policy Owner, the excess generally will
be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under Policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Owners should seek competent tax advice on the tax consequences of taking loans,
making a partial or total surrender, exchanging policies, or making any material
modifications to their Policies.
Multiple Policies
The Code further provides that multiple modified endowment contracts that are
issued within a calendar year period to the same owner by one company or its
affiliates are treated as one modified endowment contract for purposes of
determining the taxable portion of any loans or distributions. Such treatment
may result in adverse tax consequences including more rapid taxation of the
loans or distributed amounts from such combination of contracts. Owners should
consult a tax adviser prior to purchasing more than one modified endowment
contract in any calendar year period.
Tax Treatment of Assignments
An assignment of a Policy or other change of ownership of a Policy may be a
taxable event. Owners should therefore consult competent tax advisers should
they wish to assign or change the owner of their Policies.
Qualified Plans
The Policies may be used in conjunction with certain Qualified Plans. Because
the rules governing such use are complex, a purchaser should not do so until he
has consulted a competent Qualified Plans consultant.
Variable Account Voting Privileges
- --------------------------------------------------------------------------------
In accordance with its view of present applicable law, the Company will vote the
shares of the Trust held in the Variable Account at special meetings of the
shareholders of the Trust in accordance with instructions received from Owners
(or Beneficiaries if applicable) having the voting interest in the Variable
Account. The Company will vote shares for which it has not received instructions
in the same proportion as it votes shares for which it has received
instructions. The Company will vote shares it owns in the same proportion as it
votes shares for which it has received instructions. The Trust does not hold
regular meetings of shareholders.
If the 1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the Trust in its own right, it may
elect to do so.
The voting interests of the Owner (or the Beneficiary if applicable) in the
Trust will be determined as follows: Owners may cast one vote for each $100 of
Account Value of the Policy allocated to the Sub-Account on the record date for
the shareholder meeting of the Trust. Fractional votes are counted.
The number of shares which a person has a right to vote will be determined as of
the date to be chosen by the Company not more than sixty (60) days prior to the
meeting of the Trust. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to such meeting.
Each Owner (or Beneficiary if applicable) having the voting interest in the
Variable Account will receive periodic reports relating to the Trust in which he
or she has an interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the shares held in the Variable
Account corresponding to his or her interest in the Variable Account.
Disregard of Voting Instructions
The Company may, when required to do so by state insurance authorities, vote
shares of the Trust without regard to instructions from Owners if such
instructions would require such shares to be voted to cause any Fund of the
Trust to make (or refrain from making) investments which would result in changes
in the sub-classification or investment objectives of the Trust or a Fund. The
Company may also disapprove changes in the investment policy initiated by the
Owners or trustees of the Trust, if such disapproval is reasonable and is based
on a good faith determination by the Company that the change would violate state
or federal law or the change would not be consistent with the investment
objectives of the Trust or a Fund or which varies from the general quality and
nature of investments and investment techniques used by other funds with similar
investment objectives underlying other separate accounts of the Company or of an
affiliated life insurance company. In the event the Company does disregard
voting instructions, a summary of this action and the reasons for such action
will be included in the next semi-annual report to Owners.
Distribution of the Policy
- --------------------------------------------------------------------------------
The Policy is sold by licensed insurance agents, where the Policy may be
lawfully sold, who are registered representatives of broker-dealers which are
registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc.
The Policy is distributed through the principal underwriter for the Variable
Account, NALAC Financial Plans, LLC ("NFP"), 1750 Hennepin Avenue, Minneapolis,
MN, a wholly-owned subsidiary of the Company. NFP has subcontracted with
Franklin Advisers, Inc. for it and/or certain of its affiliates to provide
certain marketing support services and NFP compensates these entities for their
services.
Commissions will be paid to broker-dealers who sell the Policies. Broker-dealers
will be paid commissions at the time of purchase up to 5.25% of the single
premium. Broker-dealers are also paid a trail commission of up to 25 basis
points of the Policy Account Value. In addition, under certain circumstances,
the Company may pay certain sellers production bonuses which will take into
account, among other things, the total premiums which have been paid under
Policies associated with the broker-dealer. Additional payments may be made for
other services not directly related to the sale of the Policies.
Reports to Owners
- --------------------------------------------------------------------------------
The Company will send to each Owner semi-annual and annual reports of the Trust.
Within 30 days after each Policy Anniversary, an annual statement will be sent
to each Owner. The statement will show the current amount of death benefit
payable under the Policy, the current Account Value, the current Cash Surrender
Value, current Indebtedness and will show all transactions previously confirmed.
The statement will also show premiums paid, investment returns and all charges
deducted during the Policy Year.
Confirmations will be mailed to Policy Owners within seven days of the
transaction of: (a) the receipt of premium; (b) any transfer between
Sub-Accounts; (c) any loan, interest repayment, or loan repayment; (d) any
surrender; (e) exercise of the free-look privilege; (f) any exchange of the
Policy; and (g) payment of the death benefit under the Policy. Upon request, a
Policy Owner shall be entitled to a receipt of premium payment.
Legal Proceedings
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Variable Account or the Distributor
is a party or to which the assets of the Variable Account are subject. The
Company is not involved in any litigation that is of material importance in
relation to its total assets or that relates to the Variable Account.
Experts
- --------------------------------------------------------------------------------
The financial statements of Allianz Life Variable Account A and the consolidated
financial statements of the Company as of and for the year ended December 31,
1996 included in this Prospectus have been audited by KPMG Peat Marwick LLP,
independent auditors, as indicated in their reports included in this Prospectus,
and are included herein, in reliance upon such reports and upon the authority of
said firm as experts in accounting and auditing.
Legal Opinions
- --------------------------------------------------------------------------------
Legal matters in connection with the Policy described herein are being passed
upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
Financial Statements
- --------------------------------------------------------------------------------
The consolidated financial statements of the Company that are included herein
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Policy.
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
Statements of Assets and Liabilities
June 30, 1997 (unaudited)
Mutual
Capital Growth and High Income Money Discovery
Growth Income Income Securities Market Securities
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Capital Growth Fund, 387 shares, cost $4,542 $4,828 - - - - -
Growth and Income Fund, 102,722 shares, cost $1,540,471 - 1,909,604 - - - -
High Income Fund, 137,538 shares, cost $1,723,861 - - 1,869,139 - - -
Income Securities Fund, 59,796 shares, cost $950,905 - - - 1,000,392 - -
Money Market Fund, 902,138 shares, cost $902,138 - - - - 902,138 -
Mutual Discovery Securities Fund, 12,562 shares,
cost $134,516 - - - - - 142,205
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 4,828 1,909,604 1,869,139 1,000,392 902,138 142,205
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 16 12,086 6,842 8,815 5,670 222
Accrued administrative charges 4 3,021 1,711 2,203 1,417 55
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 20 15,107 8,553 11,018 7,087 277
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $4,808 1,894,497 1,860,586 989,374 895,051 141,928
===========================================================================================================================
Policy owners' equity (note 4) $4,808 1,894,497 1,860,586 989,374 895,051 141,928
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
June 30, 1997 (unaudited)
Mutual Natural Templeton
Shares Resources Real Estate Rising Small Developing
Securities Securities Securities Dividends Cap Markets
Fund Fund Fund Fund Fund Equity Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Mutual Shares Securities Fund, 18,873 shares,
cost $199,154 $210,246 - - - - -
Natural Resources Securities Fund, 9,541 shares,
cost $131,183 - 122,890 - - - -
Real Estate Securities Fund, 20,867 shares,
cost $391,037 - - 476,195 - - -
Rising Dividends Fund, 25,201 shares, cost $340,016 - - - 433,717 - -
Small Cap Fund, 13,621 shares, cost $176,404 - - - - 188,655 -
Templeton Developing Markets Equity Fund,
73,686 shares, cost $821,800 - - - - - 992,554
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 210,246 122,890 476,195 433,717 188,655 992,554
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 437 965 3,409 3,109 447 6,686
Accrued administrative charges 109 242 852 778 112 1,671
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 546 1,207 4,261 3,887 559 8,357
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $209,700 121,683 471,934 429,830 188,096 984,197
===========================================================================================================================
Policy owners' equity (note 4) $209,700 121,683 471,934 429,830 188,096 984,197
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
June 30, 1997 (unaudited)
Templeton
Templeton Templeton Templeton Templeton International Templeton
Global Asset Global Global Income International Smaller Pacific
Allocation Growth Securities Equity Companies Growth
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Global Asset Allocation Fund,
32,144 shares, cost $365,175 $431,694 - - - - -
Templeton Global Growth Fund,
71,917 shares, cost $894,554 - 1,106,802 - - - -
Templeton Global Income Securities Fund,
11,348 shares, cost $145,177 - - 144,115 - - -
Templeton International Equity Fund,
81,594 shares, cost $1,148,607 - - - 1,340,582 - -
Templeton International Smaller Companies Fund,
266 shares, cost $3,103 - - - - 3,159 -
Templeton Pacific Growth Fund,
31,496 shares, cost $437,238 - - - - - 469,918
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 431,694 1,106,802 144,115 1,340,582 3,159 469,918
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 1,727 8,846 1,767 11,226 5 5,361
Accrued administrative charges 432 2,211 441 2,807 1 1,340
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,159 11,057 2,208 14,033 6 6,701
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $429,535 1,095,745 141,907 1,326,549 3,153 463,217
===========================================================================================================================
Policy owners' equity (note 4) $429,535 1,095,745 141,907 1,326,549 3,153 463,217
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
June 30, 1997 (unaudited)
U.S. Government Utility Zero Zero Zero Total
Securities Equity Coupon Coupon Coupon All
Fund Fund Fund - 2000 Fund - 2005 Fund - 2010 Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
U.S. Government Securities Fund,
71,552 shares, cost $845,773 $945,205 - - - -
Utility Equity Fund, 78,456 shares,
cost $1,080,629 - 1,351,008 - - -
Zero Coupon Fund - 2000,
24,669 shares, cost $277,316 - - 356,965 - -
Zero Coupon Fund - 2005,
21,109 shares, cost $244,994 - - - 330,142 -
Zero Coupon Fund - 2010,
23,314 shares, cost $344,197 - - - - 363,228
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 945,205 1,351,008 356,965 330,142 363,228 15,095,381
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 4,876 7,475 1,531 1,605 1,509 94,632
Accrued administrative charges 1,219 1,868 383 401 378 23,656
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,095 9,343 1,914 2,006 1,887 118,288
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $939,110 1,341,665 355,051 328,136 361,341 14,977,093
==========================================================================================================================
Policy owners' equity (note 4) $939,110 1,341,665 355,051 328,136 361,341 14,977,093
==========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Adjustable
U.S. Government Fund Capital Growth Fund Growth and Income Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ - 18,030 1,373 7 - - 61,679 28,758 10,179
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges - 740 139 15 2 - 6,282 9,969 5,842
Administrative charges - 185 35 4 - - 1,571 2,492 1,460
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses - 925 174 19 2 - 7,853 12,461 7,302
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net - 17,105 1,199 (12) (2) - 53,826 16,297 2,877
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 59,819 101,857 22,157
Realized gains (losses)
on sales of investments, net - (10,027) 35 - - - 43,706 25,750 20,358
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net - (10,027) 35 - - - 103,525 127,607 42,515
Net change in unrealized appreciation
(depreciation)on investments - (200) 240 426 (140) - 54,834 37,916 184,273
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation)
on investments, net - (10,227) 275 426 (140) - 158,359 165,523 226,788
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ - 6,878 1,474 414 (142) - 212,185 181,820 229,665
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Investment Grade
High Income Fund Income Securities Fund Intermediate Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $153,512 167,136 78,044 71,443 33,370 19,772 - 3,706 3,949
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 5,669 12,310 7,709 3,209 4,656 2,265 - 366 529
Administrative charges 1,417 3,077 1,927 802 1,164 566 - 91 132
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 7,086 15,387 9,636 4,011 5,820 2,831 - 457 661
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 146,426 151,749 68,408 67,432 27,550 16,941 - 3,249 3,288
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 5,036 8,872 - 15,347 5,550 1,592 - - -
Realized gains (losses) on sales
of investments, net 18,973 33,892 7,610 3,610 2,373 721 - 1,981 1,106
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 24,009 42,764 7,610 18,957 7,923 2,313 - 1,981 1,106
Net change in unrealized appreciation
(depreciation) on investments (90,442) 26,432 122,964 (29,964) 37,183 47,314 - (3,575) 2,630
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net (66,433) 69,196 130,574 (11,007) 45,106 49,627 - (1,594) 3,736
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 79,993 220,945 198,982 56,425 72,656 66,568 - 1,655 7,024
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Mutual Discovery Mutual Shares
Money Market Fund Securities Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $16,679 32,922 33,164 40 - - 72 - -
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 2,074 4,291 4,898 200 22 - 406 31 -
Administrative charges 518 1,073 1,225 50 5 - 102 8 -
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 2,592 5,364 6,123 250 27 - 508 39 -
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 14,087 27,558 27,041 (210) (27) - (436) (39) -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - - - -
Realized gains (losses) on sales
of investments, net - - - 20 - - 486 2 -
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net - - - 20 - - 486 2 -
Net change in unrealized appreciation (depreciation)
on investments - - - 7,194 495 - 9,458 1,634 -
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net - - - 7,214 495 - 9,944 1,636 -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $14,087 27,558 27,041 7,004 468 - 9,508 1,597 -
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Natural Resources Securities Real Estate Securities Rising Dividends
Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in
fund shares $ 1,844 2,102 3,600 12,965 7,943 3,875 5,990 3,981 1,695
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 205 1,012 2,489 1,377 1,883 833 1,397 1,632 587
Administrative charges 51 253 622 344 471 208 349 408 147
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 256 1,265 3,111 1,721 2,354 1,041 1,746 2,040 734
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 1,588 837 489 11,244 5,589 2,834 4,244 1,941 961
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - 1,927 2,665 6,191 - - 10,229 - -
Realized gains (losses) on sales of
investments, net (1,564) 14,498 15,031 14,599 1,980 3,559 6,232 2,703 463
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net (1,564) 16,425 17,696 20,790 1,980 3,559 16,461 2,703 463
Net change in unrealized appreciation
(depreciation) on investments (12,316) (8,994)(10,144) (4,633) 58,343 14,488 32,559 44,265 19,701
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (13,880) 7,431 7,552 16,157 60,323 18,047 49,020 46,968 20,164
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($12,292) 8,268 8,041 27,401 65,912 20,881 53,264 48,909 21,125
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton Developing Markets Templeton Global
Small Cap Fund Equity Fund Asset Allocation Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 384 - - 10,159 2,914 562 7,863 228 4
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 342 105 - 3,251 2,551 3,898 1,310 2,065 25
Administrative charges 85 26 - 813 638 975 327 516 6
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 427 131 - 4,064 3,189 4,873 1,637 2,581 31
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (43) (131) - 6,095 (275) (4,311) 6,226 (2,353) (27)
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions
on mutual funds 4,546 - - 16,114 5,391 132 2,268 456 -
Realized gains (losses) on sales of
investments, net (89) 472 - 4,511 2,603 (585) 435 12,194 17
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments,
net 4,457 472 - 20,625 7,994 (453) 2,703 12,650 17
Net change in unrealized appreciation
(depreciation) on investments 8,627 3,624 - 112,780 56,503 4,422 25,156 41,378 (15)
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 13,084 4,096 - 133,405 64,497 3,969 27,859 54,028 2
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $13,041 3,965 - 139,500 64,222 (342) 34,085 51,675 (25)
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton Global Templeton Global Templeton International
Growth Fund Income Securities Fund Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 15,984 8,202 1,137 10,037 7,568 2,871 33,230 19,177 6,289
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 3,636 3,948 1,255 419 745 470 4,540 6,014 2,178
Administrative charges 909 987 314 105 186 118 1,135 1,504 545
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 4,545 4,935 1,569 524 931 588 5,675 7,518 2,723
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 11,439 3,267 (432) 9,513 6,637 2,283 27,555 11,659 3,566
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 5,328 8,202 - - - - 50,952 23,468 7,792
Realized gains (losses) on sales of
investments, net 4,094 2,914 587 596 432 392 7,697 4,043 606
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 9,422 11,116 587 596 432 392 58,649 27,511 8,398
Net change in unrealized appreciation
(depreciation) on investments 97,766 91,158 23,468 (10,005) 2,837 6,634 60,777 114,314 19,054
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 107,188 102,274 24,055 (9,409) 3,269 7,026 119,426 141,825 27,452
Net increase (decrease) in net assets
from operations $118,627 105,541 23,623 104 9,906 9,309 146,981 153,484 31,018
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton International
Smaller Companies Fund Templeton Pacific Growth Fund U.S. Government Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $17 - - 8,455 10,710 4,502 52,576 45,170 41,763
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 2 3 - 1,477 2,726 1,485 2,922 4,926 3,974
Administrative charges 1 1 - 369 682 371 731 1,231 994
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 3 4 - 1,846 3,408 1,856 3,653 6,157 4,968
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 14 (4) - 6,609 7,302 2,646 48,923 39,013 36,795
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - 6,208 1,872 - - -
Realized gains (losses) on sales of
investments, net - 119 - 2,418 6,092 1,245 4,956 18,468 7,473
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net - 119 - 2,418 12,300 3,117 4,956 18,468 7,473
Net change in unrealized appreciation
(depreciation) on investments 56 - - 3,854 12,362 13,125 (22,774) (37,068) 56,173
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net 56 119 - 6,272 24,662 16,242 (17,818) (18,600) 63,646
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $70 115 - 12,881 31,964 18,888 31,105 20,413 100,441
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $66,211 75,714 70,912 - - 17,379 24,296 19,213 13,993
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 4,369 11,220 8,983 - - (594) 1,075 2,212 2,179
Administrative charges 1,092 2,805 2,246 - - (149) 269 553 545
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 5,461 14,025 11,229 - - (743) 1,344 2,765 2,724
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 60,750 61,689 59,683 - - 18,122 22,952 16,448 11,269
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 91,611 - - - - 86 550 190 -
Realized gains (losses) on sales of
investments, net 41,018 118,555 23,410 - - 37,619 695 2,734 1,164
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 132,629 118,555 23,410 - - 37,705 1,245 2,924 1,164
Net change in unrealized appreciation
(depreciation) on investments (104,515) (93,370) 259,686 - - (37,457) (17,258)(13,736) 44,013
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 28,114 25,185 283,096 - - 248 (16,013)(10,812) 45,177
Net increase (decrease) in net assets
from operations $88,864 86,874 342,779 - - 18,370 6,939 5,636 56,446
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Total All Funds
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in
fund shares $25,018 19,668 12,928 22,065 8,167 3,109 600,526 514,679 331,100
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense
risk charges 1,159 2,270 2,227 1,082 1,411 916 46,418 77,110 52,287
Administrative charges 290 568 557 271 353 229 11,605 19,277 13,073
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,449 2,838 2,784 1,353 1,764 1,145 58,023 96,387 65,360
- ---------------------------------------------------------------------------------------------------------------------------
Investment income
(loss), net 23,569 16,830 10,144 20,712 6,403 1,964 542,503 418,292 265,740
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions
on mutual funds 87 - - 176 2,213 - 268,254 164,334 36,296
Realized gains (losses) on
sales of investments, net 10,278 4,146 1,495 261 6,865 258 162,932 252,789 122,564
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 10,365 4,146 1,495 437 9,078 258 431,186 417,123 158,860
Net change in unrealized
appreciation (depreciation)
on investments (26,802) (21,955) 68,320 (15,945) 4,806 32,162 78,833 354,212 871,051
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains
(losses) and unrealized
appreciation (depreciation)
on investments, net (16,437) (17,809) 69,815 (15,508) 13,884 32,420 510,019 771,335 1,029,911
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations $ 7,132 (979) 79,959 5,204 20,287 34,384 1,052,522 1,189,627 1,295,651
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Adjustable
U.S. Government Fund Capital Growth Fund Growth and Income Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ - 17,105 1,199 (12) (2) - 53,826 16,297 2,877
Realized gains (losses) on
investments, net - (10,027) 35 - - - 103,525 127,607 42,515
Net change in unrealized appreciation
(depreciation) on investments - (200) 240 426 (140) - 54,834 37,916 184,273
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations - 6,878 1,474 414 (142) - 212,185 181,820 229,665
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - 6,969 12,633 - - - 195,581 347,781 233,408
Transfers between funds - (34,766) 11,222 - 4,560 - 85,521 289,040 111,030
Surrenders and terminations - (1,178) - - - - (180,767) (28,415) (54,886)
Policy loan transactions - 74 (1,764) - - - (43,984) 8,174 842
Other transactions (note 2) - (2,842) (6,127) (24) - - (80,293) (145,312) (92,875)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions - (31,743) 15,964 (24) 4,560 - (23,942) 471,268 197,519
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets - (24,865) 17,438 390 4,418 - 188,243 653,088 427,184
Net assets at beginning of period - 24,865 7,427 4,418 - - 1,706,254 1,053,166 625,982
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ - - 24,865 4,808 4,418 - 1,894,497 1,706,254 1,053,166
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Investment Grade
High Income Fund Income Securities Fund Intermediate Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $ 146,426 151,749 68,408 67,432 27,550 16,941 - 3,249 3,288
Realized gains (losses)
on investments, net 24,009 42,764 7,610 18,957 7,923 2,313 - 1,981 1,106
Net change in unrealized
appreciation (depreciation)
on investments (90,442) 26,432 122,964 (29,964) 37,183 47,314 - (3,575) 2,630
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from operations 79,993 220,945 198,982 56,425 72,656 66,568 - 1,655 7,024
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 23,713 57,851 44,935 135,753 275,281 223,737 - 11,940 14,163
Transfers between funds 4,520 344,787 37,055 (720) 120,002 186,849 - (72,421) 8,123
Surrenders and
terminations (66,773) (3,551) (14,331) (5,071) (20,210) (14,487) - (751)(40,771)
Policy loan transactions (31,958) 8,073 1,359 (17,617) (4,239) (19,420) - - -
Other transactions (note 2) (23,862) (35,494) (32,177) (48,947) (98,005) (89,585) - (5,413) (7,440)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy
transactions (94,360) 371,666 36,841 63,398 272,829 287,094 - (66,645)(25,925)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets (14,367) 592,611 235,823 119,823 345,485 353,662 - (64,990)(18,901)
Net assets at beginning
of period 1,874,953 1,282,342 1,046,519 869,551 524,066 170,404 - 64,990 83,891
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end
of period $1,860,586 1,874,953 1,282,342 989,374 869,551 524,066 - - 64,990
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Mutual Discovery Mutual Shares
Money Market Fund Securities Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 14,087 27,558 27,041 (210) (27) - (436) (39) -
Realized gains (losses) on
investments, net - - - 20 - - 486 2 -
Net change in unrealized
appreciation (depreciation)
on investments - - - 7,194 495 - 9,458 1,634 -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 14,087 27,558 27,041 7,004 468 - 9,508 1,597 -
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 1,119,293 2,288,562 1,140,571 - - - 6,628 - -
Transfers between funds (911,807)(2,221,762) (843,539) 84,921 50,000 - 112,248 84,053 -
Surrenders and terminations (18,394) (27,431) (48,126) - - - - - -
Policy loan transactions (13,150) (5,692) (251) - - - (1,859) - -
Other transactions (note 2) (24,727) (13,338) (124,409) (465) - - (2,431) (44) -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions 151,215 20,339 124,246 84,456 50,000 - 114,586 84,009 -
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets 165,302 47,897 151,287 91,460 50,468 - 124,094 85,606 -
Net assets at
beginning of period 729,749 681,852 530,565 50,468 - - 85,606 - -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 895,051 729,749 681,852 141,928 50,468 - 209,700 85,606 -
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Natural Resources Securities Fund Real Estate Securities Fund Rising Dividends Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $ 1,588 837 489 11,244 5,589 2,834 4,244 1,941 961
Realized gains (losses) on
investments, net (1,564) 16,425 17,696 20,790 1,980 3,559 16,461 2,703 463
Net change in unrealized
appreciation (depreciation)
on investments (12,316) (8,994) (10,144) (4,633) 58,343 14,488 32,559 44,265 19,701
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations (12,292) 8,268 8,041 27,401 65,912 20,881 53,264 48,909 21,125
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 8,380 18,730 24,963 38,356 67,454 53,203 45,485 74,745 52,764
Transfers between funds 1,135 (46,431) 23,956 90,534 86,682 38,779 52,735 86,767 38,476
Surrenders and
terminations 324 (7,791) (81,139) (493) (1,098) (8,139) (599) (7,693) (264)
Policy loan transactions (65) (524) 282 (13,419) (1,340) (145) (3,382) (1,876) -
Other transactions (note 2) (3,816) (9,019) (12,614) (19,961) (27,619) (23,363) (22,584) (33,070)(19,499)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy
transactions 5,958 (45,035) (44,552) 95,017 124,079 60,335 71,655 118,873 71,477
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets (6,334) (36,767) (36,511) 122,418 189,991 81,216 124,919 167,782 92,602
Net assets at beginning
of period 128,017 164,784 201,295 349,516 159,525 78,309 304,911 137,129 44,527
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $121,683 128,017 164,784 471,934 349,516 159,525 429,830 304,911 137,129
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton Developing Markets Templeton Global
Small Cap Fund Equity Fund Asset Allocation Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($43) (131) - 6,095 (275) (4,311) 6,226 (2,353) (27)
Realized gains (losses) on
investments, net 4,457 472 - 20,625 7,994 (453) 2,703 12,650 17
Net change in unrealized appreciation
(depreciation) on investments 8,627 3,624 - 112,780 56,503 4,422 25,156 41,378 (15)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 13,041 3,965 - 139,500 64,222 (342) 34,085 51,675 (25)
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 15,260 683 - 100,058 215,896 169,165 37 439 -
Transfers between funds 109,515 51,952 - 133,539 267,310 63,297 15,492 333,332 311
Surrenders and terminations (965) 75 - (5,202) (10,080) (18,763) (108) - -
Policy loan transactions - - - (13,079) (2,638) - - - -
Other transactions (note 2) (5,191) (239) - (39,765) (73,383) (61,489) (3,692) (1,945) (66)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions 118,619 52,471 - 175,551 397,105 152,210 11,729 331,826 245
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 131,660 56,436 - 315,051 461,327 151,868 45,814 383,501 220
Net assets at beginning of period 56,436 - - 669,146 207,819 55,951 383,721 220 -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $188,096 56,436 - 984,197 669,146 207,819 429,535 383,721 220
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton Global Templeton Global Templeton International
Growth Fund Income Securities Fund Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $ 11,439 3,267 (432) 9,513 6,637 2,283 27,555 11,659 3,566
Realized gains (losses)
on investments, net 9,422 11,116 587 596 432 392 58,649 27,511 8,398
Net change in unrealized
appreciation (depreciation)
on investments 97,766 91,158 23,468 (10,005) 2,837 6,634 60,777 114,314 19,054
- ---------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets from
operations 118,627 105,541 23,623 104 9,906 9,309 146,981 153,484 31,018
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 158,441 335,873 237,156 21,092 39,862 42,908 185,610 371,300 297,409
Transfers between
funds 124,328 119,840 114,188 2,450 9,506 18,457 90,602 100,214 206,753
Surrenders and
terminations (8,407) (12,771) (6,710) (678) (2,101) (6,040) (14,251) (30,572) (9,230)
Policy loan transactions (8,239) (8,767) (3,177) (1,806) (425) (638) (24,789) (10,040) (1,799)
Other transactions
(note 2) (63,897) (113,183) (83,481) (8,771) (16,260) (17,786) (67,613) (129,653)(110,168)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets resulting
from policy
transactions 202,226 320,992 257,976 12,287 30,582 36,901 169,559 301,249 382,965
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets 320,853 426,533 281,599 12,391 40,488 46,210 316,540 454,733 413,983
Net assets at beginning
of period 774,892 348,359 66,760 129,516 89,028 42,818 1,010,009 555,276 141,293
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end
of period $1,095,745 774,892 348,359 141,907 129,516 89,028 1,326,549 1,010,009 555,276
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Templeton International
Smaller Companies Fund Templeton Pacific Growth Fund U.S. Government Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 14 (4) - 6,609 7,302 2,646 48,923 39,013 36,795
Realized gains (losses) on
investments, net - 119 - 2,418 12,300 3,117 4,956 18,468 7,473
Net change in unrealized appreciation
(depreciation) on investments 56 - - 3,854 12,362 13,125 (22,774) (37,068) 56,173
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 70 115 - 12,881 31,964 18,888 31,105 20,413 100,441
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - 72,994 181,194 141,914 20,908 26,467 25,128
Transfers between funds 3,083 (115) - (8,204) 14,234 74,887 900 261,674 24,109
Surrenders and terminations - - - (3,135) (20,255) (10,270) (18,365) (7,837) (18,462)
Policy loan transactions - - - (9,047) (2,894) (27,456) (8,526) (424) (2,060)
Other transactions (note 2) - - - (30,865) (73,664) (64,733) (15,054) (19,100) (16,258)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions 3,083 (115) - 21,743 98,615 114,342 (20,137) 260,780 12,457
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 3,153 - - 34,624 130,579 133,230 10,968 281,193 112,898
Net assets at beginning of period - - - 428,593 298,014 164,784 928,142 646,949 534,051
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $3,153 - - 463,217 428,593 298,014 939,110 928,142 646,949
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 60,750 61,689 59,683 - - 18,122 22,952 16,448 11,269
Realized gains (losses) on
investments, net 132,629 118,555 23,410 - - 37,705 1,245 2,924 1,164
Net change in unrealized
appreciation (depreciation)
on investments (104,515) (93,370) 259,686 - - (37,457) (17,258) (13,736) 44,013
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations 88,864 86,874 342,779 - - 18,370 6,939 5,636 56,446
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 59,400 127,511 116,016 - - - - - -
Transfers between funds (69,136) (163,650) 124,589 - - (270,886) - - 10,631
Surrenders and terminations (2,276) (80,389) (35,449) - - - - - -
Policy loan transactions (55,990) (97,734) (13,309) - - - (73) (64) (64)
Other transactions (note 2) (32,135) (65,596) (62,877) - - (2,815) (2,538) (4,271) (3,831)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy transactions (100,137) (279,858) 128,970 - - (273,701) (2,611) (4,335) 6,736
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets (11,273) (192,984) 471,749 - - (255,331) 4,328 1,301 63,182
Net assets at beginning
of period 1,352,938 1,545,922 1,074,173 - - 255,331 350,723 349,422 286,240
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,341,665 1,352,938 1,545,922 - - - 355,051 350,723 349,422
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1997 (unaudited) and the years ended December 31,
1996 and 1995
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Total All Funds
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $ 23,569 16,830 10,144 20,712 6,403 1,964 542,503 418,292 265,740
Realized gains (losses) on
investments, net 10,365 4,146 1,495 437 9,078 258 431,186 417,123 158,860
Net change in unrealized
appreciation (depreciation)
on investments (26,802) (21,955) 68,320 (15,945) 4,806 32,162 78,833 354,212 871,051
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from operations 7,132 (979) 79,959 5,204 20,287 34,384 1,052,522 1,189,627 1,295,651
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - - - - 2,206,989 4,448,538 2,830,073
Transfers between funds (61,210) 57,145 - 3,651 223,644 - (135,903) (34,403) (21,713)
Surrenders and
terminations - (3,894) - - - - (325,160) (265,942) (367,067)
Policy loan transactions - - (687) (183) (176) (169) (247,166) (120,512) (68,456)
Other transactions
(note 2) (3,109) (4,109) (3,625) (3,385) (3,437) (1,657) (503,125) (874,996) (836,875)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy
transactions (64,319) 49,142 (4,312) 83 220,031 (1,826) 995,635 3,152,685 1,535,962
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets (57,187) 48,163 75,647 5,287 240,318 32,558 2,048,157 4,342,312 2,831,613
Net assets at beginning
of period 385,323 337,160 261,513 356,054 115,736 83,178 12,928,936 8,586,624 5,755,011
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end
of period $328,136 385,323 337,160 361,341 356,054 115,736 14,977,093 12,928,936 8,586,624
===========================================================================================================================
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements
June 30, 1997 (unaudited)
1. ORGANIZATION
Allianz Life Variable Account A (Variable Account) is a segregated investment
account of Allianz Life Insurance Company of North America (Allianz Life)
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940 (as
amended). The Variable Account was established on May 31, 1985 and commenced
operations September 8, 1987. Accordingly, it is an accounting entity wherein
all segregated account transactions are reflected.
The Variable Account's assets are the property of Allianz Life and are held for
the benefit of the owners and other persons entitled to payments under variable
life policies issued through the Variable Account and underwritten by Allianz
Life. The assets of the Variable Account, equal to the reserves and other
liabilities of the Variable Account, are not chargeable with liabilities that
arise from any other business which Allianz Life may conduct.
The Variable Account's sub-accounts may invest, at net asset values, in one or
more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates, in accordance with the
selection made by the policy owner. Not all funds are available as investment
options for the products which comprise the Variable Account.
Certain officers and trustees of the FVF are also officers and/or directors of
Franklin Advisers, Inc. and/or Allianz Life.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include realized gain distributions received from the
respective funds and gains on the sale of fund shares as determined by the
average cost method.
Realized gain distributions are reinvested in the respective funds. Dividend
distributions received from the FVF are reinvested in additional shares of the
FVF and are recorded as income to the Variable Account on the ex-dividend date.
A Fixed Account investment option is available to variable universal life policy
owners. This account is comprised of equity and fixed income investments which
are part of the general assets of Allianz Life. The liabilities of the Fixed
Account are part of the general obligations of Allianz Life and are not included
in the Variable Account. The guaranteed minimum rate of return on the Fixed
Account is 3.5%.
The Templeton Global Asset Allocation Fund and Small Cap Fund were added as
available investment options on May 1, 1995 and November 1, 1995, respectively.
The Small Cap Fund had no investment activity during 1995. The Zero Coupon -
1995 Fund matured and was closed on December 15, 1995. The Capital Growth Fund
and Templeton International Smaller Companies Fund were added as available
investment options on May 1, 1996. The Mutual Discovery Securities Fund and
Mutual Shares Securities Fund were added as available investment options on
November 8, 1996.
The Investment Grade Intermediate Bond Fund and Adjustable U.S. Government Fund
were closed on October 25, 1996 when shares of the U.S. Government Securities
Fund were substituted for all shares of both funds.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Investments (cont.)
On May 1, 1995, the Equity Growth Fund name was changed to Growth and Income
Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996. The Precious Metals Fund name was changed to
Natural Resources Securities Fund on May 1, 1997.
Expenses
Asset Based Expenses
A mortality and expense risk charge is deducted from the Variable Account on a
daily basis equal, on an annual basis, to .60% of the daily net assets of the
Variable Account.
An administrative charge is deducted from the Variable Account on a daily basis
equal, on an annual basis, to .15% of the daily net assets of the Variable
Account.
Contract Based Expenses
A cost of insurance charge is deducted against each policy by liquidating units.
The amount of the charge is based upon age, sex, rate class and net amount at
risk (death benefit less total cash surrender value). Total cost of insurance
charges paid by the policy owners for the period ended June 30, 1997 (unaudited)
and the years ended December 31, 1996 and 1995 were $404,517, $715,700, and
$581,193, respectively.
A deferred issue charge is deducted annually, at the end of the policy year,
from each single premium variable life policy for the first ten policy years by
liquidating units. The amount of the charge is 7% of the single premium
consisting of 2.5% for premium taxes, 4% for sales charge and .5% for policy
issue charge (in the State of California, 2.35%, 4.15% and .5%, respectively).
If the policy is surrendered before the full amount is collected, the
uncollected portion of this charge is deducted from the account value. Total
deferred issue charges paid by the policy owners for the period ended June 30,
1997 (unaudited) and the years ended December 31, 1996 and 1995 were $33,349,
$28,152, and $28,613, respectively.
A policy charge is deducted on each monthly anniversary date from each variable
universal life policy by liquidating units. The amount of the charge is equal to
2.5% of each premium payment for premium taxes plus $20 per month for the first
policy year and $9 per month guaranteed thereafter. Currently, Allianz Life has
agreed to voluntarily limit the charge to $5 per month after the first policy
year. Total policy charges paid by the policy owner for the period ended June
30, 1997 (unaudited) and the years ended December 31, 1996 and 1995 were
$106,832, $204,321, and $292,695, respectively.
Twelve free transfers are permitted each contract year. Thereafter, the fee is
the lesser of $25 or 2% of the amount transferred. No transfer charges were paid
by the policy owners during the period ended June 30, 1997 (unaudited) and the
years ended December 31, 1996 and 1995, respectively. Net transfers to the Fixed
Account during the period ended June 30, 1997 (unaudited) and the years ended
December 31, 1996 and 1995 were $135,903, $34,403, and $21,713, respectively.
The cost of insurance, deferred issue, policy and transfer charges paid are
reflected in the Statements of Changes in Net Assets as other transactions.
3. FEDERAL INCOME TAXES
Operations of the Variable Account form a part of, and are taxed with,
operations of Allianz Life, which is taxed as a life insurance company under the
Internal Revenue Code.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
3. FEDERAL INCOME TAXES (cont.)
Allianz Life does not expect to incur any federal income taxes in the operation
of the Variable Account. If, in the future, Allianz Life determines that the
Variable Account may incur federal income taxes, it may then assess a charge
against the Variable Account for such taxes.
4. POLICY TRANSACTIONS - UNIT ACTIVITY
Transactions in units for each fund for the period ended June 30, 1997
(unaudited) and for the years ended December 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
Adjustable Growth Investment Mutual Mutual
U.S Capital and High Income Grade Money Discovery Shares
Government Growth Income Income Securities Intermediate Market Securities Securities
Fund Fund Fund Fund Fund Bond Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 654 - 29,795 63,380 10,514 6,002 37,381 - -
Policy transactions:
Purchase payments 1,060 - 9,561 2,463 12,397 963 77,441 - -
Transfers between funds 966 - 4,664 1,925 10,593 562 (57,166) - -
Surrenders and terminations - - (2,237) (772) (783) (2,761) (3,275) - -
Policy loan transactions (151) - 38 75 (1,137) - (17) - -
Other transactions (516) - (3,800) (1,738) (4,970) (507) (8,596) - -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 1,359 - 8,226 1,953 16,100 (1,743) 8,387 - -
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1995 2,013 - 38,021 65,333 26,614 4,259 45,768 - -
===========================================================================================================================
Policy transactions:
Purchase payments 553 - 12,119 2,801 13,495 778 147,764 - -
Transfers between funds (2,257) 391 9,962 17,863 5,904 (4,635) (143,612) 4,953 8,284
Surrenders and terminations (94) - (1,005) (177) (1,004) (49) (1,836) - -
Policy loan transactions 6 - 311 405 (212) - (376) - -
Other transactions (221) - (5,057) (1,722) (4,812) (353) (778) - (4)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (2,013) 391 16,330 19,170 13,371 (4,259) 1,162 4,953 8,280
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - 391 54,351 84,503 39,985 - 46,930 4,953 8,280
===========================================================================================================================
Policy transactions (unaudited):
Purchase payments - - 5,901 1,024 6,106 - 62,452 - 618
Transfers between funds - - 2,589 193 (42) - (49,447) 7,683 10,412
Surrenders and terminations - - (5,491) (2,976) (230) - (1,178) - -
Policy loan transactions - - (1,342) (1,405) (796) - (838) - (176)
Other transactions - (2) (2,418) (1,053) (2,200) - (1,572) (44) (230)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - (2) (761) (4,217) 2,838 - 9,417 7,639 10,624
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at June 30, 1997
(unaudited) - 389 53,590 80,286 42,823 - 56,347 12,592 18,904
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
4. POLICY TRANSACTIONS - UNIT ACTIVITY (cont.)
<TABLE>
<CAPTION>
Natural Templeton Templeton Templeton Templeton Templeton
Resources Real Estate Rising Small Developing Global Asset Global Global Income International
Securities Securities Dividends Cap Markets Allocation Growth Securities Equity
Fund Fund Fund Fund Equity Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 13,441 4,368 4,474 - 6,099 - 6,748 3,175 11,403
Policy transactions:
Purchase payments 1,662 2,884 4,625 - 18,183 - 22,517 2,992 22,647
Transfers between funds 1,698 2,056 3,323 - 6,624 27 11,063 1,333 15,984
Surrenders and terminations (5,150) (427) (23) - (2,067) - (627) (416) (691)
Policy loan transactions 20 (7) - - (211) - (307) (44) (130)
Other transactions (840) (1,246) (1,699) - (6,418) (6) (7,923) (1,239) (8,383)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions (2,610) 3,260 6,226 - 16,111 21 24,723 2,626 29,427
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1995 10,831 7,628 10,700 - 22,210 21 31,471 5,801 40,830
===========================================================================================================================
Policy transactions:
Purchase payments 1,115 2,975 5,400 54 20,769 39 28,048 2,551 24,859
Transfers between funds (2,791) 3,397 6,298 4,297 24,526 30,441 9,880 609 6,586
Surrenders and terminations (438) (51) (581) 6 (952) - (1,089) (138) (2,070)
Policy loan transactions (29) (62) (134) - (251) - (718) (26) (665)
Other transactions (536) (1,209) (2,379) (19) (7,042) (169) (9,435) (1,041) (8,691)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions (2,679) 5,050 8,604 4,338 37,050 30,311 26,686 1,955 20,019
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1996 8,152 12,678 19,304 4,338 59,260 30,332 58,157 7,756 60,849
===========================================================================================================================
Policy transactions (unaudited):
Purchase payments 560 1,379 2,705 1,168 8,017 3 11,336 1,279 10,692
Transfers between funds 49 3,115 3,066 8,397 10,622 1,128 8,768 148 5,075
Surrenders and terminations 20 (18) (36) (74) (428) (9) (602) (41) (834)
Policy loan transactions (23) (471) (213) - (1,060) - (596) (109) (1,421)
Other transactions (254) (713) (1,346) (401) (3,197) (289) (4,575) (532) (3,894)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions 352 3,292 4,176 9,090 13,954 833 14,331 745 9,618
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
June 30, 1997 (unaudited) 8,504 15,970 23,480 13,428 73,214 31,165 72,488 8,501 70,467
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
4. POLICY TRANSACTIONS - UNIT ACTIVITY (cont.)
<TABLE>
<CAPTION>
Templeton
International Templeton U.S. Zero Zero Zero Zero
Smaller Pacific Government Utility Coupon Coupon Coupon Coupon Total
Companies Growth Securities Equity Fund - Fund - Fund - Fund - All
Fund Fund Fund Fund 1995 2000 2005 2010 Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 - 12,635 31,714 59,969 14,325 14,594 12,559 3,804 347,034
Policy transactions:
Purchase payments - 10,718 1,355 5,744 - - - - 197,212
Transfers between funds - 5,757 1,281 6,185 (14,174) 458 - - 3,159
Surrenders and terminations - (779) (965) (1,893) - - - - (22,866)
Policy loan transactions - (2,141) (111) (695) - (3) (30) (6) (4,857)
Other transactions - (4,868) (872) (3,112) (151) (175) (147) (63) (57,269)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - 8,687 688 6,229 (14,325) 280 (177) (69) 115,379
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 21,322 32,402 66,198 - 14,874 12,382 3,735 462,413
===========================================================================================================================
Policy transactions:
Purchase payments - 12,100 1,329 5,397 - - - - 282,146
Transfers between funds - 802 12,856 (6,933) - 1 2,260 8,290 (2,628)
Surrenders and terminations - (1,318) (400) (3,354) - - (149) - (14,699)
Policy loan transactions - (189) (22) (4,007) - (3) - (7) (5,979)
Other transactions - (4,907) (961) (2,782) - (185) (162) (122) (52,587)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - 6,488 12,802 (11,679) - (187) 1,949 8,161 206,253
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - 27,810 45,204 54,519 - 14,687 14,331 11,896 668,666
===========================================================================================================================
Policy transactions (unaudited):
Purchase payments - 4,826 1,008 2,367 - - - - 121,441
Transfers between funds 266 (525) 47 (2,720) - - (2,226) 119 6,717
Surrenders and terminations - (207) (864) (90) - - - - (13,058)
Policy loan transactions - (575) (415) (2,262) - (3) - (6) (11,711)
Other transactions - (2,034) (724) (1,274) - (105) (115) (113) (27,085)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 266 1,485 (948) (3,979) - (108) (2,341) - 76,304
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
June 30, 1997 (unaudited) 266 29,295 44,256 50,540 - 14,579 11,990 11,896 744,970
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. UNIT VALUES
A summary of unit values and units outstanding for variable life contracts and
the expense ratios, including expenses of the underlying funds, for the
six-month period ended June 30, 1997 (unaudited) and each of the five years in
the period ended December 31, 1996 follows.
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADJUSTABLE U.S. GOVERNMENT FUND
December 31,
19961 18,047 $12.873 $ 232,322 1.34+%
1995 2,013 12.352 24,865 1.34
1994 654 11.374 7,427 1.32
1993 403 11.481 4,622 1.33
1992 410 11.170 4,577 1.35
CAPITAL GROWTH FUND
June 30, 1997 (unaudited) 389 12.370 4,808 1.51
December 31,
19962 391 11.303 4,418 1.52+
GROWTH AND INCOME FUND
June 30, 1997 (unaudited) 53,590 35.352 1,894,497 1.23
December 31,
1996 54,351 31.393 1,706,254 1.25
1995 38,021 27.700 1,053,166 1.27
1994 29,795 21.010 625,982 1.29
1993 29,140 21.604 629,549 1.33
1992 36,756 19.733 725,302 1.37
HIGH INCOME FUND
June 30, 1997 (unaudited) 80,286 23.175 1,860,586 1.27
December 31,
1996 84,503 22.188 1,874,953 1.29
1995 65,333 19.628 1,282,342 1.31
1994 63,380 16.512 1,046,519 1.35
1993 65,065 17.020 1,107,418 1.39
1992 65,825 14.815 975,210 1.43
INCOME SECURITIES FUND
June 30, 1997 (unaudited) 42,823 23.104 989,374 1.25
December 31,
1996 39,985 21.747 869,551 1.25
1995 26,614 19.691 524,066 1.26
1994 10,514 16.208 170,404 1.29
1993 2,104 17.423 36,655 1.31
1992 1,598 14.799 23,648 1.42
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT GRADE INTERMEDIATE BOND FUND
December 31,
19961 4,699 $15.617 $ 73,376 1.35+%
1995 4,259 15.260 64,990 1.36
1994 6,002 13.978 83,891 1.38
1993 582 14.017 8,158 1.41
1992 588 13.009 7,652 1.43
MONEY MARKET FUND
June 30, 1997 (unaudited) 56,347 15.885 895,051 1.19
December 31,
1996 46,930 15.550 729,749 1.18
1995 45,768 14.898 681,852 1.15
1994 37,381 14.194 530,565 1.21
1993 22,430 13.773 308,920 1.41
1992 26,464 13.532 358,105 1.44
MUTUAL DISCOVERY SECURITIES FUND
June 30, 1997 (unaudited) 12,592 11.271 141,928 1.87
December 31,
19963 4,953 10.190 50,468 2.12+
MUTUAL SHARES SECURITIES FUND
June 30, 1997 (unaudited) 18,904 11.092 209,700 1.58
December 31,
19963 8,280 10.339 85,606 1.75+
NATURAL RESOURCES SECURITIES FUND
June 30, 1997 (unaudited) 8,504 14.310 121,683 1.41
December 31,
1996 8,152 15.704 128,017 1.40
1995 10,831 15.214 164,784 1.41
1994 13,441 14.977 201,295 1.43
1993 7,933 15.396 122,135 1.43
1992 16,401 9.967 163,472 1.44
REAL ESTATE SECURITIES FUND
June 30, 1997 (unaudited) 15,970 29.550 471,934 1.28
December 31,
1996 12,678 27.568 349,516 1.32
1995 7,628 20.913 159,525 1.34
1994 4,368 17.928 78,309 1.37
1993 3,265 17.556 57,318 1.42
1992 3,450 14.862 51,275 1.44
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RISING DIVIDENDS FUND
June 30, 1997 (unaudited) 23,480 $18.307 $ 429,830 1.49%
December 31,
1996 19,304 15.795 304,911 1.51
1995 10,700 12.816 137,129 1.53
1994 4,474 9.952 44,527 1.55
1993 3,576 10.453 37,377 1.54
19924 1,899 10.909 20,717 1.42+
SMALL CAP FUND
June 30, 1997 (unaudited) 13,428 14.008 188,096 1.52
December 31,
1996 4,338 13.011 56,436 1.52
19955 - 10.157 - 1.65+
TEMPLETON DEVELOPING MARKETS EQUITY FUND
June 30, 1997 (unaudited) 73,214 13.443 984,197 2.17
December 31,
1996 59,260 11.292 669,146 2.24
1995 22,210 9.357 207,819 2.16
19946 6,099 9.173 55,951 2.28+
TEMPLETON GLOBAL ASSET ALLOCATION FUND
June 30, 1997 (unaudited) 31,165 13.783 429,535 1.62
December 31,
1996 30,332 12.651 383,721 1.61
19957 21 10.637 220 1.65+
TEMPLETON GLOBAL GROWTH FUND
June 30, 1997 (unaudited) 72,488 15.116 1,095,745 1.64
December 31,
1996 58,157 13.324 774,892 1.68
1995 31,471 11.069 348,359 1.72
19946 6,748 9.894 66,760 1.89+
TEMPLETON GLOBAL INCOME SECURITIES FUND
June 30, 1997 (unaudited) 8,501 16.695 141,907 1.36
December 31,
1996 7,756 16.700 129,516 1.36
1995 5,801 15.347 89,028 1.39
1994 3,175 13.483 42,818 1.46
1993 1,537 14.297 21,976 1.48
1992 1,562 12.346 19,280 1.42
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPLETON INTERNATIONAL EQUITY FUND
June 30, 1997 (unaudited) 70,467 $18.825 $1,326,549 1.64%
December 31,
1996 60,849 16.598 1,010,009 1.64
1995 40,830 13.600 555,276 1.67
1994 11,403 12.390 141,293 1.74
1993 1,368 12.375 16,931 1.87
19924 - 9.697 - 2.52+
TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND
June 30, 1997 (unaudited) 266 11.832 3,153 1.83
December 31,
19962 - 11.194 - 1.53+
TEMPLETON PACIFIC GROWTH FUND
June 30, 1997 (unaudited) 29,295 15.812 463,217 1.75
December 31,
1996 27,810 15.412 428,593 1.74
1995 21,322 13.977 298,014 1.76
1994 12,635 13.042 164,784 1.82
1993 9,924 14.407 142,972 1.89
19924 586 9.816 5,750 2.06+
U.S. GOVERNMENT SECURITIES FUND
June 30, 1997 (unaudited) 44,256 21.220 939,110 1.25
December 31,
1996 45,204 20.532 928,142 1.26
1995 32,402 19.966 646,949 1.27
1994 31,714 16.840 534,051 1.28
1993 38,612 17.775 686,329 1.29
1992 39,596 16.324 646,356 1.34
UTILITY EQUITY FUND
June 30, 1997 (unaudited) 50,540 26.547 1,341,665 1.25
December 31,
1996 54,519 24.816 1,352,938 1.25
1995 66,198 23.353 1,545,922 1.25
1994 59,969 17.912 1,074,173 1.27
1993 66,241 20.406 1,351,721 1.26
1992 72,790 18.600 1,353,865 1.30
ZERO COUPON FUND - 1995
December 31,
19958 10,963 18.957 207,834 1.15+
1994 14,325 17.823 255,331 1.15
1993 14,511 17.832 258,760 1.11
1992 14,686 16.719 245,536 1.00
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ZERO COUPON FUND - 2000
June 30, 1997 (unaudited) 14,579 $24.354 $ 355,051 1.15%
December 31,
1996 14,687 23.880 350,723 1.15
1995 14,874 23.491 349,422 1.15
1994 14,594 19.614 286,240 1.15
1993 15,249 21.191 323,131 1.12
1992 15,439 18.380 283,774 1.00
ZERO COUPON FUND - 2005
June 30, 1997 (unaudited) 11,990 27.367 328,136 1.15
December 31,
1996 14,331 26.888 385,323 1.15
1995 12,382 27.229 337,160 1.15
1994 12,559 20.821 261,513 1.15
1993 16,042 23.198 372,147 1.12
1992 17,524 19.121 335,065 1.00
ZERO COUPON FUND - 2010
June 30, 1997 (unaudited) 11,896 30.374 361,341 1.15
December 31,
1996 11,896 29.931 356,054 1.15
1995 3,735 30.991 115,736 1.15
1994 3,804 21.866 83,178 1.15
1993 7,408 24.745 183,310 1.00
1992 3,968 19.877 78,869 1.00
<FN>
* For the period ended June 30, 1997 (unaudited) and the year ended December 31,
including the effect of the expenses of the underlying funds.
+ Annualized.
1 Period from January 1, 1996 to October 25, 1996 (fund closure).
2 Period from May 1, 1996 (fund commencement) to December 31, 1996.
3 Period from November 8, 1996 (fund commencement) to December 31, 1996.
4 Period from January 27, 1992 (fund commencement) to December 31, 1992.
5 Period from November 1, 1995 (fund commencement) to December 31, 1995.
6 Period from July 1, 1994 (fund commencement) to December 31, 1994.
7 Period from May 1, 1995 (fund commencement) to December 31, 1995.
8 Period from January 1, 1995 to December 15, 1995 (fund closure).
</FN>
</TABLE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Independent Auditors' Report
The Board of Directors of Allianz Life Insurance Company of North America and
Policy Owners of Allianz Life Variable Account A:
We have audited the accompanying statements of assets and liabilities of the
sub-accounts of Allianz Life Variable Account A as of December 31, 1996, and the
related statements of operations and changes in net assets for each of the years
in the three-year period then ended. These financial statements are the
responsibility of the Variable Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody for the benefit of the Variable Account were confirmed to us by
the Franklin Valuemark Funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of the sub-accounts of Allianz
Life Variable Account A at December 31, 1996, and the results of their
operations and the changes in their net assets for each of the years in the
three-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 24, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements
Statements of Assets and Liabilities
December 31, 1996
U.S.
Money Growth and Precious High Real Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 734,244 shares, cost $734,244...... $734,244 - - - - -
Growth and Income Fund, 97,636 shares,
cost $1,399,209...................................... - 1,713,508 - - - -
Precious Metals Fund, 9,025 shares, cost $124,945..... - - 128,968 - - -
High Income Fund, 132,515 shares, cost $1,640,698..... - - - 1,876,418 - -
Real Estate Securities Fund, 15,894 shares,
cost $262,265........................................ - - - - 352,056 -
U.S. Government Securities Fund, 69,086 shares,
cost $808,378........................................ - - - - - 930,584
------- ------- ------- --------- ------- -------
Total assets...................................... 734,244 1,713,508 128,968 1,876,418 352,056 930,584
------- ------- ------- --------- ------- -------
Liabilities:
Accrued mortality and expense risk charges............. 3,596 5,803 761 1,172 2,032 1,954
Accrued administrative charges......................... 899 1,451 190 293 508 488
------- ------- ------- ------ ------- -------
Total liabilities................................. 4,495 7,254 951 1,465 2,540 2,442
------- --------- ------- --------- ------- -------
Net assets........................................ $729,749 1,706,254 128,017 1,874,953 349,516 928,142
======= ========= ======= ========= ======= =======
Policy owners' equity (note 5).......................... $729,749 1,706,254 128,017 1,874,953 349,516 928,142
======= ========= ======= ========= ======= =======
Units outstanding...................................... 46,930 54,351 8,152 84,503 12,678 45,204
======= ======= ====== ====== ====== ======
Unit value per unit.................................... $15.550 31.393 15.704 22.188 27.568 20.532
======= ======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton
Utility Zero Zero Zero Global Income Income
Equity Coupon Coupon Coupon Securities Securities
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Fund
-------- ----------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 74,633 shares, cost $981,928. $1,356,822 - - - - -
Zero Coupon Fund - 2000, 23,127 shares,
cost $254,387.................................... - 351,294 - - - -
Zero Coupon Fund - 2005, 23,601 shares,
cost $273,931.................................... - - 385,881 - - -
Zero Coupon Fund - 2010, 21,890 shares,
cost $321,612.................................... - - - 356,588 - -
Templeton Global Income Securities Fund,
9,633 shares, cost $122,258...................... - - - - 131,201 -
Income Securities Fund, 50,933 shares,
cost $797,107.................................... - - - - - 876,558
--------- ------- ------- ------- ------- -------
Total assets.................................. 1,356,822 351,294 385,881 356,588 131,201 876,558
--------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges......... 3,107 457 446 427 1,348 5,606
Accrued administrative charges..................... 777 114 112 107 337 1,401
-------- ------- ------- ------- ------- -------
Total liabilities............................. 3,884 571 558 534 1,685 7,007
--------- ------- ------- ------- ------- -------
Net assets.................................... $1,352,938 350,723 385,323 356,054 129,516 869,551
========= ======= ======= ======= ======= =======
Policy owners' equity (note 5)...................... $1,352,938 350,723 385,323 356,054 129,516 869,551
========= ======= ======= ======= ======= =======
Units outstanding.................................. 54,519 14,687 14,331 11,896 7,756 39,985
========= ======= ======= ======= ====== ======
Unit value per unit................................ $24.816 23.880 26.888 29.931 16.700 21.747
========= ======= ======= ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton Templeton Templeton Templeton Templeton
Pacific Rising International Developing Global Global Asset
Growth Dividends Equity Markets Equity Growth Allocation
Fund Fund Fund Fund Fund Fund
------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Pacific Growth Fund, 29,366 shares,
cost $404,622................................... $433,448 - - - - -
Rising Dividends Fund, 19,938 shares,
cost $245,909................................... - 307,051 - - - -
Templeton International Equity Fund,
65,914 shares, cost $887,168.................... - - 1,018,366 - - -
Templeton Developing Markets Equity Fund,
58,105 shares, cost $615,467.................... - - - 673,441 - -
Templeton Global Growth Fund, 56,624 shares,
cost $666,926................................... - - - - 781,408 -
Templeton Global Asset Allocation Fund,
30,522 shares, cost $342,910.................... - - - - - 384,273
------- ------- -------- -------- ------- --------
Total assets................................. 433,448 307,051 1,018,366 673,441 781,408 384,273
------- ------- -------- -------- ------- --------
Liabilities:
Accrued mortality and expense risk charges........ 3,884 1,712 6,685 3,436 5,213 442
Accrued administrative charges.................... 971 428 1,672 859 1,303 110
------- ------- -------- ------- ------- --------
Total liabilities............................ 4,855 2,140 8,357 4,295 6,516 552
------- ------- -------- ------- ------- --------
Net assets................................... $428,593 304,911 1,010,009 669,146 774,892 383,721
======= ======= ========= ======= ======= ========
Policy owners' equity (note 5)..................... $428,593 304,911 1,010,009 669,146 774,892 383,721
======= ======= ========= ======= ======= ========
Units outstanding................................. 27,810 19,304 60,849 59,260 58,157 30,332
======= ======= ======== ======= ======= ========
Unit value per unit............................... $15.412 15.795 16.598 11.292 13.324 12.651
======= ======= ======== ======= ======= ========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton
International Mutual Mutual
Small Capital Smaller Discovery Shares Total
Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Funds
------ ----- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Small Cap Fund, 4,285 shares, cost $52,944............... $56,568 - - - -
Capital Growth Fund, 389 shares, cost $4,560............. - 4,420 - - -
Templeton International Smaller Companies Fund,
0 shares, cost $4....................................... - - 4 - -
Mutual Discovery Securities Fund, 4,950 shares,
cost $50,000............................................ - - - 50,495 -
Mutual Shares Securities Fund, 8,275 shares,
cost $84,010............................................ - - - - 85,644
------ ----- ------ ------ ------
Total assets......................................... 56,568 4,420 4 50,495 85,644 12,989,240
------ ----- ------ ------ ------ ----------
Liabilities:
Accrued mortality and expense risk charges................ 106 2 3 22 30 48,244
Accrued administrative charges............................ 26 - 1 5 8 12,060
------ ----- ------ ------ ------ ----------
Total liabilities.................................... 132 2 4 27 38 60,304
------- ----- ------ ------ ------ ----------
Net assets........................................... $56,436 4,418 - 50,468 85,606 12,928,936
======= ===== ====== ====== ====== ==========
Policy owners' equity (note 5)............................. $56,436 4,418 - 50,468 85,606 12,928,936
======= ===== ====== ====== ====== ==========
Units outstanding......................................... 4,338 391 - 4,953 8,280 668,666
======= ====== ====== ====== ====== ==========
Unit value per unit....................................... $13.011 11.303 11.194 10.190 10.339
======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
Money Market Fund Growth and Income Fund Precious Metals Fund
-------------------------- -------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 32,922 33,164 14,466 28,758 10,179 4,301 2,102 3,600 626
-------- ------- ------- ------- ------ ------ ------- ----- -----
Expenses:
Mortality and expense risk charges. 4,291 4,898 2,689 9,969 5,842 3,726 1,012 2,489 700
Administrative charges............. 1,073 1,225 672 2,492 1,460 932 253 622 175
-------- ------- ------- ------- ------ ------ ------- ----- -----
Total expenses................ 5,364 6,123 3,361 12,461 7,302 4,658 1,265 3,111 875
-------- ------- ------- ------- ------ ------ ------- ----- -----
Investment income (loss), net. 27,558 27,041 11,105 16,297 2,877 (357) 837 489 (249)
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions
on mutual funds.................. - - - 101,857 22,157 8,957 1,927 2,665 -
-------- ------- ------- ------ ------ ------ ------- ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales............. 2,224,132 965,636 513,009 111,065 97,576 114,661 125,238 161,878 11,123
Cost of investments sold........ (2,224,132) (965,636) (513,009) (85,315) (77,218) (94,631) (110,740)(146,847) (9,528)
--------- ------- ------- ------- ------ ------ ------- ------- -----
Total realized gains (losses)
on sales of investments, net. - - - 25,750 20,358 20,030 14,498 15,031 1,595
--------- ------- ------- ------- ------ ------ ------ ------ -----
Realized gains (losses) on
investments, net............. - - - 127,607 42,515 28,987 16,425 17,696 1,595
Net change in unrealized
appreciation (depreciation)
on investments................... - - - 37,916 184,273 (45,642) (8,994) (10,144) (2,094)
--------- ------- ------- ------- ------- ------ ----- ------ -----
Total realized gains (losses)
and unrealized apprecia-
tion (depreciation) on
investments, net............. - - - 165,523 226,788 (16,655) 7,431 7,552 (499)
--------- ------- ------- ------- ------- ------ ----- ----- ----
Net increase (decrease) in net assets
from operations.................... $ 27,558 27,041 11,105 181,820 229,665 (17,012) 8,268 8,041 (748)
========= ======= ======= ======= ======= ====== ===== ===== ====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Real Estate U.S. Government
High Income Fund Securities Fund Securities Fund
---------------------- ------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------ ------ ------ ------ ----- ------- ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares...... $167,136 78,044 44,601 7,943 3,875 613 45,170 41,763 29,171
-------- ------ ------ ------ ------ ----- ------- ------ ------
Expenses:
Mortality and expense risk charges....... 12,310 7,709 6,671 1,883 833 672 4,926 3,974 3,380
Administrative charges................... 3,077 1,927 1,668 471 208 168 1,231 994 845
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total expenses...................... 15,387 9,636 8,339 2,354 1,041 840 6,157 4,968 4,225
-------- ------ ------ ------ ------ ----- ------- ------ ------
Investment income (loss), net....... 151,749 68,408 36,262 5,589 2,834 (227) 39,013 36,795 24,946
Realized gains (losses) and unrealized
appreciation (depreciation) on
investments:
Realized capital gain distributions
on mutual funds................. 8,872 - 6,061 - - - - - 2,285
-------- ------ ------ ------ ------ ----- ------- ------ ------
Realized gains (losses) on sales
of investments:
Proceeds from sales................... 347,465 47,176 51,287 9,243 22,803 5,838 126,946 33,799 131,317
Cost of investments sold.............. (313,573) (39,566) (45,931) (7,263) (19,244) (4,033) (108,478) (26,326) (99,718)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total realized gains (losses) on
sales of investments, net.......... 33,892 7,610 5,356 1,980 3,559 1,805 18,468 7,473 31,599
-------- ------ ------ ------ ------ ----- ------- ------ ------
Realized gains (losses) on
investments, net................... 42,764 7,610 11,417 1,980 3,559 1,805 18,468 7,473 33,884
Net change in unrealized appreciation
(depreciation) on investments.......... 26,432 122,964 (81,774) 58,343 14,488 759 (37,068) 56,173 (91,983)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total realized gains (losses) and
unrealized appreciation (depre-
ciation) on investments, net....... 69,196 130,574 (70,357) 60,323 18,047 2,564 (18,600) 63,646 (58,099)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Net increase (decrease) in net assets
from operations.......................... $220,945 198,982 (34,095) 65,912 20,881 2,337 20,413 100,441 (33,153)
======== ====== ====== ====== ====== ===== ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
----------------------- ------------------ --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------ ------- ---- ------- ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares........ $ 75,714 70,912 44,904 - 17,379 15,282 19,213 13,993 14,292
-------- ------ ------- ---- ------- ------ ------ ------ ------
Expenses:
Mortality and expense risk charges......... 11,220 8,983 6,698 - (594) 1,529 2,212 2,179 1,769
Administrative charges..................... 2,805 2,246 1,674 - (149) 383 553 545 442
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total expenses........................ 14,025 11,229 8,372 - (743) 1,912 2,765 2,724 2,211
-------- ------ ------- ---- ------- ------ ------ ------ ------
Investment income (loss), net......... 61,689 59,683 36,532 - 18,122 13,370 16,448 11,269 12,081
Realized gains (losses) and unrealized appre-
ciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds............................. - - 7,958 - 86 625 190 - 2,038
-------- ------ ------- ---- ------- ------ ------ ------ ------
Realized gains (losses) on sales
of investments:
Proceeds from sales..................... 427,719 112,297 183,473 - 273,701 4,692 9,943 3,895 14,723
Cost of investments sold................ (309,164) (88,887) (138,153) - (236,082) (3,908) (7,209) (2,731) (10,946)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total realized gains (losses) on sales
of investments, net.................. 118,555 23,410 45,320 - 37,619 784 2,734 1,164 3,777
-------- ------ ------- ---- ------- ------ ------ ------ ------
Realized gains (losses) on investments,
net.................................. 118,555 23,410 53,278 - 37,705 1,409 2,924 1,164 5,815
Net change in unrealized appreciation
(depreciation) on investments............ (93,370) 259,686 (253,440) - (37,457) (14,916) (13,736) 44,013 (41,764)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................. 25,185 283,096 (200,162) - 248 (13,507) (10,812) 45,177 (35,949)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Net increase (decrease) in net assets from
operations................................. $ 86,874 342,779 (163,630) - 18,370 (137) 5,636 56,446 (23,868)
======== ======= ======= ==== ======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Global
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Income Securities Fund
-------------------- ------------------- -------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ----- ------ -----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares........... $19,668 12,928 11,417 8,167 3,109 7,316 7,568 2,871 494
------- ------ ------ ------ ----- ------ ----- ------ -----
Expenses:
Mortality and expense risk charges............ 2,270 2,227 1,741 1,411 916 926 745 470 129
Administrative charges........................ 568 557 435 353 229 231 186 118 32
------- ------ ------ ------ ----- ------ ----- ------ -----
Total expenses........................... 2,838 2,784 2,176 1,764 1,145 1,157 931 588 161
------- ------ ------ ------ ----- ------ ----- ------ -----
Investment income (loss), net............ 16,830 10,144 9,241 6,403 1,964 6,159 6,637 2,283 333
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds................................ - - 3,569 2,213 - 3,560 - - 204
------- ------ ------ ------ ----- ------ ----- ------ -----
Realized gains (losses) on sales of investments:
Proceeds from sales......................... 13,626 4,311 75,603 57,843 1,827 79,261 8,726 15,642 2,577
Cost of investments sold.................... (9,480) (2,816) (52,536) (50,978) (1,569) (81,331) (8,294) (15,250) (2,445)
------- ------ ------ ------ ----- ------ ----- ------ -----
Total realized gains (losses) on sales of
investments, net........................ 4,146 1,495 23,067 6,865 258 (2,070) 432 392 132
------- ------ ------ ------ ----- ------ ----- ------ -----
Realized gains (losses) on
investments, net........................ 4,146 1,495 26,636 9,078 258 1,490 432 392 336
Net change in unrealized appreciation
(depreciation) on investments............... (21,955) 68,320 (72,608) 4,806 32,162 (29,320) 2,837 6,634 (2,030)
------- ------ ------ ------ ----- ------ ----- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net..................... (17,809) 69,815 (45,972) 13,884 32,420 (27,830) 3,269 7,026 (1,694)
------- ------ ------ ------ ----- ------ ----- ------ -----
Net increase (decrease) in net assets from
operations................................... $ (979) 79,959 (36,731) 20,287 34,384 (21,671) 9,906 9,309 (1,361)
======= ====== ====== ====== ===== ====== ===== ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Investment Grade Adjustable U.S.
Intermediate Bond Fund Income Securities Fund Government Fund
------------------- -------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.......... $ 3,706 3,949 253 33,370 19,772 2,467 18,030 1,373 184
------- ------ --- ------ ------ ------ ------- ------ -----
Expenses:
Mortality and expense risk charges........... 366 529 169 4,656 2,265 963 740 139 27
Administrative charges....................... 91 132 42 1,164 566 241 185 35 7
------- ------ --- ------ ------ ------ ------- ------ -----
Total expenses.......................... 457 661 21 5,820 2,831 1,204 925 174 34
------- ------ --- ------ ------ ------ ------- ------ -----
Investment income (loss), net........... 3,249 3,288 42 27,550 16,941 1,263 17,105 1,199 150
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds............................... - - 36 5,550 1,592 367 - - -
------- ------ --- ------ ------ ------ ------- ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales....................... 78,943 44,251 577 33 55,949 29,910 248,895 11,606 8,733
Cost of investments sold.................. (76,962) (43,145) (565) (30,950) (55,228) (30,339) (258,922) (11,571) (8,814)
------- ------ --- ------ ------ ------ ------- ------ -----
Total realized gains (losses) on sales of
investments, net....................... 1,981 1,106 12 2,373 721 (429) (10,027) 35 (81)
------- ------ --- ------ ------ ------ ------- ------ -----
Realized gains (losses) on investments,
net.................................... 1,981 1,106 48 7,923 2,313 (62) (10,027) 35 (81)
Net change in unrealized appreciation
(depreciation) on investments.............. (3,575) 2,630 150 37,183 47,314 (9,527) (200) 240 (98)
------- ------ --- ------ ------ ------ ------- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................... (1,594) 3,736 198 45,106 49,627 (9,589) (10,227) 275 (179)
------- ------ --- ------ ------ ------ ------- ------ -----
Net increase (decrease) in net assets from
operations................................... $ 1,655 7,024 240 72,656 66,568 (8,326) 6,878 1,474 (29)
======= ====== === ====== ====== ====== ======= ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton
Pacific Growth Fund Rising Dividends Fund International Equity Fund
----------------------- ------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ------ ----- ------ ------ -----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares......... $10,710 4,502 347 3,981 1,695 601 19,177 6,289 71
------- ------ ------ ------ ----- ----- ------ ------ -----
Expenses:
Mortality and expense risk charges.......... 2,726 1,485 689 1,632 587 227 6,014 2,178 323
Administrative charges...................... 682 371 172 408 147 57 1,504 545 81
------- ------ ------ ------ ----- ----- ------ ------ -----
Total expenses......................... 3,408 1,856 861 2,040 734 284 7,518 2,723 404
------- ------ ------ ------ ----- ----- ------ ------ -----
Investment income (loss), net.......... 7,302 2,646 (514) 1,941 961 317 11,659 3,566 (333)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds.............................. 6,208 1,872 672 - - - 23,468 7,792 95
------- ------ ------ ------ ----- ----- ------ ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales...................... 58,829 60,917 116,746 21,816 6,910 752 45,661 37,517 895
Cost of investments sold................. (52,737) (59,672)(108,205) (19,113) (6,447) (796) (41,618) (36,911) (878)
------- ------ ------- ------ ----- ----- ------ ------ -----
Total realized gains (losses) on sales of
investments, net...................... 6,092 1,245 8,541 2,703 463 (44) 4,043 606 17
------- ------ ------- ------ ----- ----- ------ ------ -----
Realized gains (losses) on investments,
net.................................. 12,300 3,117 9,213 2,703 463 (44) 27,511 8,398 112
Net change in unrealized appreciation
(depreciation) on investments............. 12,362 13,125 (24,505) 44,265 19,701 (2,053) 114,314 19,054 (3,562)
------- ------ ------- ------ ------ ----- ------- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................. 24,662 16,242 (15,292) 46,968 20,164 (2,097) 141,825 27,452 (3,450)
------- ------ ------- ------ ------ ----- ------- ------ -----
Net increase (decrease) in net assets from
operations................................. $31,964 18,888 (15,806) 48,909 21,125 (1,780) 153,484 31,018 (3,783)
======= ====== ======= ====== ====== ===== ======= ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Developing Templeton Templeton Global
Markets Equity Fund Global Growth Fund Asset Allocation Fund
--------------------- ------------------- ----------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ----- ------ ---- ---- ----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares............... $ 2,914 562 - 8,202 1,137 - 228 4 -
----- ----- ---- ----- ----- ---- ------- ---- ---
Expenses:
Mortality and expense risk charges................ 2,551 3,898 3,197 3,948 1,255 65 2,065 25 -
Administrative charges............................ 638 975 799 987 314 16 516 6 -
----- ----- ---- ----- ----- ----- ----- ---- ---
Total expenses............................... 3,189 4,873 3,996 4,935 1,569 81 2,581 31 -
----- ----- ---- ----- ----- ----- ----- ---- ---
Investment income (loss), net................ (275) (4,311) (3,996) 3,267 (432) (81) (2,353) (27) -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds.................................... 5,391 132 - 8,202 - - 456 - -
------ ----- ---- ----- ----- ----- ------ ---- ---
Realized gains (losses) on sales of investments:
Proceeds from sales............................. 31,363 37,410 2,518 30,853 28,814 3,901 185,620 168 -
Cost of investments sold........................ (28,760) (37,995) (2,585) (27,939) (28,227) (3,952) (173,426) (151) -
------ ------ ----- ------ ----- ----- ------- ---- ---
Total realized gains (losses) on sales of
investments, net............................ 2,603 (585) (67) 2,914 587 (51) 12,194 17 -
----- ----- ----- ----- ----- ----- ------ ---- ---
Realized gains (losses) on investments, net 7,994 (453) (67) 11,116 587 (51) 12,650 17 -
Net change in unrealized appreciation
(depreciation) on investments................... 56,503 4,422 (2,951) 91,158 23,468 (144) 41,378 (15) -
------ ----- ---- ------ ------ ----- ------ ---- ---
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net......................... 64,497 3,969 (3,018) 102,274 24,055 (195) 54,028 2 -
------ ----- ----- ------- ------ ----- ------ ---- ---
Net increase (decrease) in net assets from
operations........................................ $64,222 (342) (7,014) 105,541 23,623 (276) 51,675 (25) -
======= ===== ===== ======= ====== ==== ====== ==== ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton
International
Capital Smaller
Small Cap Fund Growth Fund Companies Fund
---------------- ------------ --------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ---- ---- ---- ---- ---- ------ --- ---
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.................................. $ - - - - - - - - -
----- --- --- --- --- --- --- --- ---
Expenses:
Mortality and expense risk charges................................... 105 - - 2 - - 3 - -
Administrative charges............................................... 26 - - - - - 1 - -
----- --- --- --- --- --- --- --- ---
Total expenses.................................................. 131 - - 2 - - 4 - -
----- --- --- --- --- --- --- --- ---
Investment income (loss), net................................... (131) - - (2) - - (4) - -
Realized gains (losses) and unrealized appreciation (depreciation) on
investments:
Realized capital gain distributions on mutual funds................. - - - - - - - - -
----- --- --- --- --- --- --- --- ---
Realized gains (losses) on sales of investments:
Proceeds from sales................................................ 11,065 - - - - - 10,115 - -
Cost of investments sold........................................... (10,593) - - - - - (9,996) - -
------ --- --- --- --- --- ----- --- ---
Total realized gains (losses) on sales of investments,.......... 472 - - - - - 119 - -
----- --- --- --- --- --- ----- --- ---
Realized gains (losses) on investments, net..................... 472 - - - - - 119 - -
Net change in unrealized appreciation (depreciation) on investments. 3,624 - - (140) - - - - -
----- --- --- --- --- --- ----- --- ---
Total realized gains (losses) and unrealized appreciation
(depreciation) on investments, net............................. 4,096 - - (140) - - 119 - -
----- --- --- --- --- --- ----- --- ---
Net increase (decrease) in net assets from operations................. $ 3,965 - - (142) - - 115 - -
===== === === === === === ===== === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Mutual Discovery Mutual Shares
Securities Fund Securities Fund Total All Funds
------------- ------------- ----------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- --- --- ---- ---- ---- ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.................... $ - - - - - - 514,679 331,100 191,406
---- --- --- ---- --- --- ------- ------- -------
Expenses:
Mortality and expense risk charges..................... 22 - - 31 - - 77,110 52,287 36,290
Administrative charges................................. 5 - - 8 - - 19,277 13,073 9,072
---- --- --- ---- --- --- -------- -------- --------
Total expenses.................................... 27 - - 39 - - 96,387 65,360 45,362
---- --- --- ---- --- --- -------- -------- --------
Investment income (loss), net..................... (27) - - (39) - - 418,292 265,740 146,044
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds... - - - - - - 164,334 36,296 36,427
---- --- --- ---- --- --- -------- -------- --------
Realized gains (losses) on sales of investments:
Proceeds from sales.................................. - - - 717 - - 4,219,146 2,024,083 1,351,596
Cost of investments sold............................. - - - (715) - - (3,966,357) (1,901,519) (1,212,303)
---- --- --- ---- --- --- --------- --------- ---------
Total realized gains (losses) on sales of
investments, net................................. - - - 2 - - 252,789 122,564 139,293
---- --- --- ---- --- --- -------- -------- -------
Realized gains (losses) on investments, net...... - - - 2 - - 417,123 158,860 175,720
Net change in unrealized appreciation (depreciation) on
investments.......................................... 495 - - 1,634 - - 354,212 871,051 (677,502)
---- --- --- ----- --- --- -------- -------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.. 495 - - 1,636 - - 771,335 1,029,911 (501,782)
---- --- --- ----- --- --- --------- --------- -------
Net increase (decrease) in net assets from operations... $468 - - 1,597 - - 1,189,627 1,295,651 (355,738)
==== === === ===== === === ========= ========= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets
For the years ended December 31, 1996, 1995 and 1994
Money Market Fund Growth and Income Fund Precious Metals Fund
------------------------- ----------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss),
net......................... $ 27,558 27,041 11,105 16,297 2,877 (357) 837 489 (249)
Realized gains (losses) on
investments, net............ - - - 127,607 42,515 28,987 16,425 17,696 1,595
Net change in unrealized
appreciation (depreciation)
on investments.............. - - - 37,916 184,273 (45,642) (8,994) (10,144) (2,094)
--------- -------- ------- -------- -------- ------- ------- ------- ------
Net increase (decrease)
in net assets from
operations.............. 27,558 27,041 11,105 181,820 229,665 (17,012) 8,268 8,041 (748)
--------- -------- ------- -------- -------- ------- ------- ------- -------
Policy transactions (note 5):
Purchase payments............ 2,288,562 1,140,571 835,456 347,781 233,408 15,811 18,730 24,963 988
Transfers between funds...... (2,221,762) (843,539) (442,767) 289,040 111,030 97,056 (46,431) 23,956 89,216
Surrenders and terminations.. (27,431) (48,126) (101,035) (28,415) (54,886) (49,775) (7,791) (81,139) (8,168)
Policy loan transactions..... (5,692) (251) (354) 8,174 842 (35,837) (524) 282 13
Other transactions (note 2).. (13,338) (124,409) (80,760) (145,312) (92,875) (13,810) (9,019) (12,614) (2,141)
--------- -------- ------- -------- -------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from policy transactions 20,339 124,246 210,540 471,268 197,519 13,445 (45,035) (44,552) 79,908
--------- -------- ------- -------- -------- ------- ------- ------- -------
Increase (decrease) in net
assets........................ 47,897 151,287 221,645 653,088 427,184 (3,567) (36,767) (36,511) 79,160
Net assets at beginning of year 681,852 530,565 308,920 1,053,166 625,982 629,549 164,784 201,295 122,135
--------- ------- ------- --------- --------- ------- ------- ------- -------
Net assets at end of year...... $ 729,749 681,852 530,565 1,706,254 1,053,166 625,982 128,017 164,784 201,295
========= ======= ======= ========= ========= ======= ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Real Estate U.S. Government
High Income Fund Securities Fund Securities Fund
------------------------- -------------------- ----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.... $ 151,749 68,408 36,262 5,589 2,834 (227) 39,013 36,795 24,946
Realized gains (losses) on
investments, net................ 42,764 7,610 11,417 1,980 3,559 1,805 18,468 7,473 33,884
Net change in unrealized
appreciation (depreciation) on
investments..................... 26,432 122,964 (81,774) 58,343 14,488 759 (37,068) 56,173 (91,983)
-------- -------- --------- ------- ------- ------ ------- ------- ------
Net increase (decrease) in
net assets from operations.. 220,945 198,982 (34,095) 65,912 20,881 2,337 20,413 100,441 (33,153)
-------- -------- --------- ------- ------- ------ ------- ------- ------
Policy transactions (note 5):
Purchase payments................ 57,851 44,935 4,791 67,454 53,203 7,592 26,467 25,128 1,041
Transfers between funds.......... 344,787 37,055 (10,182) 86,682 38,779 14,088 261,674 24,109 (111,346)
Surrenders and terminations...... (3,551) (14,331) (14,141) (1,098) (8,139) - (7,837) (18,462) -
Policy loan transactions......... 8,073 1,359 9,224 (1,340) (145) 222 (424) (2,060) (18)
Other transactions (note 2)...... (35,494) (32,177) (16,496) (27,619) (23,363) (3,248) (19,100) (16,258) (8,802)
-------- -------- --------- ------- ------- ------ ------- ------- -------
Net increase (decrease) in
net assets resulting from
policy transactions......... 371,666 36,841 (26,804) 124,079 60,335 18,654 260,780 12,457 (119,125)
-------- --------- --------- ------- ------- ------ ------- ------- -------
Increase (decrease) in net assets.. 592,611 235,823 (60,899) 189,991 81,216 20,991 281,193 112,898 (152,278)
Net assets at beginning of year.... 1,282,342 1,046,519 1,107,418 159,525 78,309 57,318 646,949 534,051 686,329
--------- --------- --------- ------- ------- ------ ------- ------- -------
Net assets at end of year.......... $1,874,953 1,282,342 1,046,519 349,516 159,525 78,309 928,142 646,949 534,051
========= ========= ========= ======= ======= ====== ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
-------------------------- ------------------- ----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 61,689 59,683 36,532 - 18,122 13,370 16,448 11,269 12,081
Realized gains (losses) on
investments, net................... 118,555 23,410 53,278 - 37,705 1,409 2,924 1,164 5,815
Net change in unrealized
appreciation (depreciation)
on investments..................... (93,370) 259,686 (253,440) - (37,457) (14,916) (13,736) 44,013 (41,764)
--------- ------- ------- --- ------ ------- ------ ------ -------
Net increase (decrease) in net
assets from operations........ 86,874 342,779 (163,630) - 18,370 (137) 5,636 56,446 (23,868)
--------- ------- ------- --- ------ ------- ------ ------ -------
Policy transactions (note 5):
Purchase payments................... 127,511 116,016 11,599 - - - - - -
Transfers between funds............. (163,650) 124,589 (62,456) - (270,886) - - 10,631 -
Surrenders and terminations......... (80,389) (35,449) (23,338) - - - - - (7,535)
Policy loan transactions............ (97,734) (13,309) (18,349) - - - (64) (64) (1,409)
Other transactions (note 2)......... (65,596) (62,877) (21,374) - (2,815) (3,292) (4,271) (3,831) (4,079)
--------- ------- ------ --- ------ ------- ------ ------ -------
Net increase (decrease) in net
assets resulting from policy
transactions................... (279,858) 128,970 (113,918) - (273,701) (3,292) (4,335) 6,736 (13,023)
--------- ------- ------- --- ------ ------- ------ ------ -------
Increase (decrease) in net assets..... (192,984) 471,749 (277,548) - (255,331) (3,429) 1,301 63,182 (36,891)
Net assets at beginning of year....... 1,545,922 1,074,173 1,351,721 - 255,331 258,760 349,422 286,240 323,131
--------- --------- --------- --- ------- ------- ------- ------- -------
Net assets at end of year............. $1,352,938 1,545,922 1,074,173 - - 255,331 350,723 349,422 286,240
========= ========= ========= === ======= ======= ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Global
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Income Securities Fund
----------------------- ---------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.......... $ 16,830 10,144 9,241 6,403 1,964 6,159 6,637 2,283 333
Realized gains (losses) on investments,
net................................... 4,146 1,495 26,636 9,078 258 1,490 432 392 336
Net change in unrealized appreciation
(depreciation) on investments......... (21,955) 68,320 (72,608) 4,806 32,162 (29,320) 2,837 6,634 (2,030)
------- ------- ------- ------ ------ ------ ------- ------ ------
Net increase (decrease) in net
assets from operations............ (979) 79,959 (36,731) 20,287 34,384 (21,671) 9,906 9,309 (1,361)
------- ------- ------- ------ ------ ------ ------- ------ ------
Policy transactions (note 5):
Purchase payments...................... - - - - - - 39,862 42,908 1,813
Transfers between funds................ 57,145 - (41,224) 223,644 - (74,884) 9,506 18,457 21,778
Surrenders and terminations............ (3,894) - (28,826) - - - (2,101) (6,040) -
Policy loan transactions............... - (687) (10) (176) (169) (158) (425) (638) -
Other transactions (note 2)............ (4,109) (3,625) (3,843) (3,437) (1,657) (3,419) (16,260) (17,786) (1,388)
------- ------- ------- ------ ------ ----- ------- ------ ------
Net increase (decrease) in net
assets resulting from policy
transactions...................... 49,142 (4,312) (73,903) 220,031 (1,826) (78,461) 30,582 36,901 22,203
-------- ------- ------- ------ ------ ------ ------- ------ ------
Increase (decrease) in net assets........ 48,163 75,647 (110,634) 240,318 32,558 (100,132) 40,488 46,210 20,842
Net assets at beginning of year.......... 337,160 261,513 372,147 115,736 83,178 183,310 89,028 42,818 21,976
-------- ------- ------- ------- ------ ------- ------- ------ ------
Net assets at end of year................ $385,323 337,160 261,513 356,054 115,736 83,178 129,516 89,028 42,818
======== ======= ======= ======= ======= ======= ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Investment Grade Adjustable U.S.
Intermediate Bond Fund Income Securities Fund Government Fund
-------------------- ---------------------- -----------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net................ $ 3,249 3,288 42 27,550 16,941 1,263 17,105 1,199 150
Realized gains (losses) on investments, net.. 1,981 1,106 48 7,923 2,313 (62) (10,027) 35 (81)
Net change in unrealized appreciation
(depreciation) on investments............... (3,575) 2,630 150 37,183 47,314 (9,527) (200) 240 (98)
------ ------ ------ ------ ------ ------- ------ ------ -----
Net increase (decrease) in net assets
from operations......................... 1,655 7,024 240 72,656 66,568 (8,326) 6,878 1,474 (29)
------ ------ ------ ------ ------ ------- ------ ------ -----
Policy transactions (note 5):
Purchase payments............................ 11,940 14,163 1,391 275,281 223,737 22,483 6,969 12,633 5,636
Transfers between funds...................... (72,421) 8,123 75,010 120,002 186,849 153,200 (34,766) 11,222 (2,444)
Surrenders and terminations.................. (751) (40,771) - (20,210) (14,487 - (1,178) - -
Policy loan transactions..................... - - - (4,239) (19,420 (26,076) 74 (1,764) -
Other transactions (note 2).................. (5,413) (7,440) (908) (98,005) (89,585 (7,532) (2,842) (6,127) (358)
------ ------ ------ ------ ------ ------- ------ ------ -----
Net increase (decrease) in net assets
resulting from policy transactions...... (66,645) (25,925) 75,493 272,829 287,094 142,075 (31,743) 15,964 2,834
------ ------ ------ ------- ------- ------- ------ ------ -----
Increase (decrease) in net assets.............. (64,990) (18,901) 75,733 345,485 353,662 133,749 (24,865) 17,438 2,805
Net assets at beginning of year................ 64,990 83,891 8,158 524,066 170,404 36,655 24,865 7,427 4,622
------ ------ ------ ------- ------- ------- ------ ------ -----
Net assets at end of year...................... $ - 64,990 83,891 869,551 524,066 170,404 - 24,865 7,427
====== ====== ====== ======= ======= ======= ====== ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton
Pacific Growth Fund Rising Dividends Fund International Equity Fund
---------------------- ---------------------- -----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 7,302 2,646 (514) 1,941 961 317 11,659 3,566 (333)
Realized gains (losses) on
investments, net................... 12,300 3,117 9,213 2,703 463 (44) 27,511 8,398 112
Net change in unrealized appreciation
(depreciation) on investments...... 12,362 13,125 (24,505) 44,265 19,701 (2,053) 114,314 19,054 (3,562)
------- ------ ------ ------ ------ ----- ------- ------ -----
Net increase (decrease) in net
assets from operations......... 31,964 18,888 (15,806) 48,909 21,125 (1,780) 153,484 31,018 (3,783)
------ ------ ------ ------ ------ ----- ------- ------ -----
Policy transactions (note 5):
Purchase payments................... 181,194 141,914 13,634 74,745 52,764 4,169 371,300 297,409 32,269
Transfers between funds............. 14,234 74,887 91,481 86,767 38,476 5,960 100,214 206,753 104,241
Surrenders and terminations......... (20,255) (10,270) - (7,693) (264) - (30,572) (9,230) -
Policy loan transactions............ (2,894) (27,456) (58,475) (1,876) - - (10,040) (1,799) 260
Other transactions (note 2)......... (73,664) (64,733) (9,022) (33,070) (19,499) (1,199) (129,653) (110,168) (8,625)
------ ------ ------ ------ ------ ----- ------- ------- ------
Net increase (decrease) in net
assets resulting from policy
transactions................... 98,615 114,342 37,618 118,873 71,477 8,930 301,249 382,965 128,145
------ ------- ------ ------ ------ ----- ------- ------- -------
Increase (decrease) in net assets..... 130,579 133,230 21,812 167,782 92,602 7,150 454,733 413,983 124,362
Net assets at beginning of year....... 298,014 164,784 142,972 137,129 44,527 37,377 555,276 141,293 16,931
------- ------- ------- ------- ------- ------ -------- ------- -------
Net assets at end of year............. $428,593 298,014 164,784 304,911 137,129 44,527 1,010,009 555,276 141,293
======= ======= ======= ======= ======= ====== ========= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton Templeton Global
Developing Markets Equity Fund Global Growth Fund Asset Allocation Fund
----------------------- ---------------------- ---------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ----- ------ ---- -----
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net............... $ (275) (4,311) (3,996) 3,267 (432) (81) (2,353) (27) -
Realized gains (losses) on investments, net. 7,994 (453) (67) 11,116 587 (51) 12,650 17 -
Net change in unrealized appreciation
(depreciation) on investments.............. 56,503 4,422 (2,951) 91,158 23,468 (144) 41,378 (15) -
------- ------ ------- ------ ------ ----- ------- --- ---
Net increase (decrease) in net assets
from operations........................ 64,222 (342) (7,014) 105,541 23,623 (276) 51,675 (25) -
------- ------ ------- ------- ------ ----- ----- --- ---
Policy transactions (note 5):
Purchase payments........................... 215,896 169,165 19,997 335,873 237,156 27,117 439 - -
Transfers between funds..................... 267,310 63,297 44,206 119,840 114,188 45,458 333,332 311 -
Surrenders and terminations................. (10,080) (18,763) - (12,771) (6,710) - - - -
Policy loan transactions.................... (2,638) - - (8,767) (3,177) - - - -
Other transactions (note 2)................. (73,383) (61,489) (1,238) (113,183) (83,481) (5,539) (1,945) (66) -
------- ------ ------- ------- ------- ----- ------ --- ---
Net increase (decrease) in net assets
resulting from policy transactions..... 397,105 152,210 62,965 320,992 257,976 67,036 331,826 245 -
------- ------ ------- ------- ------- ------ ------- --- ---
Increase (decrease) in net assets............. 461,327 151,868 55,951 426,533 281,599 66,760 383,501 220 -
Net assets at beginning of year............... 207,819 55,951 - 348,359 66,760 - 220 - -
------- ------- ------ ------- ------- ------ ------ --- ---
Net assets at end of year..................... $669,146 207,819 55,951 774,892 348,359 66,760 383,721 220 -
======= ======= ====== ======= ======= ====== ======= === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton
International
Smaller
Small Cap Fund Capital Growth Fund Companies Fund
-------------- -------------- ------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net........................................ $ (131) - - (2 - - (4) - -
Realized gains (losses) on investments, net.......................... 472 - - - - - 119 - -
Net change in unrealized appreciation (depreciation) on investments.. 3,624 - - (140) - - - - -
------ --- --- ------ --- --- ---- --- ---
Net increase (decrease) in net assets from operations............ 3,965 - - (142) - - 115 - -
------ --- --- ------ --- --- ---- --- ---
Policy transactions (note 5):
Purchase payments.................................................... 683 - - - - - - - -
Transfers between funds.............................................. 51,952 - - 4,560 - - (115) - -
Surrenders and terminations.......................................... 75 - - - - - - - -
Policy loan transactions............................................. - - - - - - - - -
Other transactions (note 2).......................................... (239) - - - - - - - -
------ --- --- ------ --- --- ---- --- ---
Net increase (decrease) in net assets resulting from policy
transactions.................................................... 52,471 - - 4,560 - - (115) - -
------ --- --- ------ --- --- ---- --- ---
Increase (decrease) in net assets...................................... 56,436 - - 4,418 - - - - -
Net assets at beginning of year........................................ - - - - - - - - -
------ --- --- ------ --- --- ---- --- ---
Net assets at end of year.............................................. $56,436 - - 4,418 - - - - -
====== === === ====== === === ==== === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Mutual Discovery Mutual Shares
Securities Fund Securities Fund Total All Funds
-------------- -------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- -------- -------- --------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net...................... $ (27) - - (39) - - 418,292 265,740 146,044
Realized gains (losses) on investments, net........ - - - 2 - - 417,123 158,860 175,720
Net change in unrealized appreciation (depreciation)
on investment..................................... 495 - - 1,634 - - 354,212 871,051 (677,502)
------ --- --- ------ --- --- -------- -------- -------
Net increase (decrease) in net assets from
operations.................................... 468 - - 1,597 - - 1,189,627 1,295,651 (355,738)
------ --- --- ------ --- --- --------- -------- -------
Policy transactions (note 5):
Purchase payments.................................. - - - - - - 4,448,538 2,830,073 1,005,787
Transfers between funds............................ 50,000 - - 84,053 - - (34,403) (21,713) (3,609)
Surrenders and terminations........................ - - - - - - (265,942) (367,067) (232,818)
Policy loan transactions........................... - - - - - - (120,512) (68,456) (130,967)
Other transactions (note 2)........................ - - - (44) - - (874,996) (836,875) (197,073)
------ --- --- ------ --- --- -------- -------- -------
Net increase (decrease) in net assets resulting
from policy transactions...................... 50,000 - - 84,009 - - 3,152,685 1,535,962 441,320
------ --- --- ------ --- --- --------- --------- -------
Increase (decrease) in net assets.................... 50,468 - - 85,606 - - 4,342,312 2,831,613 85,582
Net assets at beginning of year...................... - - - - - - 8,586,624 5,755,011 5,669,429
------ --- --- ------ --- --- ---------- --------- ---------
Net assets at end of year............................ $50,468 - - 85,606 - - 12,928,936 8,586,624 5,755,011
====== === === ====== === === ========== ========= =========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements
December 31, 1996
1. Organization
Allianz Life Variable Account A (Variable Account) is a segregated investment
account of Allianz Life Insurance Company of North America (Allianz Life)
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940 (as
amended). The Variable Account was established on May 31, 1985 and commenced
operations September 8, 1987. Accordingly, it is an accounting entity wherein
all segregated account transactions are reflected.
The Variable Account's assets are the property of Allianz Life and are held for
the benefit of the owners and other persons entitled to payments under variable
life policies issued through the Variable Account and underwritten by Allianz
Life. The assets of the Variable Account, equal to the reserves and other
liabilities of the Variable Account, are not chargeable with liabilities that
arise from any other business which Allianz Life may conduct.
The Variable Account's sub-accounts may invest, at net asset values, in one or
more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin
Advisers, Inc. or other of its affiliated adviser entities, in accordance with
the selection made by the policy owner. Not all funds are available as
investment options for the products which comprise the Variable Account.
Certain officers and trustees of the FVF are also officers and/or directors
of Franklin Advisers, Inc. and/or Allianz Life.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include realized gain distributions received from the
respective funds and gains on the sale of fund shares as determined by the
average cost method.
Realized gain distributions are reinvested in the respective funds. Dividend
distributions received from the FVF are reinvested in additional shares of the
FVF and are recorded as income to the Variable Account on the ex-dividend date.
A Fixed Account investment option is available to variable universal life policy
owners. This account is comprised of equity and fixed income investments which
are part of the general assets of Allianz Life. The liabilities of the Fixed
Account are part of the general obligations of Allianz Life and are not included
in the Variable Account. The guaranteed minimum rate of return on the Fixed
Account is 3.5%.
The Templeton Developing Markets Equity Fund, Templeton Global Growth Fund and
Fixed Account were added as available investment options on July 1, 1994. The
Templeton Global Asset Allocation Fund and Small Cap Fund were added as
available investment options on May 1, 1995 and November 1, 1995,
respectively. The Small Cap Fund had no investment activity during 1995. The
Zero Coupon - 1995 Fund matured and was closed on December 15, 1995.
The Capital Growth Fund and Templeton International Smaller Companies Fund were
added as available investment options on May 1, 1996. The Mutual Discovery
Securities Fund and Mutual Shares Securities Fund were added as available
investment options on November 8, 1996.
The Investment Grade Intermediate Bond Fund and Adjustable U.S. Government Fund
were closed on October 25, 1996 when shares of the U.S. Government Securities
Fund were substituted for all shares of both funds.
On May 1, 1995, the Equity Growth Fund name was changed to Growth and
Income Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996.
Expenses
Asset Based Expenses
A mortality and expense risk charge is deducted from the Variable Account on a
daily basis equal, on an annual basis, to .60% of the daily net assets of the
Variable Account.
An administrative charge is deducted from the Variable Account on a daily basis
equal, on an annual basis, to .15% of the daily net assets of the Variable
Account.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
2. Significant Accounting Policies (cont.)
Contract Based Expenses
A cost of insurance charge is deducted against each policy by liquidating
units. The amount of the charge is based upon age, sex, rate class and net
amount at risk (death benefit less total cash surrender value). Total cost of
insurance charges paid by the policy owners for the years ended December 31,
1996, 1995 and 1994 were $715,700, $581,193 and $123,231, respectively.
A deferred issue charge is deducted annually, at the end of the policy year,
from each single premium variable life policy for the first ten policy years by
liquidating units. The amount of the charge 7% of the single premium
consisting of 2.5% for premium taxes, 4% for sales charge and .5% for policy
issue charge (in the State of California, 2.35%, 4.15% and .5%, respectively).
If the policy is surrendered before the full amount is collected, the
uncollected portion of this charge is deducted from the account value. Total
deferred issue charges paid by the policy owners for the years ended December
31, 1996, 1995 and 1994 were $28,152, $28,613 and $32,516, respectively.
A policy charge is deducted on each monthly anniversary date from each variable
universal life policy by liquidating units. The amount of the charge is equal to
2.5% of each premium payment for premium taxes plus $20 per month for the first
policy year and $9 per month guaranteed thereafter. Currently, Allianz Life has
agreed to voluntarily limit the charge to $5 per month after the first policy
year. Total policy charges paid by the policy owners for the years ended
December 31, 1996, 1995 and 1994 were $204,321, $292,695 and $64,030,
respectively.
Twelve free transfers are permitted each contract year. Thereafter, the fee is
the lesser of $25 or 2% of the amount transferred. No transfer charges were paid
by the policy owners during the years ended December 31, 1996, 1995 and 1994,
respectively. Net transfers to the Fixed Account during the years ended
December 31, 1996, 1995 and 1994 were $34,403, $21,713 and $3,609, respectively.
The cost of insurance, deferred issue, policy and transfer charges paid are
reflected in the Statements of Changes in Net Assets as other transactions.
3. Investment Transactions
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund.................................$2,269,592
Growth and Income Fund............................ 699,549
Precious Metals Fund.............................. 80,133
High Income Fund.................................. 870,340
Real Estate Securities Fund....................... 139,966
U.S. Government Securities Fund................... 423,315
Utility Equity Fund............................... 200,976
Zero Coupon Fund - 2000........................... 19,311
Zero Coupon Fund - 2005........................... 76,636
Zero Coupon Fund - 2010........................... 285,255
Templeton Global Income Securities Fund........... 46,775
Investment Grade Intermediate Bond Fund........... 14,607
Income Securities Fund............................ 342,871
Adjustable U.S. Government Fund................... 233,813
Templeton Pacific Growth Fund..................... 173,362
Rising Dividends Fund............................. 143,668
Templeton International Equity Fund............... 387,255
Templeton Developing Markets Equity Fund.......... 436,775
Templeton Global Growth Fund...................... 368,252
Templeton Global Asset Allocation Fund............ 516,099
Small Cap Fund.................................... 63,537
Capital Growth Fund............................... 4,560
Templeton International Smaller Companies Fund.... 10,000
Mutual Discovery Securities Fund.................. 50,000
Mutual Shares Securities Fund..................... 84,725
</TABLE>
4. Federal Income Taxes
Operations of the Variable Account form a part of, and are taxed with,
operations of Allianz Life, which is taxed as a life insurance company under the
Internal Revenue Code.
Allianz Life does not expect to incur any federal income taxes in the operation
of the Variable Account. If, in the future, Allianz Life determines that the
Variable Account may incur federal income taxes, it may then assess a charge
against the Variable Account for such taxes.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity
Transactions in units for each fund for the years ended December 31, 1996, 1995
and 1994, were as follows:
<TABLE>
<CAPTION>
Growth U.S. Zero Zero
Money and Precious High Real Estate Government Utility Coupon Coupon
Market Income Metals Income Securities Securities Equity Fund - Fund -
Fund Fund Fund Fund Fund Fund Fund 1995 2000
------- ------ -------- ------ ----------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993........ 22,430 29,140 7,933 65,065 3,265 38,612 66,241 14,511 15,249
Policy transactions:
Purchase payments............................ 59,285 751 67 265 419 62 654 - -
Transfers between funds...................... (31,325) 4,606 6,162 (637) 861 (6,440) (3,468) - -
Surrenders and terminations.................. (7,250) (2,364) (578) (869) - - (1,253) - (379)
Policy loan transactions..................... (25) (1,687) (1) 558 14 (1) (1,010) - (72)
Other transactions........................... (5,734) (651) (142) (1,002) (191) (519) (1,195) (186) (204)
------ ------ ----- ------ ------- ------ ------ ------ ------
Net increase (decrease) in
units resulting
from policy transactions............... 14,951 655 5,508 (1,685) 1,103 (6,898) (6,272) (186) (655)
------ ------ ------ ------ ------- ------ ------ ------ ------
Units outstanding at December 31, 1994........ 37,381 29,795 13,441 63,380 4,368 31,714 59,969 14,325 14,594
====== ====== ====== ====== ======= ====== ====== ====== ======
Policy transactions:
Purchase payments............................ 77,441 9,561 1,662 2,463 2,884 1,355 5,744 - -
Transfers between funds...................... (57,166) 4,664 1,698 1,925 2,056 1,281 6,185 (14,174) 458
Surrenders and terminations.................. (3,275) (2,237) (5,150) (772) (427) (965) (1,893) - -
Policy loan transactions..................... (17) 38 20 75 (7) (111) (695) - (3)
Other transactions........................... (8,596) (3,800) (840) (1,738) (1,246) (872) (3,112) (151) (175)
------ ------ ------ ------ ------- ------ ------ ------ ------
Net increase (decrease) in
units resulting
from policy transactions............... 8,387 8,226 (2,610) 1,953 3,260 688 6,229 (14,325) 280
------ ------ ------ ------ ------- ------ ------ ------ ------
Units outstanding at December 31, 1995........ 45,768 38,021 10,831 65,333 7,628 32,402 66,198 - 14,874
====== ====== ====== ====== ======= ====== ====== ====== ======
Policy transactions:
Purchase payments........................... 147,764 12,119 1,115 2,801 2,975 1,329 5,397 - -
Transfers between funds..................... (143,612) 9,962 (2,791) 17,863 3,397 12,856 (6,933) - 1
Surrenders and terminations................. (1,836) (1,005) (438) (177) (51) (400) (3,354) - -
Policy loan transactions.................... (376) 311 (29) 405 (62) (22) (4,007) - (3)
Other transactions.......................... (778) (5,057) (536) (1,722) (1,209) (961) (2,782) - (185)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in
units resulting from
policy transactions.................... 1,162 16,330 (2,679) 19,170 5,050 12,802 (11,679) - (187)
------ ------ ------ ------ ------ ------ ------ ------ ------
Units outstanding at December 31, 1996........ 46,930 54,351 8,152 84,503 12,678 45,204 54,519 - 14,687
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity (cont.)
<TABLE>
<CAPTION>
Templeton
Zero Zero Global Investment Adjustable Templeton Templeton
Coupon Coupon Income Grade Income U.S. Pacific Rising International
Fund Fund Securities Intermediate Securities Government Growth Dividends Equity
- 2005 - 2010 Fund Bond Fund Fund Fund Fund Fund Fund
------ ------ -------- --------- ---------- ---------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993.. 16,042 7,408 1,537 582 2,104 403 9,924 3,576 1,368
Policy transactions:
Purchase payments...................... - - 133 100 1,334 495 998 418 2,526
Transfers between funds................ (1,953) (3,442) 1,607 5,385 9,100 (213) 6,850 601 8,168
Surrenders and terminations............ (1,348) - - - - - - - -
Policy loan transactions............... - (7) - - (1,567) - (4,457) - 20
Other transactions..................... (182) (155) (102) (65) (457) (31) (680) (121) (679)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... (3,483) (3,604) 1,638 5,420 8,410 251 2,711 898 10,035
------ ------ ----- ----- ------ ----- ------ ------ ------
Units outstanding at December 31, 1994.. 12,559 3,804 3,175 6,002 10,514 654 12,635 4,474 11,403
====== ====== ===== ===== ====== ===== ====== ====== ======
Policy transactions:
Purchase payments...................... - - 2,992 963 12,397 1,060 10,718 4,625 22,647
Transfers between funds................ - - 1,333 562 10,593 966 5,757 3,323 15,984
Surrenders and terminations............ - - (416) (2,761) (783) - (779) (23) (691)
Policy loan transactions............... (30) (6) (44) - (1,137) (151) (2,141) - (130)
Other transactions..................... (147) (63) (1,239) (507) (4,970) (516) (4,868) (1,699) (8,383)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... (177) (69) 2,626 (1,743) 16,100 1,359 8,687 6,226 29,427
------ ------ ----- ----- ------ ----- ------- ------ ------
Units outstanding at December 31, 1995.. 12,382 3,735 5,801 4,259 26,614 2,013 21,322 10,700 40,830
====== ====== ===== ===== ====== ===== ======= ====== ======
Policy transactions:
Purchase payments...................... - - 2,551 778 13,495 553 12,100 5,400 24,859
Transfers between funds................ 2,260 8,290 609 (4,635) 5,904 (2,257) 802 6,298 6,586
Surrenders and terminations............ (149) - (138) (49) (1,004) (94) (1,318) (581) (2,070)
Policy loan transactions............... - (7) (26) - (212) 6 (189) (134) (665)
Other transactions..................... (162) (122) (1,041) (353) (4,812) (221) (4,907) (2,379) (8,691)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 1,949 8,161 1,955 (4,259) 13,371 (2,013) 6,488 8,604 20,019
------ ------ ----- ----- ------ ----- ------ ------ ------
Units outstanding at December 31, 1996.. 14,331 11,896 7,756 - 39,985 - 27,810 19,304 60,849
====== ====== ===== ===== ====== ===== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity (cont.)
<TABLE>
<CAPTION>
Templeton
Templeton Templeton Templeton International Mutual Mutual
Developing Global Global Asset Small Capital Smaller Discovery Shares Total
Markets Equity Growth Allocation Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Fund Fund Fund Funds
------------ ------- ---------- ----- ------ ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993.. - - - - - - - - 305,390
Policy transactions:
Purchase payments...................... 2,054 2,721 - - - - - - 72,282
Transfers between funds................ 4,590 4,585 - - - - - - 5,037
Surrenders and terminations............ - - - - - - - - (14,041)
Policy loan transactions............... - - - - - - - - (8,235)
Other transactions..................... (545) (558) - - - - - - (13,399)
------ ------ ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 6,099 6,748 - - - - - - 41,644
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1994.. 6,099 6,748 - - - - - - 347,034
====== ====== ====== ===== ==== ==== ===== ===== =======
Policy transactions:
Purchase payments...................... 18,183 22,517 - - - - - - 197,212
Transfers between funds................ 6,624 11,063 27 - - - - - 3,159
Surrenders and terminations............ (2,067) (627) - - - - - - (22,866)
Policy loan transactions............... (211) (307) - - - - - - (4,857)
Other transactions..................... (6,418) (7,923) (6) - - - - - (57,269)
------ ------ ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 16,111 24,723 21 - - - - - 115,379
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1995.. 22,210 31,471 21 - - - - - 462,413
====== ====== ====== ===== ==== ==== ===== ===== =======
Policy transactions:
Purchase payments...................... 20,769 28,048 39 54 - - - - 282,146
Transfers between funds................ 24,526 9,880 30,441 4,297 391 - 4,953 8,284 (2,628)
Surrenders and terminations............ (952) (1,089) - 6 - - - - (14,699)
Policy loan transactions............... (251) (718) - - - - - - (5,979)
Other transactions..................... (7,042) (9,435) (169) (19) - - - (4) (52,587)
------- ----- ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy
transactions..................... 37,050 26,686 30,311 4,338 391 - 4,953 8,280 206,253
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1996.. 59,260 58,157 30,332 4,338 391 - 4,953 8,280 668,666
====== ====== ====== ===== ==== ==== ===== ===== =======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values
A summary of unit values and units outstanding for variable life contracts and
the expense ratios, including expenses of the underlying funds, for each of the
five years in the period ended December 31, 1996 follows.
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Money Market Fund
December 31,
1996........................................................... 46,930 $15.550 $ 729,749 1.18%
1995........................................................... 45,768 14.898 681,852 1.15
1994........................................................... 37,381 14.194 530,565 1.21
1993........................................................... 22,430 13.773 308,920 1.41
1992........................................................... 26,464 13.532 358,105 1.44
Growth and Income Fund
December 31,
1996........................................................... 54,351 31.393 1,706,254 1.25
1995........................................................... 38,021 27.700 1,053,166 1.27
1994........................................................... 29,795 21.010 625,982 1.29
1993........................................................... 29,140 21.604 629,549 1.33
1992........................................................... 36,756 19.733 725,302 1.37
Precious Metals Fund
December 31,
1996........................................................... 8,152 15.704 128,017 1.40
1995........................................................... 10,831 15.214 164,784 1.41
1994........................................................... 13,441 14.977 201,295 1.43
1993........................................................... 7,933 15.396 122,135 1.43
1992........................................................... 16,401 9.967 163,472 1.44
High Income Fund
December 31,
1996........................................................... 84,503 22.188 1,874,953 1.29
1995........................................................... 65,333 19.628 1,282,342 1.31
1994........................................................... 63,380 16.512 1,046,519 1.35
1993........................................................... 65,065 17.020 1,107,418 1.39
1992........................................................... 65,825 14.815 975,210 1.43
Real Estate Securities Fund
December 31,
1996........................................................... 12,678 27.568 349,516 1.32
1995........................................................... 7,628 20.913 159,525 1.34
1994........................................................... 4,368 17.928 78,309 1.37
1993........................................................... 3,265 17.556 57,318 1.42
1992........................................................... 3,450 14.862 51,275 1.44
U.S. Government Securities Fund
December 31,
1996........................................................... 45,204 20.532 928,142 1.26
1995........................................................... 32,402 19.966 646,949 1.27
1994........................................................... 31,714 16.840 534,051 1.28
1993........................................................... 38,612 17.775 686,329 1.29
1992........................................................... 39,596 16.324 646,356 1.34
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Utility Equity Fund
December 31,
1996........................................................... 54,519 $24.816 $1,352,938 1.25%
1995........................................................... 66,198 23.353 1,545,922 1.25
1994........................................................... 59,969 17.912 1,074,173 1.27
1993........................................................... 66,241 20.406 1,351,721 1.26
1992........................................................... 72,790 18.600 1,353,865 1.30
Zero Coupon Fund - 1995
December 31,
1995 1......................................................... 10,963 18.957 207,834 1.15+
1994........................................................... 14,325 17.823 255,331 1.15
1993........................................................... 14,511 17.832 258,760 1.11
1992........................................................... 14,686 16.719 245,536 1.00
Zero Coupon Fund - 2000
December 31,
1996........................................................... 14,687 23.880 350,723 1.15
1995........................................................... 14,874 23.491 349,422 1.15
1994........................................................... 14,594 19.614 286,240 1.15
1993........................................................... 15,249 21.191 323,131 1.12
1992........................................................... 15,439 18.380 283,774 1.00
Zero Coupon Fund - 2005
December 31,
1996........................................................... 14,331 26.888 385,323 1.15
1995........................................................... 12,382 27.229 337,160 1.15
1994........................................................... 12,559 20.821 261,513 1.15
1993........................................................... 16,042 23.198 372,147 1.12
1992........................................................... 17,524 19.121 335,065 1.00
Zero Coupon Fund - 2010
December 31,
1996........................................................... 11,896 29.931 356,054 1.15
1995........................................................... 3,735 30.991 115,736 1.15
1994........................................................... 3,804 21.866 83,178 1.15
1993........................................................... 7,408 24.745 183,310 1.00
1992........................................................... 3,968 19.877 78,869 1.00
Templeton Global Income Securities Fund
December 31,
1996........................................................... 7,756 16.700 129,516 1.36
1995........................................................... 5,801 15.347 89,028 1.39
1994........................................................... 3,175 13.483 42,818 1.46
1993........................................................... 1,537 14.297 21,976 1.48
1992........................................................... 1,562 12.346 19,280 1.42
Investment Grade Intermediate Bond Fund
December 31,
1996 2......................................................... 4,699 15.617 73,376 1.35+
1995........................................................... 4,259 15.260 64,990 1.36
1994........................................................... 6,002 13.978 83,891 1.38
1993........................................................... 582 14.017 8,158 1.41
1992........................................................... 588 13.009 7,652 1.43
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Income Securities Fund
December 31,
1996........................................................... 39,985 $21.747 $ 869,551 1.25%
1995........................................................... 26,614 19.691 524,066 1.26
1994........................................................... 10,514 16.208 170,404 1.29
1993........................................................... 2,104 17.423 36,655 1.31
1992........................................................... 1,598 14.799 23,648 1.42
Adjustable U.S. Government Fund
December 31,
1996 2......................................................... 18,047 12.873 232,322 1.34+
1995........................................................... 2,013 12.352 24,865 1.34
1994........................................................... 654 11.374 7,427 1.32
1993........................................................... 403 11.481 4,622 1.33
1992........................................................... 410 11.170 4,577 1.35
Templeton Pacific Growth Fund
December 31,
1996........................................................... 27,810 15.412 428,593 1.74
1995........................................................... 21,322 13.977 298,014 1.76
1994........................................................... 12,635 13.042 164,784 1.82
1993........................................................... 9,924 14.407 142,972 1.89
1992 3......................................................... 586 9.816 5,750 2.06+
Rising Dividends Fund
December 31,
1996........................................................... 19,304 15.795 304,911 1.51
1995........................................................... 10,700 12.816 137,129 1.53
1994........................................................... 4,474 9.952 44,527 1.55
1993........................................................... 3,576 10.453 37,377 1.54
1992 3......................................................... 1,899 10.909 20,717 1.42+
Templeton International Equity Fund
December 31,
1996........................................................... 60,849 16.598 1,010,009 1.64
1995........................................................... 40,830 13.600 555,276 1.67
1994........................................................... 11,403 12.390 141,293 1.74
1993........................................................... 1,368 12.375 16,931 1.87
1992 3......................................................... - 9.697 - 2.52+
Templeton Developing Markets Equity Fund
December 31,
1996........................................................... 59,260 11.292 669,146 2.24
1995........................................................... 22,210 9.357 207,819 2.16
1994 4......................................................... 6,099 9.173 55,951 2.28+
Templeton Global Growth Fund
December 31,
1996........................................................... 58,157 13.324 774,892 1.68
1995........................................................... 31,471 11.069 348,359 1.72
1994 4......................................................... 6,748 9.894 66,760 1.89+
Templeton Global Asset Allocation Fund
December 31,
1996........................................................... 30,332 12.651 383,721 1.61
1995 5......................................................... 21 10.637 220 1.65+
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Small Cap Fund
December 31,
1996........................................................... 4,338 $13.011 $ 56,436 1.52%
1995 6......................................................... - 10.157 - 1.65+
Capital Growth Fund
December 31,
1996 7......................................................... 391 11.303 4,418 1.52+
Templeton International Smaller Companies Fund
December 31,
1996 7......................................................... - 11.194 - 1.53+
Mutual Discovery Securities Fund
December 31,
1996 8......................................................... 4,953 10.190 50,468 2.12+
Mutual Shares Securities Fund
December 31,
1996 8......................................................... 8,280 10.339 85,606 1.75+
<FN>
*For the year ended December 31, including the effect of the expenses of the
underlying funds.
+Annualized.
1Period from January 1, 1995 to December 15, 1995 (fund closure).
2Period from January 1, 1996 to October 25, 1996 (fund closure).
3Period from January 27, 1992 (fund commencement) to December 31, 1992.
4Period from July 1, 1994 (fund commencement) to December 31, 1994.
5Period from May 1, 1995 (fund commencement) to December 31, 1995.
6Period from November 1, 1995 (fund commencement) to December 31, 1995.
7Period from May 1, 1996 (fund commencement) to December 31, 1996.
8Period from November 8, 1996 (fund commencement) to December 31, 1996.
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996 and 1995
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Report
The Board of Directors
Allianz Life Insurance Company of North America:
We have audited the accompanying consolidated balance sheets of Allianz Life
Insurance Company of North America (a wholly owned subsidiary of Allianz of
America, Inc.) and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholder's equity and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Allianz
Life Insurance Company of North America and subsidiaries as of December 31, 1996
and 1995, and the results of their operations, changes in stockholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
In 1994, as discussed in note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
February 4, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in thousands)
Assets 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments:
Fixed maturities, at market $ 2,768,306 2,549,598
Equity securities, at market 327,834 254,458
Mortgage loans on real estate 245,559 203,128
Real estate, at cost 34,129 8,806
Investment in real estate partnerships, at equity 10,695 11,975
Certificates of deposit and short-term securities 204,972 31,501
Policy loans 103,708 104,184
Other long-term investments 124 650
- ---------------------------------------------------------------------------------------------------------------------
Total investments 3,695,327 3,164,300
Cash 37,992 36,449
Accrued investment income 36,130 36,858
Receivables (net of allowance for uncollectible
accounts of $4,630 in 1996 and $7,697 in 1995) 155,278 124,700
Reinsurance receivable:
Funds held on deposit 1,101,716 1,060,566
Recoverable on future policy benefit reserves 48,909 43,248
Recoverable on unpaid claims 142,199 109,075
Receivable on paid claims 18,240 22,172
Prepaid insurance premiums 4,840 4,078
Home office property and equipment (net of accumulated
depreciation of $20,090 in 1996 and $21,256 in 1995) 9,590 8,790
Deferred acquisition costs 863,338 826,994
Federal income tax recoverable 12,455 3,947
Other assets 11,622 11,048
- ---------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 6,137,636 5,452,225
Separate account assets 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1996 and 1995
(in thousands)
1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Future policy benefit reserves:
Life $ 1,204,633 1,088,964
Annuity 2,879,221 2,601,943
Policy and contract claims 438,824 371,898
Unearned premiums 32,176 34,181
Reinsurance payable 96,857 72,838
Deferred income taxes 150,760 140,174
Accrued expenses 84,254 66,779
Commissions due and accrued 37,103 22,979
Other policyholder funds 52,267 82,138
Other liabilities 147,364 19,137
- ---------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 5,123,459 4,501,031
Separate account liabilities 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 14,644,020 12,903,034
- ---------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1 par value, 20 million shares
authorized, issued and outstanding 20,000 20,000
Preferred stock, $1 par value, cumulative,
200 million shares authorized, 25 million shares
issued and outstanding 25,000 25,000
Additional paid-in capital 407,088 407,088
Net unrealized gain on investments
net of deferred federal income taxes 102,637 139,204
Net unrealized Canadian currency loss (3,473) (3,455)
Retained earnings 462,925 363,357
- ---------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,014,177 951,194
Commitments and contingencies (notes 6 and 11)
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 284,084 257,647 234,295
Other life policy considerations 85,747 93,158 92,254
Annuity considerations 170,656 147,112 120,240
Accident and health premiums 603,230 527,059 547,508
- ----------------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,143,717 1,024,976 994,297
Premiums ceded 277,163 223,226 244,208
- ----------------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 866,554 801,750 750,089
Investment income, net 222,622 201,158 181,291
Realized investment gains, net 28,561 29,202 829
Other 6,193 10,140 12,703
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,123,930 1,042,250 944,912
- ----------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 281,441 268,163 254,326
Annuity benefits 153,238 145,636 131,793
Accident and health insurance benefits 434,793 374,743 379,122
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits 869,472 788,542 765,241
Benefit recoveries 249,552 210,702 212,144
- ----------------------------------------------------------------------------------------------------------------------------------
Net benefits 619,920 577,840 553,097
Commissions and other agent compensation 267,714 233,939 313,715
General and administrative expenses 99,018 115,419 111,116
Taxes, licenses and fees 19,959 17,672 22,514
Increase in deferred acquisition costs, net (36,344) (28,552) (132,090)
Minority interest in income of consolidated
subsidiary 0 (30) (66)
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 970,267 916,288 868,286
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 153,663 125,962 76,626
- ----------------------------------------------------------------------------------------------------------------------------------
Income tax expense:
Current 21,936 12,993 5,098
Deferred 30,559 25,772 16,053
- ----------------------------------------------------------------------------------------------------------------------------------
Total income tax expense 52,495 38,765 21,151
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 101,168 87,197 55,475
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 20,000 20,000 20,000
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock:
Balance at beginning of year 25,000 40,000 0
Issuance of stock during the year 0 0 40,000
Redemption of stock during the year 0 (15,000) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 25,000 25,000 40,000
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital:
Balance at beginning of year 407,088 406,494 401,304
Additional contribution from parent 0 594 5,190
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 407,088 407,088 406,494
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments:
Balance at beginning of year 139,204 (62,073) 9,071
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 0 0 74,866
Net unrealized gain on securities transferred
from held-to-maturity to available-for-sale
classification, net of deferred federal income taxes 0 1,789 0
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (36,567) 199,488 (146,010)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 102,637 139,204 (62,073)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized Canadian currency loss:
Balance at beginning of year (3,455) (3,787) (2,708)
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (18) 332 (1,079)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (3,473) (3,455) (3,787)
- ----------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 363,357 278,811 223,749
Net income 101,168 87,197 55,475
Cash dividend to stockholder (1,600) (2,651) (413)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 462,925 363,357 278,811
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $ 1,014,177 951,194 679,445
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 101,168 87,197 55,475
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized gains on investments (28,561) (29,202) (829)
Deferred federal income tax expense 30,559 25,772 16,053
Charges to policy account balances (84,069) (120,254) (125,488)
Interest credited to policy account balances 166,766 169,151 150,490
Change in:
Accrued investment income 728 (2,072) (764)
Receivables (30,578) (13,300) 12,040
Reinsurance receivables (119,384) (190,953) (93,453)
Deferred acquisition costs (36,344) (28,552) (132,090)
Future policy benefit reserves 76,478 66,932 20,791
Policy and contract claims
and other policyholder funds 37,055 25,116 25,072
Unearned premiums (2,005) (6,195) (1,194)
Reinsurance payable 24,019 (8,669) 19,779
Current tax recoverable (8,508) (153) (6,255)
Accrued expenses and other liabilities 15,506 17,365 7,556
Commissions due and accrued 14,124 (1,211) 3,316
Depreciation and amortization (25,874) (23,391) (11,498)
Other, net (1,568) 916 (86)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 28,344 (118,700) (116,560)
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities 129,512 (31,503) (61,085)
- -----------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities 129,512 (31,503) (61,085)
Cash flows used in investing activities:
Purchase of fixed maturities, at market $ (1,324,676) (1,533,290) (928,532)
Purchase of equity securities (137,304) (166,701) (145,267)
Purchase of real estate (26,980) 0 0
Funding of mortgage loans (70,265) (66,301) (64,808)
Sale of fixed maturities, at market 1,043,748 1,242,988 791,659
Matured or redeemed fixed maturities, at amortized cost 0 7,022 4,342
Matured fixed maturities, at market 2,711 38,991 32,508
Sale of equity securities 122,788 97,619 150,347
Sale of real estate 4,324 0 0
Repayment of mortgage loans 23,317 25,563 28,206
Purchase of minority interest's shares in subsidiary 0 (7,903) 0
Net change in certificates of deposit and
short-term securities (173,471) 123,806 (96,344)
Change in liability related to
reverse repurchase transactions 130,196 (58,150) 58,150
Other 2,090 (2,851) (6,699)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (403,522) (299,207) (176,438)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 592,670 553,699 526,918
Policyholders' withdrawals from account balances (368,490) (291,102) (235,309)
Change in assets held under reinsurance agreements 52,973 36,354 (59,349)
Net change in mortgage notes payable 0 (1,049) (39)
Additional paid-in capital from parent 0 594 5,190
Preferred stock transactions 0 (15,000) 40,000
Cash dividends paid (1,600) (2,651) (413)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities 275,553 280,845 276,998
- ------------------------------------------------------------------------------------------------------------------------
Net change in cash 1,543 (49,865) 39,475
Cash at beginning of year 36,449 86,314 46,839
- ------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 37,992 36,449 86,314
========================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allianz Life Insurance Company of North America (the Company) is a wholly owned
subsidiary of Allianz of America, Inc. (AZOA), a majority-owned subsidiary of
Allianz A.G. Holding, a Federal Republic of Germany company.
The Company is a life insurance company which is licensed to sell both group and
individual life, annuity and accident and health policies in the United States,
Canada and several U.S. territories. Based on 1996 gross premium volume, 14%,
64% and 22% of the Company's business is life, annuity and accident and health,
respectively. The Company's primary distribution channels are through strategic
alliances with other insurance companies and third party marketing
organizations. The Company has a significant relationship with a mutual fund
company and its broker/dealer network related to sales of its variable life and
variable annuity products and another significant administration, marketing and
reinsurance relationship with an unrelated insurance company.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major subsidiary, Preferred Life
Insurance Company of New York and other less significant subsidiaries have been
consolidated. All significant intercompany balances and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported assets
and liabilities including reporting or disclosure of contingent assets and
liabilities as of the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Actual results could vary
significantly from management's estimates.
RECOGNITION OF TRADITIONAL LIFE, GROUP LIFE AND GROUP ACCIDENT AND HEALTH
REVENUE
Traditional life products include products with guaranteed premiums and benefits
and consist principally of whole life and term insurance policies, limited
payment contracts and certain annuity products with life contingencies.
Premiums on traditional life and group life products are recognized as income
when due. Group accident and health premiums are recognized as earned on a pro
rata basis over the risk coverage periods. Benefits and expenses for traditional
and group products are matched with earned premiums so that profits are
recognized over the premium paying periods of the contracts. This matching is
accomplished by establishing provisions for future policy benefits and policy
and contract claims, and deferring and amortizing related policy acquisition
costs.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
RECOGNITION OF NONTRADITIONAL AND VARIABLE LIFE AND ANNUITY REVENUE
Nontraditional and variable life insurance and interest sensitive contracts that
have significant mortality or morbidity risk are accounted for in accordance
with the retrospective deposit method. Interest sensitive contracts that do not
have significant mortality or morbidity risk are accounted for in a manner
consistent with interest bearing financial instruments. For both types of
contracts, premium receipts are reported as deposits to the contractholder's
account while revenues consist of amounts assessed against contractholders
including surrender charges and earned administrative service fees. Mortality or
morbidity charges are also accounted for as revenue on those contracts
containing mortality or morbidity risk. Benefits consist of interest credited to
contractholder's accounts and claims or benefits incurred in excess of the
contractholder's balance.
DEFERRED ACQUISTION COSTS
Acquisition costs, consisting of commissions and other costs which vary with and
are primarily related to production of new business, are deferred. For
traditional life and group life products, such costs are amortized over the
revenue-producing period of the related policies using the same actuarial
assumptions used in computing future policy benefit reserves. Acquisition costs
for accident and health insurance policies are deferred and amortized over the
lives of the policies in the same manner as premiums are earned. For interest
sensitive products, acquisition costs are amortized in relation to the present
value of expected future gross profits from investment margins and mortality,
morbidity and expense charges. Deferred acquisition costs amortized during 1996,
1995 and 1994 were $137,618, $117,782 and $108,676, respectively.
FUTURE POLICY BENEFIT RESERVES
Future policy benefit reserves on traditional life products are computed by the
net level premium method based upon estimated future investment yield, mortality
and withdrawal assumptions, commensurate with the Company's experience, modified
as necessary to reflect anticipated trends, including possible unfavorable
deviations. Most life reserve interest assumptions are graded from 9% to 5.5%.
Future policy benefit reserves for interest sensitive products are generally
carried at accumulated contract values. Reserves on some deferred annuity
contracts are computed based on contractholder cash value accumulations,
adjusted for mortality, withdrawal and interest margin assumptions.
Fair values of investment contracts, which include deferred annuities and other
annuities without significant mortality risk, were determined by testing amounts
payable on demand against discounted cash flows using interest rates
commensurate with the risks involved. Fair values are based on the amount
payable on demand at December 31, 1996 and 1995.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent an estimate of claims and claim adjustment
expenses that have been reported but not yet paid and incurred but not yet
reported as of December 31.
REINSURANCE
Insurance liabilities are reported before the effects of reinsurance. Amounts
paid or deemed to have been paid for claims covered by reinsurance contracts are
recorded as reinsurance receivable. Reinsurance receivables are recognized in a
manner consistent with the liabilities related to the underlying reinsured
contracts.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
INVESTMENTS
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities which addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are classified in one of three
categories. Debt securities that the Company has the positive intent and ability
to hold to maturity are classified as "held-to-maturity securities" and reported
at amortized cost. Debt and equity securities bought and held principally for
the purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
"held-to-maturity securities" or "trading securities" are classified as
"available-for-sale securities" and reported at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity, net
of deferred taxes. At January 1, 1994, the Company classified the majority of
its investment portfolio as "available-for-sale securities" with a limited
number of securities classified as "held-to-maturity".
At December 31, 1995, the Company transferred all of its securities with an
amortized cost of $83,357 classified as "held-to-maturity' to the
"available-for-sale" classifications as provided in the Financial Accounting
Standards Board (FASB) Special Report on the implementation of SFAS No. 115. The
effect of this transfer was an increase in stockholder's equity of $1,789. All
of the Company's investment portfolio is classified as "available-for-sale" at
December 31, 1996 and 1995.
Short-term investments are carried at amortized cost which approximates market.
Policy loans are reflected at their unpaid principal balances. Mortgage loans
are reflected at unpaid principal balances adjusted for premium and discount
amortization and an allowance for uncollectible balances. During 1995, the
Company adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan
and SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures. SFAS No. 114 addresses accounting by creditors for
impairment of certain loans. It requires that impaired loans within the scope of
the Statement be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, alternatively, at the
loan's observable market price of the fair value of supporting collateral. The
Company analyzes loan impairment at least once a year when assessing the
adequacy of the allowance for possible credit losses. SFAS No. 118 permits
existing income recognition practices to continue. The Company does not accrue
interest on impaired loans and accounts for interest income on a cash basis. The
adoption of these Statements did not have a material impact on the Company's net
income or financial position.
Investments in real estate are reflected at the lower of cost or market value.
Real estate occupied by the Company is reflected at cost, less accumulated
depreciation. Investments in real estate, exclusive of land, are being
depreciated on a straight-line basis over estimated useful lives ranging from 3
to 30 years.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1996 and 1995, investments with a carrying value of $102,361
and $37,879, respectively, were held on deposit with various insurance
departments and in other trusts as required by statutory regulations.
The fair values of invested assets, excluding investments in real estate, are
deemed by management to approximate their estimated market values. The fair
value of mortgage loans has been calculated using discounted cash flows and is
based on pertinent information available to management as of year end. Policy
loan balances which are supported by the underlying cash value of the policies
approximate fair value. Changes in market conditions subsequent to year end may
cause estimates of fair values to differ from the amounts presented herein.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and investment
gains and losses accrue directly to the policyholders and contractholders. Each
account has specific investment objectives and the assets are carried at market
value. The assets of each account are legally segregated and are not subject to
claims which arise out of any other business of the Company.
Fair values of separate account assets were determined using the market value of
the investments held in segregated fund accounts. Fair values of separate
account liabilities were determined using the cash surrender values of the
policyholder's and contractholder's account.
RECEIVABLES
Receivable balances approximate estimated fair values. This is based on
pertinent information available to management as of year end including the
financial condition and credit worthiness of the parties underlying the
receivables. Changes in market conditions subsequent to year end may cause
estimates of fair values to differ from the amounts presented herein.
ACCOUNTING CHANGES
In 1996, the Company adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of by a company. No adjustments were made to the consolidated
financial statements upon adoption of this pronouncement.
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. In December 1996, the FASB issued
SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125, which defers the effective date of certain paragraphs of SFAS
No. 125 that are applicable to the Company. The Statements which address
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, is to be applied prospectively. Earlier or
retroactive application is not permitted. As a result of SFAS No. 127, the
Company will adopt SFAS No. 125 at January 1, 1998. Adoption of these
pronouncements is not expected to have a significant impact on the consolidated
financial statements.
RECLASSIFICATIONS
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(2) INVESTMENTS
<TABLE>
<CAPTION>
Investments at December 31, 1996 consist of:
Amount
Amortized Estimated shown on
cost fair balance
or cost value sheet
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. Government $ 620,236 645,264 645,264
States and political subdivisions 419 424 424
Foreign government 304,589 309,394 309,394
Public utilities 6,466 7,041 7,041
Corporate securities 1,025,189 1,040,322 1,040,322
Mortgage backed securities 669,181 687,054 687,054
Collateralized mortgage obligations 78,331 78,807 78,807
- --------------------------------------------------------------------------------------------------------
Total fixed maturities $ 2,704,411 2,768,306 2,768,306
- --------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Public utilities 4,941 5,087 5,087
Banks, trusts and insurance
companies 8,132 10,528 10,528
Industrial and miscellaneous 211,520 301,691 301,691
Nonredeemable preferred stocks 9,496 10,528 10,528
- --------------------------------------------------------------------------------------------------------
Total equity securities $ 234,089 327,834 327,834
- --------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 245,559 XXXXXXXXX 245,559
Real estate:
Investment properties 34,129 XXXXXXXXX 34,129
Partnerships 10,695 XXXXXXXXX 10,695
Certificates of deposit and
short term securities 204,972 XXXXXXXXX 204,972
Policy loans 103,708 XXXXXXXXX 103,708
Other long term investments 124 XXXXXXXXX 124
- --------------------------------------------------------------------------------------------------------
Total other investments $ 599,187 XXXXXXXXX 599,187
- --------------------------------------------------------------------------------------------------------
Total investments $ 3,537,687 XXXXXXXXX 3,695,327
========================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
At December 31, 1996 and 1995, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of available-for-sale securities are
as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
U.S. Government 620,236 25,954 926 645,264
States and political subdivisions 419 5 0 424
Foreign government 304,589 6,090 1,285 309,394
Public utilities 6,466 575 0 7,041
Corporate securities 1,025,189 24,137 9,004 1,040,322
Mortgage backed securities 669,181 18,444 571 687,054
Collateralized mortgage obligations 78,331 995 519 78,807
- ---------------------------------------------------------------------------------------------------
Total fixed maturities 2,704,411 76,200 12,305 2,768,306
Equity securities 234,089 98,711 4,966 327,834
- ---------------------------------------------------------------------------------------------------
Total $ 2,938,500 174,911 17,271 3,096,140
===================================================================================================
1995:
U.S. Government 793,311 74,482 0 867,793
States and political subdivisions 469 12 0 481
Foreign government 254,457 11,613 273 265,797
Public utilities 32,100 4,628 0 36,728
Corporate securities 709,906 41,746 4,043 747,609
Mortgage backed securities 516,538 31,644 0 548,182
Collateralized mortgage obligations 80,949 2,751 692 83,008
- ---------------------------------------------------------------------------------------------------
Total fixed maturities 2,387,730 166,876 5,008 2,549,598
Equity securities 201,608 61,753 8,903 254,458
- ---------------------------------------------------------------------------------------------------
Total $ 2,589,338 228,629 13,911 2,804,056
===================================================================================================
</TABLE>
The changes in unrealized gains (losses) on fixed maturities available-for-sale
securities were $(97,973), $261,471 and $(214,245) in each of the years ended
December 31, 1996, 1995, 1994 and the change in unrealized losses on
held-to-maturity securities was $(8,783) for the year ended December 31, 1994.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$40,895, $48,186 and $(9,587) for the years ended December 31, 1996, 1995 and
1994, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of fixed maturities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized Estimated
cost fair value
- --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 4,523 4,689
Due after one year through five years 337,770 347,854
Due after five years through ten years 1,261,874 1,287,172
Due after ten years 352,732 362,730
Mortgage backed securities 747,512 765,861
- --------------------------------------------------------------------------------
Totals $ 2,704,411 2,768,306
================================================================================
</TABLE>
Gross gains of $43,696, $41,962 and $26,848 and gross losses of $16,834, $14,607
and $26,805 were realized on sales of available-for-sale securities in 1996,
1995 and 1994, respectively; related taxes were $9,402, $9,574 and $715 in 1996,
1995 and 1994, respectively. Proceeds from redemptions of held-to-maturity
securities during 1995 and 1994 were $7,022 and $4,342, respectively, with no
gain or loss realized on the transactions.
<TABLE>
<CAPTION>
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities, at market $ 8,897 21,877 (2,712)
Equity securities 17,964 5,478 2,745
Mortgage loans (1,129) (687) (1,667)
Real estate 3,104 2,530 2,067
Other (275) 4 396
- --------------------------------------------------------------------------------
Net gains before taxes 28,561 29,202 829
Tax expense on net realized gains 9,996 10,218 352
- --------------------------------------------------------------------------------
Net gains after taxes $ 18,565 18,984 477
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
In 1995, in conjunction with an expanded marketing agreement, the Company
provided an unrelated insurance company with $30,000 in exchange for a fifteen
year convertible debenture paying 5% interest for the first five years with the
interest rate reset annually thereafter at the one-year LIBOR plus 1%. If
converted, the Company would obtain an approximate 10% equity ownership in the
unrelated company. The Company has no intention of converting the debenture in
the near term.
During 1996 and 1995, the Company entered into mortgage backed security reverse
repurchase transactions ("dollar rolls") with certain securities dealers. Under
this program, the Company sells certain securities for delivery in the current
month and simultaneously contracts with the same dealer to repurchase similar,
but not identical, securities on a specified future date. The Company gives up
the right to receive principal and interest on the securities sold. As of
December 31, 1996, mortgage backed securities underlying the agreements were
carried at a market value of $124,281 and other liabilities included $130,196
for funds received under these agreements. As of December 31, 1995 there were no
outstanding amounts under the Company's dollar roll program. Average balances
outstanding were $83,602 and $67,735 and weighted average interest rates were
7.5% and 7.4% during 1996 and 1995, respectively. The maximum balance
outstanding during 1996 was $130,196.
During 1996 and 1995, the Company participated in a securities lending program
administered by AZOA's investment division. Under this program, the Company
loans U.S. Treasury Notes to qualified third parties. The Company obtains
collateral for the loan equal to 102 percent of the estimated market value and
accrued interest on the loaned securities and receives a portion of the interest
earned on the collateral. In addition, the Company maintains full ownership
rights to the securities loaned, including investment income and has the ability
to sell the securities while they are on loan with the consent of the borrower.
There were no securities on loan at December 31, 1996 and 1995.
Impaired mortgage loans are defined as those where it is probable that amounts
due according to contractual terms, including principal and interest, will not
be collected. Impaired mortgage loans are measured by the Company at the fair
value of collateral. Interest income on impaired mortgage loans is recorded on a
cash basis. There were no impaired loans held by the Company as of December 31,
1996. Below is a summary of impaired mortgage loans as of December 31, 1995.
<TABLE>
<CAPTION>
Impaired Impaired Total
mortgage loans mortgage loans impaired
with a related without a related mortgage
allowance allowance loans
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995:
Balance $ 9,210 8,541 17,751
Related allowance 3,580 3,580
- ----------------------------------------------------------------------------------------
Balance, net of allowance $ 5,630 8,541 14,171
========================================================================================
Below is a summary of interest income on impaired mortgage loans.
1996 1995
- -----------------------------------------------------------------------------------------------
Average principal balance of impaired mortgage loans $ 9,835 19,671
Total interest income on impaired mortgage loans 557 1,100
Interest income on impaired mortgage loans recorded on a cash basis 557 1,100
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The valuation allowances at December 31, 1996, 1995 and 1994 and the changes in
the allowance for the years then ended are summarized as follows:
Writedowns
Beginning Charged to Charged to End
of year Operations Allowance Recoveries of year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996:
Mortgage loans $ 10,487 0 0 3,208 7,279
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 10,487 0 0 3,208 7,279
==========================================================================================================
December 31, 1995:
Mortgage loans $ 11,552 914 0 1,979 10,487
Investment in real estate 1,550 0 0 1,550 0
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 13,102 914 0 3,529 10,487
==========================================================================================================
December 31, 1994:
Mortgage loans $ 11,552 1,598 0 1,598 11,552
Investment in real estate 1,550 0 0 0 1,550
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 13,102 1,598 0 1,598 13,102
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Major categories of net investment income for the respective years ended
December 31 are:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 0 6,284 6,966
Fixed maturities, at market 178,664 158,421 141,611
Mortgage loans 19,267 16,125 13,706
Policy loans 7,013 6,688 6,329
Short-term investments 10,688 7,182 3,012
Dividends:
Preferred stock 818 581 495
Common stock 4,527 3,204 2,673
Rental income on real estate 3,161 2,781 3,135
Interest on assets held by reinsurers 9,709 10,445 10,470
Other 2,183 833 577
- --------------------------------------------------------------------------------
Total investment income 236,030 212,544 188,974
Investment expenses 13,408 11,386 7,683
- --------------------------------------------------------------------------------
Net investment income $ 222,622 201,158 181,291
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(3) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Financial assets
- ----------------
Fixed maturities, at market:
U.S. Government $ 645,264 645,264 867,793 867,793
States and political subdivisions 424 424 481 481
Foreign governments 309,394 309,394 265,797 265,797
Public utilities 7,041 7,041 36,728 36,728
Corporate securities 1,040,322 1,040,322 747,609 747,609
Mortgage backed securities 687,054 687,054 548,182 548,182
Collateralized mortgage obligations 78,807 78,807 83,008 83,008
Equity securities 327,834 327,834 254,458 254,458
Mortgage loans 245,559 252,825 203,128 212,766
Short term investments 204,972 204,972 31,501 31,501
Policy loans 103,708 103,708 104,184 104,184
Other long term investments 124 124 650 650
Receivables 155,278 155,278 124,700 124,700
Separate accounts assets 9,520,561 9,520,561 8,402,003 8,402,003
Financial liabilities
- ---------------------
Investment contracts 3,297,973 2,747,914 3,063,100 2,542,260
Separate account liabilities 9,520,561 9,324,358 8,402,003 8,181,725
- --------------------------------------------------------------------------------------------------------------------
<FN>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
</FN>
</TABLE>
(4) RECEIVABLES
<TABLE>
<CAPTION>
Receivables at December 31 consist of the following:
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Premiums due $ 125,216 83,695
Agents balances 5,523 7,236
Related party receivables 2,099 922
Reinsurance commission receivable 7,515 16,693
Scholarship enrollment fees 8,025 6,822
Due from administrators 3,244 6,149
Other 3,656 3,183
- -------------------------------------------------------------------------
Total receivables $ 155,278 124,700
=========================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(5) ACCIDENT AND HEALTH CLAIMS RESERVES
Accident and health claims reserves are based on long-range projections subject
to uncertainty. Uncertainty regarding reserves of a given accident year is
gradually reduced as new information emerges each succeeding year, thereby
allowing more reliable re-evaluations of such reserves. While management
believes that reserves as of December 31, 1996 are adequate, uncertainties in
the reserving process could cause such reserves to develop favorably or
unfavorably in the near term as new or additional information emerges. Any
adjustments to reserves are reflected in the operating results of the periods in
which they are made. Movements in reserves which are small relative to the
amount of such reserves could significantly impact future reported earnings of
the Company.
<TABLE>
<CAPTION>
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $14,348, $18,858 and $11,149 in
1996, 1995 and 1994, respectively, is summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $99,292, $96,090 and $86,551 $ 191,804 185,028 170,123
Incurred related to:
Current year 271,308 242,024 230,995
Prior years (11,642) (9,163) (7,290)
- --------------------------------------------------------------------------------------------------------
Total incurred 259,666 232,861 223,705
- --------------------------------------------------------------------------------------------------------
Paid related to:
Current year 107,842 100,165 82,338
Prior years 127,032 125,920 126,462
- --------------------------------------------------------------------------------------------------------
Total paid 234,874 226,085 208,800
- --------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
recoverables of $114,230, $99,292 and $96,090 $ 216,596 191,804 185,028
========================================================================================================
</TABLE>
Due to lower than anticipated losses related to prior years, the provision for
claims and claim adjustment expenses decreased.
(6) REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
risks under excess coverage and coinsurance contracts. The Company retains a
maximum of $1 million coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk to minimize its exposure
to significant losses from reinsurer insolvencies.
Included in reinsurance receivables at December 31, 1996 are $53,036, $799,499
and $248,389 recoverable from three insurers who, as of December 31, 1996, were
rated A+, A+ and B++, respectively, by Best's Insurance Reports. A contingent
liability exists to the extent that the Company's reinsurers are unable to meet
their contractual obligations. Management is of the opinion that no liability
will accrue to the Company with respect to this contingency.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Life insurance, annuities and accident and health business assumed from and
ceded to other companies is as follows:
Percentage
Assumed Ceded of amount
Gross from other to other Net assumed
Year ended amount companies companies amount to net
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996:
Life insurance In force $ 37,527,994 44,073,247 6,126,541 75,474,700 58.4%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 235,837 133,994 37,986 331,845 40.4%
Annuities 169,503 1,153 12,769 157,887 0.7%
Accident and health insurance 396,051 207,179 226,408 376,822 55.0%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 801,391 342,326 277,163 866,554 39.5%
=================================================================================================================
December 31, 1995:
Life insurance In force $ 39,601,531 28,790,199 6,884,645 61,507,085 46.8%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 242,704 108,102 40,291 310,515 34.8%
Annuities 145,994 1,117 10,376 136,735 0.8%
Accident and health insurance 361,290 165,769 172,559 354,500 46.8%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 749,988 274,988 223,226 801,750 34.3%
=================================================================================================================
December 31, 1994:
Life insurance In force $ 39,789,859 24,411,513 6,893,030 57,308,342 42.6%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 230,241 96,308 35,578 290,971 33.1%
Annuities 119,045 1,195 6,806 113,434 1.1%
Accident and health insurance 388,759 158,749 201,824 345,684 45.9%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 738,045 256,252 244,208 750,089 34.2%
=================================================================================================================
</TABLE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$381,381, $182,638 and $86,055 in 1996, 1995 and 1994, respectively, and life
insurance premiums earned of $1,293, $641 and $203 in 1996, 1995 and 1994,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company also
ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$1,922, $(7,520) and $12,256 in 1996, 1995 and 1994.
In addition to the above transactions, the Company ceded a portion of its
mortality risk associated with the variable annuity product to Allianz
Aktiengesellshaft. The Company recorded a recoverable on future policy benefit
reserves of $1,279 and $930 as of December 31, 1996 and 1995, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(7) INCOME TAXES
INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Total income tax expense (benefit) for the years ended December 31 are as
follows:
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 21,936 12,993 5,098
Deferred tax (benefit) expense 30,559 25,772 16,053
- ------------------------------------------------------------------------------------------------------
Total income tax expense attributable to operations $ 52,495 38,765 21,151
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 0 0 40,312
Attributable to unrealized gains and losses
for the year (19,967) 108,559 (79,201)
- ------------------------------------------------------------------------------------------------------
Total income tax effect on equity $ 32,528 147,324 (17,738)
======================================================================================================
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Income tax expense computed at the statutory rate of 35% in 1996, 1995 and 1994,
varies from tax expense reported in the Consolidated Statements of Income for
the respective years ended December 31 as follows:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $ 53,782 44,087 26,819
Dividends received deductions and tax-exempt interest (650) (5,430) (3,967)
Foreign tax (2,723) (464) (79)
Interest on tax deficiency 261 408 (716)
Other 1,824 164 (906)
- ---------------------------------------------------------------------------------------------------
Income tax expense as reported $ 52,494 38,765 21,151
===================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
<TABLE>
<CAPTION>
Tax effects of temporary differences giving rise to the significant components
of the net deferred tax liability at December 31 are as follows:
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 2,024 1,936
Allowance for uncollectible accounts 1,256 2,283
Policy reserves 158,131 175,963
- ----------------------------------------------------------------------
Total deferred tax assets 161,411 180,182
- ----------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs 240,906 234,393
Net unrealized gain 53,008 72,975
Other 18,257 12,988
- ----------------------------------------------------------------------
Total deferred tax liabilities 312,171 320,356
- ----------------------------------------------------------------------
Net deferred tax liability $ 150,760 140,174
======================================================================
</TABLE>
Although realization is not assured, the Company believes it is not necessary to
establish a valuation allowance for the deferred tax asset as it is more likely
than not the deferred tax asset will be realized principally through future
reversals of existing taxable temporary differences and future taxable income.
The amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future reversals of existing taxable
temporary differences and future taxable income are reduced.
As of December 31, 1996 and 1995, the Company had no tax loss carryforwards or
alternative minimum tax credits.
The Company files a consolidated federal income tax return with AZOA and all of
its wholly owned subsidiaries. The consolidated tax allocation agreement
stipulates that each company participating in the return will bear its share of
the tax liability pursuant to United States Treasury Department regulations. The
Company and each of its insurance subsidiaries generally will be paid for the
tax benefit on their losses, and any other tax attributes, to the extent they
could have obtained a benefit against their post-1990 separate return taxable
income or tax. Income taxes paid by the Company were $30,946, $14,865 and
$15,162 in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995 the
Company had a tax recoverable from AZOA of $11,599 and $3,257, respectively and
a recoverable from Revenue Canada Taxation of $856 and $690, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(8) RELATED PARTY TRANSACTIONS
In November 1995, the Company purchased the 400 non-voting common shares in its
subsidiary, Canadian American Financial Corporation from AZOA for $7,903. The
acquisition of the shares increased the Company's equity ownership in both
voting and non-voting common stock to 100%.
As of December 31, 1995, Allianz Real Estate (AzRE), a wholly owned subsidiary
of AZOA, owned 100% of the stock or was a limited partner of certain entities
whose assets include mortgage loans issued by the Company amounting to $6,245.
Included in the mortgage loans are properties originally foreclosed upon by the
Company of which the balances at December 31, 1995 was $1,650.
The Company reimbursed AZOA $86, $738 and $817 in 1996, 1995 and 1994,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $0 and $528 at December 31, 1996 and 1995, respectively.
AZOA's investment division manages the Company's investment portfolio. The
Company paid AZOA $1,657, $1,024 and $1,285 in 1996, 1995 and 1994,
respectively, for investment advisory fees. The Company's liability to AZOA was
$543 and $377 at December 31, 1996 and 1995, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $3,275, $3,752 and $4,228 in
1996, 1995 and 1994, respectively. The Company's liability for data center
charges was $58 and $337 at December 31, 1996 and 1995, respectively.
The Company has 200 million authorized shares of preferred stock with a par
value of $1 per share. This preferred stock is issuable in series with the
number of shares, redemption rights and dividend rate designated by the Board of
Directors for each series. Dividends are cumulative at a rate reflective of
prevailing market conditions at time of issue and are payable semiannually.
Dividend payments are restricted by provisions in State of Minnesota statutes.
In 1994, the Company issued 25 millions shares of Series A preferred stock with
a dividend rate of 6.4% to AZOA for $25,000 and issued 15 millions shares of
Series B preferred stock with a dividend rate of 6.95% to AZOA for $15,000. In
December 1995, the Company redeemed and canceled the 15 million shares of Series
B preferred stock issued to AZOA. There are currently 25 million shares of
Series A preferred stock issued and outstanding.
As of December 31, 1996, the Company sold to AZOA, without recourse, two
receivables due from third parties amounting to $6,600. The Company recognized a
loss of $416 resulting from these sales.
In 1995 and 1994, AZOA contributed additional capital to the Company of $594 and
$5,190, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(9) EMPLOYEE BENEFIT PLANS
The Company participates in the Allianz Primary Retirement Plan (Primary
Retirement Plan), a defined contribution plan. The Company makes contributions
to a money purchase pension plan on behalf of eligible participants. All
employees, excluding agents, are eligible to participate in the Primary
Retirement Plan after two years of service. The contributions are based on a
percentage of the participant's salary with the participants being 100% vested
upon eligibility. It is the Company's policy to fund the plan costs as accrued.
Total pension contributions were $808, $860 and $918 in 1996, 1995 and 1994,
respectively.
The Company participates in the Allianz Asset Accumulation Plan (Allianz Plan),
a defined contribution plan sponsored by AZOA. Under the Allianz Plan
provisions, the Company will match from 50% to 100% of eligible employees'
contributions up to a maximum of 6% of a participant's compensation. The total
Company match for 1996, 1995 and 1994 Plan participants was 100%. All employees,
excluding agents, are eligible to participate after one year of service and are
fully vested in the Company's matching contribution after three years of
service. The Allianz Plan will accept participants' pretax or after-tax
contributions up to 15% of the participant's compensation. It is the Company's
policy to fund the Allianz Plan costs as accrued. The Company has accrued
$1,105, $1,188 and $1,266 in 1996, 1995 and 1994, respectively, toward planned
contributions.
In 1995, the Company discontinued support of its individual agency field force
and suspended contributions to the agents' asset accumulation plan as of January
1, 1996. Prior to this event, the Company matched 100% of eligible agents'
contributions up to a maximum of 3% of a participant's compensation and accepted
participant's pretax or after tax contributions up to 10% of participant's
compensation. Also during 1995, participation in the Plan decreased
significantly resulting in a partial plan termination whereby participants as of
January 1, 1995 became fully vested in the Plan. The Company has no intention to
fully terminate the Plan in the near term. Total Company contributions to the
Plan were $0, $118 and $386 in 1996, 1995 and 1994, respectively.
The Company provides certain postretirement benefits to employees who retired on
or before December 31, 1988 or who were hired before December 31, 1988 and who
have at least ten years of service when they reach age 55. The Company's plan
obligation at December 31, 1996 and 1995 was $5,783 and $5,532, respectively,
and the liability is included in "Other liabilities" in the accompanying balance
sheet.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(10) STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS
Statutory accounting is directed toward insurer solvency and protection of
policyholders. Accordingly, certain items recorded in financial statements
prepared under GAAP are excluded or vary in determining statutory policyholders'
surplus and net gain from operations. These items include, among others,
deferred acquisition costs, furniture and fixtures, accident and health premiums
receivable which are more than 90 days past due, deferred taxes and undeclared
dividends to policyholders. Additionally, future life policy and annuity benefit
reserves calculated for statutory accounting do not include provisions for
withdrawals.
<TABLE>
<CAPTION>
The differences between stockholder's equity and net income reported in
accordance with statutory accounting practices and the accompanying consolidated
financial statements as of and for the year ended December 31 are as follows:
Stockholder's equity Net income
-------------------------- -------------------------------------
1996 1995 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 384,989 299,186 67,995 11,565 6,895
Adjustments:
Change in reserve basis (199,566) (211,678) 13,324 (43,642) (109,473)
Deferred acquisition costs 863,338 826,994 36,344 28,552 132,090
Net deferred taxes (150,760) (140,174) (30,559) (25,772) (16,053)
Statutory asset valuation reserve 133,564 100,462 0 0 0
Statutory interest maintenance reserve 26,342 25,061 1,183 8,756 (4,768)
Modified coinsurance reinsurance (113,743) (119,178) 5,435 104,222 44,920
Unrealized gains on investments 64,928 163,237 0 0 0
Nonadmitted assets 7,121 1,471 0 0 0
Other (2,036) 5,813 7,446 3,516 1,864
- -------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $ 1,014,177 951,194 101,168 87,197 55,475
===================================================================================================================
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1996 and 1995 was in compliance with these requirements. The maximum amount of
dividends which can be paid by Minnesota insurance companies to stockholders
without prior approval of the Commissioner of Commerce is subject to
restrictions relating to statutory earned surplus, also known as unassigned
funds. Unassigned funds are determined in accordance with the accounting
procedures and practices governing preparation of the statutory annual
statement, minus 25% of earned surplus attributable to unrealized capital gains.
In accordance with Minnesota Statutes, the Company may declare and pay from its
surplus, cash dividends of not more than the greater of 10% of its beginning of
the year statutory surplus in any year, or the net gain from operations of the
insurer, not including realized gains, for the 12-month period ending the 31st
day of the next preceding year. In 1996 and 1995, respectively, the Company paid
to AZOA dividends, on preferred stock only, in the amount of $1,600 and $2,651,
respectively. Dividends of $61,439 could be paid in 1997 without prior approval
of the Commissioner of Commerce.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
REGULATORY RISK BASED CAPITAL
An insurance enterprise's state of domicile imposes minimum risk-based capital
requirements that were developed by the National Association of Insurance
Commissioners (NAIC). The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of an enterprise's regulatory total adjusted
capital to its authorized control level risk-based capital, as defined by the
NAIC. Enterprises below specific triggerpoints or ratios are classified within
certain levels, each of which requires specified corrective action. The levels
and ratios are as follows:
Ratio of total adjusted capital to
authorized control level risk-based
Regulatory Event Capital (less than or equal to)
------------------------- -------------------------------------
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7
The Company met the minimum risk-based capital requirements as of December 31,
1996 and 1995.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company is required to file annual statements with insurance regulatory
authorities which are prepared on an accounting basis prescribed or permitted by
such authorities. Currently, prescribed statutory accounting practices include
state laws, regulations, and general administrative rules, as well as a variety
of publications of the NAIC. Permitted statutory accounting practices encompass
all accounting practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a state, and may
change in the future. The NAIC currently has a project underway to codify
statutory accounting practices, the result of which is expected to constitute
the only source of "prescribed" statutory accounting practices. Accordingly,
that project will likely change the definition of what comprises prescribed
versus permitted statutory accounting practices, and may result in changes to
existing accounting policies insurance enterprises use to prepare their
statutory financial statements. The Company does not currently use permitted
statutory accounting practices which have a significant impact on its statutory
financial statements.
STATE EXAMINATION
Preferred Life is currently under routine examination by the New York State
Department of Insurance. No matters of significance or adjustments to Preferred
Life's statutory financial statements have been brought to management's
attention as a result of this examination.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(11) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion of
management, the ultimate resolution of such litigation will not have a material
effect on the consolidated financial position of the Company.
The Company is contingently liable for possible future assessments under
regulatory requirements pertaining to insolvencies and impairments of
unaffiliated insurance companies. Provision has been made for assessments
currently received and assessments anticipated for known insolvencies.
(12) FOREIGN CURRENCY TRANSLATION
<TABLE>
<CAPTION>
The net assets of the Company's foreign operations are translated into U.S.
dollars using exchange rates in effect at each year end. Translation adjustments
arising from differences in exchange rates from period to period are included in
the accumulated foreign currency translation adjustment reported as a separate
component of stockholder's equity. An analysis of this account for the
respective years ended December 31 follows:
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $ (3,455) (3,787) (2,708)
- -------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments (28) 511 (1,659)
Amount of income tax benefit (expense)
for period related to aggregate adjustment 10 (179) 580
- -------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity (18) 332 (1,079)
- -------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $ (3,473) (3,455) (3,787)
=======================================================================================================
Canadian foreign exchange rate at end of year 0.7297 0.7329 0.7129
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(13) SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
The following table summarizes certain financial information by line of business
for 1996, 1995 and 1994:
As of December 31 For the year ended December 31
------------------------------------------ -------------------------------------------------------------------
Future Benefits, Net
policy Other Premium claims change
benefits, policy revenue losses, in
Deferred losses, claims and other Net and policy
policy claims and contract invest- settle- acquisi- Other Premiums
acquistion and loss Unearned benefits consider- ment ment tion operating written
costs expense premiums payable ations income expenses costs (a) expenses (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996:
Life $ 175,608 1,204,633 5,502 62,369 331,845 89,049 258,221 4,308 103,352
Annuities 672,797 2,879,221 0 1,859 157,887 113,537 105,335 (43,283) 161,002
Accident and health 14,933 0 26,674 374,596 376,822 20,036 256,364 2,631 122,337
- -----------------------------------------------------------------------------------------------------------------------------------
$ 863,338 4,083,854 32,176 438,824 866,554 222,622 619,920 (36,344) 386,691
===================================================================================================================================
1995:
Life $ 179,915 1,088,964 5,493 62,660 310,514 83,741 239,287 8,475 124,415
Annuities 629,515 2,601,943 0 580 136,736 98,214 89,321 (34,235) 137,000
Accident and health 17,564 0 28,688 308,658 354,500 19,203 249,232 (2,792) 105,615
- ------------------------------------------------------------------------------------------------------------------------------------
$ 826,994 3,690,907 34,181 371,898 801,750 201,158 577,840 (28,552) 367,030
===================================================================================================================================
1994:
Life $ 188,390 1,022,537 6,012 63,728 290,971 78,100 228,383 6,889 114,767
Annuities 595,280 2,304,560 0 360 113,434 86,168 88,100 (140,776) 210,933
Accident and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797 121,645
- -----------------------------------------------------------------------------------------------------------------------------------
$ 798,442 3,327,097 40,376 355,411 750,089 181,291 553,097 (132,090) 447,345
===================================================================================================================================
<FN>
(a) See note 1 for total gross amortization.
(b) Premiums written are not applicable for life insurance companies.
</FN>
</TABLE>
<PAGE>
APPENDIX A
ILLUSTRATION OF POLICY VALUES
The following tables illustrate how Account Values, Cash Surrender Values and
death benefits of a Policy change with the investment experience of the
Sub-Accounts. The Account Values, Cash Surrender Values and death benefits in
the tables take into account all charges and deductions against the Policy.
These tables assume that the cost of insurance rates for the Policy are based on
the current and guaranteed rates appropriate to the class indicated. These
tables also assume that a $100,000 single premium is paid. For premiums of other
than $100,000, the tables shown can be adjusted (i.e. for a $20,000 premium,
multiply the attached tables by $20,000 divided by 100,000 or for a $200,000
premium, multiply the attached tables by $200,000 divided by 100,000). These
tables all assume that the Insured, both male and female, is in the most
favorable risk status, i.e., Non-Smoker. For Insureds who are classified as
Smoker or less favorable risk status, the cost of insurance will be greater and
thus Policy values will be less given the same assumed hypothetical gross annual
investment rates of return.
Gross investment returns of 0%, 6% and 12% are assumed to be level for all years
shown. The values would be different if the rates of return averaged 0%, 6% and
12% over the period of years but fluctuated above and below those averages
during individual years.
The values shown reflect the fact that the net investment return of the
Sub-Accounts is lower than the gross investment return on the assets held in the
Funds because of the charges levied against the Sub-Accounts. The daily
investment advisory fee is assumed to be equivalent to an annual rate of 0.54%
of the net assets of the Fund of the Trust (which is the average of the
investment advisory fees assessed the Trust in 1996 weighted by Sub-Account
value as of 12/31/96). The values also assume that each Fund of the Trust will
incur expenses annually which are assumed to be 0.04% of the average net assets
of the Fund. This is the average in 1996, weighted by Sub-Account value as of
12/31/96. The Sub-Accounts will be assessed for mortality and expense risks at
an annual rate of 0.60% of the average daily net assets of the Sub-Account and
for administrative expenses at an annual rate of 0.15% of the average daily net
assets of the Sub-Account. After taking these expenses and charges into
consideration, the illustrated gross annual investment rates of 0%, 6% and 12%
are equivalent to net rates of -1.32%, 4.60% and 10.52%.
The Company deducts the cost of insurance for a Policy Processing Period from
the Account Values. The cost of insurance rate is based on the sex (where
permitted by state law), Attained Age and rate class of the Insured.
Upon request, the Company will provide a comparable illustration based upon the
Attained Age, sex (where permitted by state law) and rate class of the proposed
Insured and for the face amount or premium requested.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $97,577 $91,277 $448,956
2 0 110,250 0 95,156 89,556 448,956
3 0 115,762 0 92,734 87,834 448,956
4 0 121,550 0 90,306 86,106 448,956
5 0 127,628 0 87,870 84,370 448,956
10 0 162,889 0 75,405 75,405 448,956
15 0 207,892 0 65,666 65,666 448,956
20 0 265,329 0 54,234 54,234 448,956
25 0 338,635 0 40,096 40,096 448,956
30 0 432,194 0 21,247 21,247 448,956
Summary of end of year values assuming 0.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $97,442 $91,142 $448,956
2 0 110,250 0 94,880 89,280 448,956
3 0 115,762 0 92,306 87,406 448,956
4 0 121,550 0 89,715 85,515 448,956
5 0 127,628 0 87,104 83,604 448,956
10 0 162,889 0 73,539 73,539 448,956
15 0 207,892 0 62,246 62,246 448,956
20 0 265,329 0 48,520 48,520 448,956
25 0 338,635 0 30,942 30,942 448,956
30 0 432,194 0 6,653 6,653 448,956
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- -----------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $103,478 $ 97,178 $469,124
2 0 110,250 0 107,087 101,487 473,694
3 0 115,762 0 110,829 105,929 478,099
4 0 121,550 0 114,709 110,509 481,272
5 0 127,628 0 118,727 115,227 486,524
10 0 162,889 0 141,013 141,013 505,776
15 0 207,892 0 171,362 171,362 524,302
20 0 265,329 0 207,412 207,412 543,817
25 0 338,635 0 250,030 250,030 564,817
30 0 432,194 0 300,042 300,042 586,519
Summary of end of year values assuming 6.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- -----------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $103,338 $ 97,038 $468,447
2 0 110,250 0 106,792 101,192 472,314
3 0 115,762 0 110,361 105,461 475,986
4 0 121,550 0 114,050 109,850 478,402
5 0 127,628 0 117,856 114,356 482,848
10 0 162,889 0 138,711 138,711 497,522
15 0 207,892 0 166,890 166,890 510,620
20 0 265,329 0 199,726 199,726 523,664
25 0 338,635 0 237,731 237,731 537,035
30 0 432,194 0 281,264 281,264 549,812
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS. THE
DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE
SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR
THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $ 109,374 $ 103,074 $ 497,587
2 0 110,250 0 119,675 114,075 532,448
3 0 115,762 0 130,990 126,090 569,094
4 0 121,550 0 143,419 139,219 606,307
5 0 127,628 0 157,064 153,564 648,396
10 0 162,889 0 247,978 247,978 889,432
15 0 207,892 0 396,856 396,856 1,214,229
20 0 265,329 0 632,585 632,585 1,658,581
25 0 338,635 0 1,004,247 1,004,247 2,268,595
30 0 432,194 0 1,587,072 1,587,072 3,102,392
Summary of end of year values assuming 12.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $ 109,225 $ 102,925 $ 496,870
2 0 110,250 0 119,344 113,744 530,902
3 0 115,762 0 130,435 125,535 566,587
4 0 121,550 0 142,592 138,392 602,705
5 0 127,628 0 155,908 152,408 643,517
10 0 162,889 0 243,943 243,943 874,960
15 0 207,892 0 386,520 386,520 1,182,604
20 0 265,329 0 609,174 609,174 1,597,200
25 0 338,635 0 954,900 954,900 2,157,118
30 0 432,194 0 1,487,822 1,487,822 2,908,379
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount...................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $97,581 $91,281 $400,205
2 0 110,250 0 95,171 89,571 400,205
3 0 115,762 0 92,762 87,862 400,205
4 0 121,550 0 90,353 86,153 400,205
5 0 127,628 0 87,939 84,439 400,205
10 0 162,889 0 75,643 75,643 400,205
15 0 207,892 0 65,904 65,904 400,205
20 0 265,329 0 53,955 53,955 400,205
25 0 338,635 0 37,513 37,513 400,205
30 0 432,194 0 12,607 12,607 400,205
Summary of end of year values assuming 0.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $97,448 $91,148 $400,205
2 0 110,250 0 94,899 89,299 400,205
3 0 115,762 0 92,343 87,443 400,205
4 0 121,550 0 89,777 85,577 400,205
5 0 127,628 0 87,197 83,697 400,205
10 0 162,889 0 73,854 73,854 400,205
15 0 207,892 0 62,558 62,558 400,205
20 0 265,329 0 48,117 48,117 400,205
25 0 338,635 0 27,344 27,344 400,205
30 0 432,194 0 0 0 400,205
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount...................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $103,483 $ 97,183 $418,203
2 0 110,250 0 107,104 101,504 422,295
3 0 115,762 0 110,864 105,964 426,225
4 0 121,550 0 114,766 110,566 430,029
5 0 127,628 0 118,816 115,316 433,718
10 0 162,889 0 141,385 141,385 450,686
15 0 207,892 0 172,042 172,042 466,889
20 0 265,329 0 208,209 208,209 483,966
25 0 338,635 0 249,939 249,939 502,379
30 0 432,194 0 297,039 297,039 522,320
Summary of end of year values assuming 6.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- -----------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $103,344 $ 97,044 $417,606
2 0 110,250 0 106,814 101,214 421,088
3 0 115,762 0 110,407 105,507 424,386
4 0 121,550 0 114,126 109,926 427,538
5 0 127,628 0 117,974 114,474 430,553
10 0 162,889 0 139,200 139,200 443,720
15 0 207,892 0 167,774 167,774 455,307
20 0 265,329 0 200,749 200,749 466,628
25 0 338,635 0 237,615 237,615 477,609
30 0 432,194 0 277,513 277,513 487,985
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representativ
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount...................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross rate of return. This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $ 109,379 $ 103,079 $ 443,576
2 0 110,250 0 119,694 114,094 474,674
3 0 115,762 0 131,031 126,131 507,346
4 0 121,550 0 143,491 139,291 541,749
5 0 127,628 0 157,182 153,682 578,020
10 0 162,889 0 248,631 248,631 792,548
15 0 207,892 0 398,429 398,429 1,081,262
20 0 265,329 0 635,010 635,010 1,476,037
25 0 338,635 0 1,003,877 1,003,877 2,017,804
30 0 432,194 0 1,571,181 1,571,181 2,762,795
Summary of end of year values assuming 12.00% gross rate of return. This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY ACCOUNT SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $ 109,232 $ 102,932 $ 442,944
2 0 110,250 0 119,369 113,769 473,320
3 0 115,762 0 130,489 125,589 505,166
4 0 121,550 0 142,687 138,487 538,624
5 0 127,628 0 156,065 152,565 573,818
10 0 162,889 0 244,800 244,800 780,337
15 0 207,892 0 388,565 388,565 1,054,492
20 0 265,329 0 612,291 612,291 1,423,228
25 0 338,635 0 954,428 954,428 1,918,411
30 0 432,194 0 1,467,973 1,467,973 2,581,313
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE FUNDS.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
Table of Net Single Premium Factors
Attained FACTORS Attained FACTORS Attained FACTORS
--------------- ------------- -------------
Age Male* Female* Age Male* Female* Age Male* Female*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 12.62467 14.69383 35 4.30327 4.82748 70 1.52757 1.66607
1 12.50646 14.48692 36 4.16038 4.66752 71 1.49533 1.62425
2 12.16372 14.08281 37 4.02237 4.51338 72 1.46481 1.58427
3 11.82118 13.67851 38 3.88934 4.36506 73 1.43608 1.54629
4 11.48209 13.27838 39 3.76113 4.22232 74 1.40915 1.51041
5 11.14463 12.88451 40 3.63755 4.08498 75 1.38398 1.47664
6 10.80849 12.49577 41 3.51861 3.95303 76 1.36040 1.44488
7 10.47450 12.11263 42 3.40410 3.82624 77 1.33828 1.41498
8 10.14347 11.73553 43 3.29382 3.70425 78 1.31741 1.38673
9 9.81784 11.36605 44 3.18765 3.58674 79 1.29764 1.35999
10 9.49960 11.00434 45 3.08543 3.47344 80 1.27888 1.33468
11 9.19034 10.65053 46 2.98710 3.36425 81 1.26112 1.31079
12 8.89337 10.30762 47 2.89249 3.25897 82 1.24440 1.28836
13 8.61119 9.97611 48 2.80143 3.15749 83 1.22879 1.26746
14 8.34507 9.65635 49 2.71381 3.05962 84 1.21434 1.24807
15 8.09470 9.34852 50 2.62950 2.96530 85 1.20100 1.22998
16 7.85593 9.04683 51 2.54845 2.87445 86 1.18868 1.21335
17 7.62788 8.75962 52 2.47062 2.78696 87 1.17723 1.19789
18 7.40829 8.48131 53 2.39595 2.70281 88 1.16647 1.18342
19 7.19529 8.21157 54 2.32443 2.62191 89 1.15617 1.16975
20 6.98773 7.95007 55 2.25594 2.54404 90 1.14612 1.15668
21 6.78427 7.69599 56 2.19040 2.46904 91 1.13609 1.14399
22 6.58380 7.44915 57 2.12767 2.39670 92 1.12581 1.13142
23 6.38615 7.20889 58 2.06757 2.32674 93 1.11497 1.11871
24 6.19122 6.97553 59 2.01001 2.25900 94 1.10328 1.10559
25 5.99922 6.74889 60 1.95494 2.19345 95 1.09064 1.09192
26 5.81010 6.52878 61 1.90230 2.13013 96 1.07717 1.07777
27 5.62462 6.31538 62 1.85199 2.06916 97 1.06337 1.06359
28 5.44313 6.10815 63 1.80404 2.01067 98 1.05029 1.05034
29 5.26593 5.90723 64 1.75842 1.95479 99 1.04000 1.04000
30 5.09324 5.71269 65 1.71504 1.90144
31 4.92522 5.52403 66 1.67380 1.85048
32 4.76215 5.34132 67 1.63456 1.80168
33 4.60408 5.16433 68 1.59713 1.75478
34 4.45114 4.99306 69 1.56150 1.70960
<FN>
*In states requiring unisex rates, male rates should apply.
</FN>
</TABLE>
<PAGE>
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission theretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REPRESENTATION
Allianz Life Insurance Compnay of North America ("Company") hereby represents
that the fees and charges deducted under the Policy described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
INDEMNIFICATION
Under its Bylaws, Article XI, the Company indemnifies, to the extent permitted
by the laws of the State of Minnesota, each person (and the heirs, executors,
and administrators of such person) made or threatened to be made a party to any
action, civil or criminal, by reason of being or having been a director, officer
or employee of the Company (or by reason of serving any other organization at
the request of the Company).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to such provisions of the bylaws or statutes or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any such action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
Policies issued by the Variable Account, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus consisting of 80 pages
Representations
The signatures
Part II
Other Information
Page 2
The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company#
2. Not Applicable
3.a. Principal Underwriter's Agreement###
3.b. General Agency Agreement###
4. Not Applicable
5. Individual Single Premium Variable Life Insurance Policy##
6.a. Articles of Incorporation of the Company#
6.b. Bylaws of the Company#
7. Not Applicable
8. Not Applicable
9.a. Administrative Agreement***
9.b. Fund Participation Agreement##
10. Application Form##
12. Illustrative Calculations for the Exchange of the Single Premium
Variable Life Insurance Policy for a Whole Life Policy**
13. Powers of Attorney
27. Not Applicable
B. Opinion and Consent of Counsel
C. Consent of Actuary###
D. Independent Auditors' Consent
** incorporated by reference to Registrant's Form S-6, File No. 33-15464
filed on June 29, 1987
*** incorporated by reference to Pre-Effective Amendment No. 1 to Form
S-6, File No. 33-11158 filed on October 19, 1987
# incorporated by reference to Post-Effective Amendment No. 14 to
Registrants Form S-6 electronically filed on November 1, 1995.
## incorporated by reference to Post-Effective Amendment No. 15 to
Registrants Form S-6 electronically filed on April 23, 1996.
### incorporated by reference to Post-Effective Amendment No. 17 to
Registrants Form S-6 electronically filed on April 29, 1997.
SIGNATURES
As required by the Securities Act of 1933, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and it has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of Minneapolis and State of Minnesota, on
this 29th day of September, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT A
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ Michael T. Westermeyer
------------------
Michael T. Westermeyer
Attest: /S/Catherine Farley
---------------------------
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board,
Lowell C. Anderson* President 9-29-97
Lowell C. Anderson and Chief Executive Officer
Herbert F. Hansmeyer* Director 9-29-97
Herbert F. Hansmeyer
Michael P. Sullivan* Director 9-29-97
Michael P. Sullivan
Dr.Jerry E. Robertson* Director 9-29-97
Dr.Jerry E. Robertson
Dr. Gerhard Rupprecht* Director 9-29-97
Dr. Gerhard Rupprecht
Edward J. Bonach* Chief Financial Officer 9-29-97
Edward J. Bonach
Rev. Dennis J. Dease* Director 9-29-97
Rev. Dennis J. Dease
James R. Campbell* Director 9-29-97
James R. Campbell
</TABLE>
*By Power of Attorney
By: /S/ Michael T. Westermeyer
---------------------------------
Michael T. Westermeyer
Attorney-in-Fact
<PAGE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 18
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX99.A13 Powers of Attorney
EX99.B Opinion and Consent of Counsel
EX99.D Independent Auditors' Consent
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Herbert F. Hansmeyer, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 29th day of September 1997.
WITNESS
/s/ Kathleen Doolwith /s/ Herbert Hansmeyer
___________________________ _____________________________
Herbert Hansmeyer
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Michael P Sullivan, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 5th day of September 1997.
WITNESS
/s/ Karen M Amundson /s/ Michael P. Sullivan
___________________________ _____________________________
Michael P. Sullivan
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Jerry E. Robertson, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 4th day of September 1997.
WITNESS
/s/ Jerry E. Robertson
___________________________ _____________________________
Jerry E. Robertson
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Gerhard G. Rupprecht, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a securi.y under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this ____ day of ___________ 1997.
WITNESS
/s/ Gerhard G. Rupprecht
___________________________ _____________________________
Gerhard G Rupprecht
I hereby certify that the above is the true signature, acknowledged in my
presence of
Dr. Gerhard Rupprecht
Chairman of the Board of Management
Reinsburgstrabe 19, 70178 Stuttgart, Germany
personally known to me.
Stuttgart, den 17.09.1997
/s/ Dr. Kubler
Dr. Kubler
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Dennis J. Dease, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 5th day of September 1997.
WITNESS
/s/ Sandra J. Schwartz /s/ Dennis J. Dease
___________________________ _____________________________
Dennis J. Dease
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, James R. Campbell, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 8th day of September 1997.
WITNESS
/s/ Carrie Knowles /s/ James R. Campbell
___________________________ _____________________________
James R. Campbell
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
September 16, 1997
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Re: Opinion and Consent of Counsel
Allianz Life Variable Account A
Dear Sir or Madam:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of a Registration Statement on Form S-6 for the Individual Single
Premium Variable Life Insurance Policies to be issued by Allianz Life Insurance
Company of North America and its separate account, Allianz Life Variable Account
A.
We are of the following opinions:
1. Allianz Life Variable Account A is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of premium payments made by a Policy Owner pursuant to a
Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a
Policy Owner will have a legally-issued, fully-paid, non-assessable
contractual interest under such Policy.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD, & HASENAUER, P.C.
By: /s/ LYNN KORMAN STONE
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Lynn Korman Stone
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America and
Policy Owners of Allianz Life Variable Account A:
We consent to the use of our report, dated January 24, 1997, on the financial
statements of Allianz Life Variable Account A and our report dated February 4,
1997, on the consolidated financial statements of Allianz Life Insurance Company
of North America and subsidiaries included herein and to the reference to our
Firm under the heading "EXPERTS".
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 26, 1997
