File Nos. 33-72046
811-05618
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 2 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 18 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
_______________________________
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
_______________________________________________
(Name of Depositor)
<PAGE>
1750 Hennepin Avenue, Minneapolis, MN 55403
___________________________________________ _____
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
_____________________________________
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on November 1 , 1995 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:
_____ 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 its Rule 24f-2 Notice for the most recent fiscal
year on or about February 21, 1995.
<PAGE>
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
________ ________
<S> <C> <C>
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . . Definitions
Item 3. Synopsis or Highlights. . . . . . . . . . . . Highlights
Item 4. Condensed Financial Information. . . . . . . . Condensed Financial
Information
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies. . . . . . . . . . . . The Company; The
Variable Account;
Franklin Valuemark
Funds
Item 6. Deductions. . . . . . . . .. . . . . . . . . . Charges and
Deductions
Item 7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . The Contracts
Item 8. Annuity Period. . .. . . . . . . . . . . . . . Annuity Provisions
Item 9. Death Benefit. . . . . . . . . . . . . . . . . The Contracts;
Annuity Provisions
Item 10. Purchases and Contract Value. . . . . . . . . Purchase Payments
and Contract Value
Item 11. Redemptions. . . . . . . . . . . . . . . . . . Surrenders
Item 12. Taxes. . . . . . . . . . . . . . . . . . . . . Tax Status
Item 13. Legal Proceedings. . . . . . . . . . . . . . . Legal Proceedings
Item 14. Table of Contents of the Statement of Table of Contents of
Additional Information. . . . . . . . . . . . the Statement of
Additional Informa-
tion
</TABLE>
<PAGE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
________ ________
<S> <C> <C>
PART B
Item 15. Cover Page. . . . . . . . .. . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . . The Company
Item 18. Services. . . . . . . . . . . . .. . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data. . . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered, in Part C to this Registration
Statement.
<PAGE>
PART A
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Home Office: Valuemark Service Center:
1750 Hennepin Avenue 300 Berwyn Park
Minneapolis, MN 55403-2195 P.O. Box 3031
(800) 542-5427 Berwyn, PA 19312-0031
(800) 624-0197
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
November 1, 1995
The Individual Flexible Payment Variable Annuity Contracts (the "Contracts")
described in this Prospectus provide for accumulation of Contract Values and
eventual payment of monthly annuity payments. The Contracts are designed to
aid individuals in long-term planning for retirement or other long-term
purposes. This is not appropriate as a trading vehicle.
The Contracts are available for retirement plans which do not qualify for the
special federal tax advantages available under the Internal Revenue Code
("Non-Qualified Plans") and for retirement plans which do qualify for the
federal tax advantages available under the Internal Revenue Code ("Qualified
Plans"). (See "Tax Status - Qualified Plans.") However, because of the
minimum purchase requirements, these Contracts may not be appropriate for some
periodic payment retirement plans.
Purchase payments for the Contracts will be allocated to a segregated
investment account of Allianz Life Insurance Company of North America (the
"Company") which account has been designated Allianz Life Variable Account B
(the "Variable Account") or to the Company's Fixed Account. THE FIXED ACCOUNT
MAY NOT BE AVAILABLE IN ALL STATES. IN CALIFORNIA, THE FIXED ACCOUNT, THE
TEMPLETON GLOBAL ASSET ALLOCATION FUND AND THE SMALL CAP FUND ARE NOT
AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH
YOUR AGENT REGARDING AVAILABILITY.) Prior to May 1, 1993, the Variable Account
was known as NALAC Variable Account B.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). The Trust is a series fund with twenty-two Funds: the Money Market
Fund, the Adjustable U.S. Government Fund, the Global Income Fund, the
High Income Fund, the Investment Grade Intermediate Bond Fund, the U.S.
Government Securities Fund, the four Zero Coupon Funds, the Growth and Income
Fund, the Income Securities Fund, the Rising Dividends Fund, the Templeton
Global Asset Allocation Fund, the Utility Equity Fund, the Precious Metals
<PAGE>
Fund, the Real Estate Securities Fund, the Small Cap Fund, the Templeton
Developing Markets Equity Fund, the Templeton Global Growth Fund, the Templeton
International Equity Fund and the Templeton Pacific Growth Fund. Prior to May
1, 1995, the Growth and Income Fund was known as the Equity Growth Fund. See
"Highlights" and "Tax Status" for a discussion of owner control of the
underlying investments in a variable annuity contract.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE CONTRACT OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE
SURRENDERED, THE VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENT.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the "Statement of Additional Information," which is available at
no charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents of the Statement of Additional Information can be found
on the last page of this Prospectus. For the Statement of Additional
Information, call or write the Home Office address shown above.
INQUIRIES: Any inquiries can be made by telephone or in writing to the Company
at the Home Office phone number or address listed above.
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 MUST BE ACCOMPANIED BY OR PRECEDED BY A CURRENT PROSPECTUS FOR
FRANKLIN VALUEMARK FUNDS.
This Prospectus and the Statement of Additional Information are dated
November 1, 1995, and as may be amended from time to time.
This Prospectus should be kept for future reference.
In the State of Oregon, all references to Franklin Valuemark III refer to
Valuemark III.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS
HIGHLIGHTS
FEE TABLE
CONDENSED FINANCIAL INFORMATION
THE COMPANY
THE VARIABLE ACCOUNT
FRANKLIN VALUEMARK FUNDS
Description of The Funds
General
Substitution of Securities
Voting Rights
CHARGES AND DEDUCTIONS
Deduction for Contingent Deferred Sales Charge (Sales Load)
Reduction or Elimination of Contingent Deferred Sales Charge
Deduction for Mortality and Expense Risk Charge
Deduction for Administrative Expense Charge
Deduction for Contract Maintenance Charge
Deduction for Premium Taxes
Deduction for Income Taxes
Deduction for Trust Expenses
Deduction for Transfer Fee
THE CONTRACTS
Ownership
Assignment
Beneficiary
Change of Beneficiary
Annuitant
Death of the Contract Owner Before the Income Date
Death of the Annuitant Prior to the Income Date
Death of the Annuitant After the Income Date
ANNUITY PROVISIONS
Income Date
Change in Income Date and Annuity Option
Annuity Options
Annuity Units
Annuity Unit Value
<PAGE>
PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments
Allocation of Purchase Payments
Transfer of Contract Values
Dollar Cost Averaging
Contract Value
Accumulation Unit
DISTRIBUTOR
SURRENDERS
Systematic Withdrawal
Delay of Payments
ADMINISTRATION OF THE CONTRACTS
PERFORMANCE DATA
Money Market Sub-Account
Other Sub-Accounts
Performance Ranking
TAX STATUS
General
Diversification
Multiple Contracts
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
Contracts Owned by Other than Natural Persons
FINANCIAL STATEMENTS
LEGAL PROCEEDINGS
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
DEFINITIONS
Accumulation Unit - An accounting unit of measure used to calculate the
Contract Value prior to the Income Date.
Annuitant - The person upon whose continuation of life any annuity payment
involving life contingencies depends. The Annuitant may be changed at any
time prior to the Income Date unless the Contract Owner is not a natural
person.
Annuity Option - An arrangement under which annuity payments are made under
the Contract.
Annuity Period - The period starting on the Income Date.
Annuity Unit - An accounting unit of measure used to calculate annuity
payments after the Income Date.
Company - Allianz Life Insurance Company of North America at its Valuemark
Service Center shown on the cover page of this Prospectus.
Contract Anniversary - An anniversary of the Effective Date of the Contract.
Contract Owner - The person(s) who own the Contract as named in the Company's
records as the Owner or Joint Owner. If Joint Owners are named, all
references to Contract Owner shall mean the Joint Owners.
Contract Value - The dollar value as of any Valuation Date of all amounts
accumulated under the Contract.
Contract Year - Any period of twelve (12) months commencing with the Effective
Date and each Contract Anniversary thereafter.
Effective Date - The date on which the first Contract Year begins.
Eligible Investment(s) - An investment entity which can be selected by the
Contract Owner to be the underlying investment of the Contract.
Fixed Account - The Company's general investment account which contains all
the assets of the Company with the exception of the Variable Account and other
segregated asset accounts.
Fund - A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment.
Income Date - The date on which annuity payments are to commence.
<PAGE>
Joint Owner - If there is more than one Contract Owner, each Contract Owner
shall be a Joint Owner of the Contract. Joint Owners have equal ownership
rights and must both authorize any exercising of those ownership rights unless
otherwise allowed by the Company. Any Joint Owner must be the spouse of the
other Joint Owner (except in Pennsylvania).
Non-Qualified Contracts - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 401, 403(b) or 408 of the
Internal Revenue Code.
Qualified Contracts - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b) or 408 of the Internal
Revenue Code.
Surrender Value - The Contract Value for the Valuation Period next
following the Valuation Period during which the written request to the Company
for surrender is received, reduced by the sum of: (I) any applicable premium
taxes not previously deducted; (ii) any applicable Contract Maintenance
Charge; and (iii) any applicable Contingent Deferred Sales Charge.
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 investment account of the Company, designated as
Allianz Life Variable Account B, into which purchase payments may be
allocated.
HIGHLIGHTS
Purchase payments for the Contracts will be allocated to a segregated
investment account of Allianz Life Insurance Company of North America (the
"Company") which has been designated Allianz Life Variable Account B (the
"Variable Account") or to the Company's Fixed Account. THE FIXED ACCOUNT MAY
NOT BE AVAILABLE IN ALL STATES. IN CALIFORNIA, THE FIXED ACCOUNT, THE
TEMPLETON GLOBAL ASSET ALLOCATION FUND AND THE SMALL CAP FUND ARE NOT
AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH
YOUR AGENT REGARDING AVAILABILITY.)
On April 1, 1993, the Company changed its name from North American Life and
Casualty Company to its present name. Prior to May 1, 1993, the Variable
Account was known as NALAC Variable Account B. The Variable Account invests
in shares of Franklin Valuemark Funds (the "Trust"). (See "Franklin Valuemark
Funds.") CONTRACT OWNERS BEAR THE INVESTMENT RISK FOR ALL AMOUNTS ALLOCATED
<PAGE>
TO THE VARIABLE ACCOUNT.
The Contract may be returned within 10 days (or for a longer period in states
where required) after it is received ("Free Look Period"). It can be mailed
or delivered to either the Company or the agent who sold it. Return of the
Contract by mail is effective on being postmarked, properly addressed and
postage prepaid. The returned Contract will be treated as if the Company had
never issued it. The Company will promptly refund the Contract Value in
states where permitted. This may be more or less than the purchase payments.
In states where required and where the Contract is purchased pursuant to an
Individual Retirement Annuity, the Company will promptly refund the purchase
payments, less any withdrawals. The Company has reserved the right to
allocate initial purchase payments to the Money Market Sub-Account (except
those allocated to the Fixed Account) until the expiration of the Free Look
Period. If the Company does so allocate the initial purchase payments to the
Money Market Sub-Account, it will refund the greater of the purchase payments,
less any withdrawals, or the Contract Value. It is the Company's current
practice to directly allocate the initial purchase payments to the Fund(s)
and/or to the Fixed Account as selected by the Contract Owner.
A Contingent Deferred Sales Charge (sales load) may be deducted in the event
of a surrender. The Contingent Deferred Sales Charge is imposed on surrenders
of purchase payments within five (5) years after their being made. Once each
Contract Year, Contract Owners may surrender up to fifteen percent (15%) of
purchase payments paid less any prior surrenders without incurring a
Contingent Deferred Sales Charge. If no withdrawal is made during a Contract
Year, the 15% is cumulative into future years. If less than 15% is withdrawn
in a Contract Year, the remaining percentage is not available in future years.
The Contingent Deferred Sales Charge will vary in amount, depending upon the
Contract Year in which the purchase payment being surrendered was made. The
Company currently makes available a systematic withdrawal plan which allows
for additional options in some instances. (See "Surrenders - Systematic
Withdrawal.") The Contingent Deferred Sales Charge is found in the Fee Table.
See also "Charges and Deductions - Deduction for Contingent Deferred Sales
Charge (Sales Load).") The maximum Contingent Deferred Sales Charge is 6% of
purchase payments. For purposes of determining the applicability of the
Contingent Deferred Sales Charge, surrenders are deemed to be on a first-in,
first-out basis.
There is a Mortality and Expense Risk Charge which is equal, on an annual
basis, to 1.25% of the average daily net assets of the Variable Account. This
Charge compensates the Company for assuming the mortality and expense risks
under the Contracts. (See "Charges and Deductions - Deduction for Mortality
and Expense Risk Charge.")
There is an Administrative Expense Charge which is equal, on an annual basis,
to 0.15% of the average daily net assets of the Variable Account. This Charge
<PAGE>
compensates the Company for costs associated with the administration of the
Contract and the Variable Account. (See "Charges and Deductions - Deduction
for Administrative Expense Charge.")
There is an annual Contract Maintenance Charge of $30 each Contract Year. (See
"Charges and Deductions - Deduction for Contract Maintenance Charge.")
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against Contract Values. (See "Charges and Deductions -
Deduction for Premium Taxes.")
Under certain circumstances there may be assessed a transfer fee when a
Contract Owner transfers Contract Values. (See "Charges and Deductions -
Deduction for Transfer Fee.")
There is a ten percent (10%) federal income tax penalty applied to the income
portion of any distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches
age 59 1/2; (b) after the death of the Contract Owner; (c) if the taxpayer is
totally disabled (for this purpose, disability is as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code")); (d)
in a series of substantially equal periodic payments made not less frequently
than annually for the life (or life expectancy) of the taxpayer or for the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary; (e) under an immediate annuity; or (f) which are allocable to
purchase payments made prior to August 14, 1982. For federal income tax
purposes, withdrawals are deemed to be on a last-in, first-out basis. This
discussion does not apply to Qualified Contracts issued pursuant to plans
qualified under Sections 401, 403(b) or 408 of the Code. Separate tax
withdrawal penalties and restrictions apply to Qualified Contracts. (See "Tax
Status - Tax Treatment of Withdrawals - Qualified Contracts.") For a further
discussion of the taxation of the Contracts, see "Tax Status."
Withdrawals of amounts attributable to contributions made pursuant to a salary
reduction agreement (as defined in Section 403(b)(11) of the Code) are limited
to circumstances only when the Contract Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Contract Owner's
Contract Value which represents contributions made by the Contract Owner and
does not include any investment results. The limitations on withdrawals
become effective on January 1, 1989 and only apply to (i) salary reduction
contributions made after December 31, 1988; (ii) to income attributable to
such contributions; and (iii) to amounts held as of December 31, 1988. The
limitations on withdrawals do not affect rollovers or transfers between
certain Qualified Plans. Contract Owners should consult their own tax counsel
or other tax adviser regarding distributions. (See "Tax Status - Tax
Sheltered Annuities - Withdrawal Limitations".)
<PAGE>
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract
for tax purposes if the owner of the contract has excessive control over the
investment underlying the contract. The issuance of such guidelines may
require the Company to impose limitations on a Contract Owner's right to
control the investment. It is not known whether any such guidelines would
have a retroactive effect (see "Tax Status - Diversification").
The Company offers other deferred variable annuity contracts but does not
permit exchange of those contracts for the Contracts offered by this
Prospectus.
Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the
Fixed Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the Fixed Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B FEE TABLE*
______________________________________________________________
<S> <C> <C>
Contract Owner Transaction Fees
Contingent Deferred Sales Charge** Years Since
(as a percentage of purchase payments) Payment Charge
___________ _______
0-1 6%
1-2 5%
2-3 4%
3-4 3%
4-5 1.5%
5+ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Current Transfer Fee*** First 12 transfers in a
Contract Year are free.
Thereafter, the fee is $25
(or 2% of the amount
transferred, if less).
Prescheduled automatic
dollar cost averaging
transfers are not counted.
Contract Maintenance Charge (Prior to the $30 per Contract
Income Date the charge is waived for Contracts
having Contract Values or purchase payments
less withdrawals of $100,000 or more.)
Variable Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge .15%
_____
Total Variable Account Annual Expenses 1.40%
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
* Applies to all twenty- two Sub-Accounts of the Variable Account.
** Once each Contract Year, a Contract Owner may surrender up to fifteen
percent (15%) of purchase payments paid less any prior surrenders
without incurring a Contingent Deferred Sales Charge. If no withdrawal
is made during a Contract Year, the 15% is cumulative into future
years. If less than 15% is withdrawn in a Contract Year, the remaining
percentage is not available in future years. See also "Surrenders -
Systematic Withdrawal" for additional options.
*** The Contract provides that if more than three transfers have been made
in a Contract Year, the Company reserves the right to deduct a transfer
fee which shall not exceed the lesser of $25 or 2% of the amount
transferred.
</TABLE>
<PAGE>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES
(as a percentage of Franklin Valuemark Funds' average net assets).
The Management Fees for each Fund are based on a percentage of
that Fund's assets under management. See "Franklin Valuemark Funds"
in this Prospectus and "Management" in the Trust prospectus.
The fees below represent the amounts that were paid to the investment
advisers to the Trust for the 1994 calendar year (except for the Money
Market Fund, the Zero Coupon Fund-1995, the Zero Coupon Fund-2000, the
Zero Coupon Fund-2005, the Zero Coupon Fund 2010, the Templeton Global
Asset Allocation Fund and the Small Cap Fund). The purpose of the Table
is to assist the Contract Owner in understanding the various costs and
expenses that a Contract Owner will incur, directly or indirectly on
amounts allocated to the Variable Account.
<TABLE>
<CAPTION>
Management
and Business Total
Management Other Annual
Fees(1/) Expenses Expenses
____________ ________ ________
<S> <C> <C> <C>
Money Market Fund (2/) .51% .03% .54%
Growth and Income Fund (3/) .50% .04% .54%
Precious Metals Fund .61% .07% .68%
Real Estate Securities Fund .58% .04% .62%
Utility Equity Fund .47% .05% .52%
High Income Fund .55% .05% .60%
Global Income Fund .55% .16% .71%
Investment Grade Intermediate Bond Fund .59% .04% .63%
Income Securities Fund .48% .06% .54%
U.S. Government Securities Fund .49% .04% .53%
Adjustable U.S. Government Fund .54% .03% .57%
Zero Coupon Fund-1995 (4/) .36% .04% .40%
<PAGE>
Zero Coupon Fund-2000 (4/) .36% .04% .40%
Zero Coupon Fund-2005 (4/) .35% .05% .40%
Zero Coupon Fund-2010 (4/) .35% .05% .40%
Rising Dividends Fund .75% .05% .80%
Templeton International Equity Fund (5/) .84% .15% .99%
Templeton Pacific Growth Fund (6/) .90% .17% 1.07%
Templeton Global Growth Fund .99% .15% 1.14%
Templeton Developing Markets Equity Fund 1.25% .28% 1.53%
Templeton Global Asset Allocation Fund (7/) .80% .11% .91%
Small Cap Fund (8/) .75% .06% .81%
<FN>
1/ The Business Management Fee is a direct expense for the Templeton
Global Asset Allocation Fund; the other Funds pay for similar services
indirectly through the Management Fee. See "Management" in the Trust
Prospectus for further information regarding Management and Business
Management Fees.
2/ Franklin Advisers Inc. agreed in advance to waive a portion of its
Management Fee and make payment of other expenses incurred by the Money Market
Fund during 1994 and is currently continuing this arrangement in 1995. This
arrangement may be terminated at any time. Therefore, the expenses of the
Money Market Fund have been restated for 1995 and do not reflect this
arrangement.
3/ Prior to May 1, 1995, the Growth and Income Fund was known as the
Equity Growth Fund.
4/ Net of management fees waived and/or expense reimbursements.
Although not obligated to, Franklin Advisers, Inc. has agreed in advance to
waive a portion of its management fees and make payment of other expenses for
the four Zero Coupon Funds through at least December 31, 1995 such that the
aggregate expenses of the Zero Coupon Fund-1995, the Zero Coupon Fund-2000,
the Zero Coupon Fund-2005 and the Zero Coupon Fund-2010 will not exceed 0.40%
of each Fund's net assets. Absent the management fee waivers and expense
payments, for the year ended December 31, 1994, the total annual expenses
would have been as follows: Zero Coupon Fund-1995, .67%; Zero Coupon
Fund-2000, .66%; Zero Coupon Fund-2005, .68%; and Zero Coupon Fund-2010, .68%.
<PAGE>
5/ Templeton International Equity Fund was known as the International
Equity Fund prior to August 18, 1993.
6/ Templeton Pacific Growth Fund was known as the Pacific Growth Fund
prior to August 18, 1993.
7/ The Templeton Global Asset Allocation Fund commenced operations May 1,
1995. The expenses shown are estimated expenses for the Fund for 1995.
8/ The Small Cap Fund has not yet commenced operations. The expenses
shown are estimated expenses for the Fund for 1995.
</TABLE>
The following Tables reflect expenses of the Variable Account as well as of
the Trust. The dollar figures should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown. The $30 Contract Maintenance Charge is included in the Examples as $1.
Since the average Contract account size for the Contracts described in this
Prospectus is greater than $1,000, the expense effect of the Contract
Maintenance Charge is reduced accordingly. For additional information, see
"Charges and Deductions" in this Prospectus and "Management" in the Trust
Prospectus.
Premium taxes are not reflected in the Tables. Premium taxes may apply.
EXAMPLE
If the Contract is fully surrendered at the end of the applicable time period
and no prior surrenders have occurred, the Contract Owner would have incurred
the following expenses on a $1,000 investment, assuming a 5% annual return on
assets compounded semi-annually:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
____ ______ ______ ______
<S> <C> <C> <C> <C>
Money Market Fund $ 72 $ 89 $ 125 $ 294
Growth and Income Fund $ 72 $ 89 $ 125 $ 294
Precious Metals Fund $ 73 $ 94 $ 133 $ 312
Real Estate Securities Fund $ 73 $ 92 $ 130 $ 304
Utility Equity Fund $ 72 $ 89 $ 124 $ 291
<PAGE>
High Income Fund $ 72 $ 91 $ 129 $ 302
Global Income Fund $ 74 $ 95 $ 135 $ 316
Investment Grade Intermediate Bond Fund $ 73 $ 92 $ 130 $ 306
Income Securities Fund $ 72 $ 89 $ 125 $ 294
U.S. Government Securities Fund $ 72 $ 89 $ 125 $ 292
Adjustable U.S. Government Fund $ 72 $ 90 $ 127 $ 298
Zero Coupon Fund-1995# $ 70 $ 85 $ 117 $ 275
Zero Coupon Fund-2000# $ 70 $ 85 $ 117 $ 275
Zero Coupon Fund-2005# $ 70 $ 85 $ 117 $ 275
Zero Coupon Fund-2010# $ 70 $ 85 $ 117 $ 275
Rising Dividends Fund $ 74 $ 98 $ 140 $ 328
Templeton International Equity Fund $ 76 $ 104 $ 151 $ 353
Templeton Pacific Growth Fund $ 77 $ 106 $ 155 $ 363
Templeton Global Growth Fund* $ 78 $ 109 $ 159 $ 372
Templeton Developing Markets Equity Fund* $ 82 $ 121 $ 181 $ 420
Templeton Global Asset Allocation Fund** $ 76 $ 101 $ 146 $ 342
Small Cap Fund** $ 75 $ 98 $ 140 $ 329
<FN>
* Annualized
** Estimated
# Calculated with waiver of fees and reimbursement of expenses
</TABLE>
If the Contract is not surrendered at the end of the applicable time period
and no prior surrenders have occurred, the Contract Owner would have incurred
the following expenses on a $1,000 investment, assuming a 5% annual return on
assets compounded semi-annually:
<PAGE>
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
____ ______ ______ ______
<S> <C> <C> <C> <C>
Money Market Fund $ 21 $ 67 $ 121 $ 294
Growth and Income Fund $ 21 $ 67 $ 121 $ 294
Precious Metals Fund $ 22 $ 72 $ 129 $ 312
Real Estate Securities Fund $ 22 $ 70 $ 126 $ 304
Utility Equity Fund $ 21 $ 67 $ 120 $ 291
High Income Fund $ 21 $ 69 $ 125 $ 302
Global Income Fund $ 23 $ 73 $ 131 $ 316
Investment Grade Intermediate Bond Fund $ 22 $ 70 $ 126 $ 306
Income Securities Fund $ 21 $ 67 $ 121 $ 294
U.S. Government Securities Fund $ 21 $ 67 $ 121 $ 292
Adjustable U.S. Government Fund $ 21 $ 68 $ 123 $ 298
Zero Coupon Fund-1995# $ 19 $ 63 $ 113 $ 275
Zero Coupon Fund-2000# $ 19 $ 63 $ 113 $ 275
Zero Coupon Fund-2005# $ 19 $ 63 $ 113 $ 275
Zero Coupon Fund-2010# $ 19 $ 63 $ 113 $ 275
Rising Dividends Fund $ 23 $ 76 $ 136 $ 328
Templeton International Equity Fund $ 25 $ 82 $ 147 $ 353
Templeton Pacific Growth Fund $ 26 $ 84 $ 151 $ 363
Templeton Global Growth Fund* $ 27 $ 87 $ 155 $ 372
Templeton Developing Markets Equity Fund* $ 31 $ 99 $ 177 $ 420
Templeton Global Asset Allocation Fund** $ 25 $ 79 $ 142 $ 342
<PAGE>
Small Cap Fund** $ 24 $ 76 $ 136 $ 329
<FN>
* Annualized
** Estimated
# Calculated with waiver of fees and reimbursement of other expenses
</TABLE>
CONDENSED FINANCIAL INFORMATION
The consolidated financial statements of Allianz Life Insurance Company of
North America and the financial statements of Allianz Life Variable Account B
may be found in the Statement of Additional Information.
The table below gives per unit information about the financial history of each
Fund from the inception of each to June 30, 1995.#
This information should be read in conjunction with the financial statements
and related notes to the Variable Account included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(Number of units in thousands)
Year ended Year ended Year ended Year ended
Period Ended December 31, December 31, December 31, December 31,
Franklin Valuemark Funds: June 30, 1995 1994 1993 1992 1991
_____________ _____________ ____________ ____________ ___________
Money Market Fund
Unit value at beginning of period $ 12.354 $12.066 $11.932 $11.742 $11.288
Unit value at end of period $ 12.622 $12.354 $12.066 $11.932 $11.742
Number of units outstanding at end of period 32,878 39,437 10,247 6,951 5,682
Growth and Income Fund*
Unit value at beginning of period $ 13.215 $13.677 $12.574 $11.949 $9.803
Unit value at end of period $ 15.112 $13.215 $13.677 $12.574 $11.949
Number of units outstanding at end of period 39,885 35,695 24,719 17,144 9,671
Precious Metals Fund
Unit value at beginning of period $ 13.979 $14.464 $9.424 $10.635 $10.387
Unit value at end of period $ 14.016 $13.979 $14.464 $9.424 $10.635
Number of units outstanding at end of period 7,956 8,285 4,685 1,419 833
High Income Fund
Unit value at beginning of period $ 14.608 $15.155 $13.278 $11.583 $9.026
Unit value at end of period $ 16.444 $14.608 $15.155 $13.278 $11.583
Number of units outstanding at end of period 17,985 15,679 11,787. 4,780 1,923
<PAGE>
Real Estate Securities Fund
Unit value at beginning of period $ 15.594 $15.369 $13.095 $11.848 $9.000
Unit value at end of period $ 16.139 $15.594 $15.369 $13.095 $11.848
Number of units outstanding at end of period 11,234 11,645 5,589 1,052 394
U.S. Government Securities Fund
Unit value at beginning of period $ 13.835 $14.698 $13.586 $12.798 $11.199
Unit value at end of period $ 15.451 $13.835 $14.698 $13.586 $12.798
Number of units outstanding at end of period 36,068 36,490 40,402 25,054 14,426
Utility Equity Fund
Unit value at beginning of period $ 15.104 $17.319 $15.889 $14.821 $12.062
Unit value at end of period $ 16.906 $15.104 $17.319 $15.889 $14.821
Number of units outstanding at end of period 69,272 70,082 84,217 39,387 16,188
Zero Coupon - 1995 Fund
Unit value at beginning of period $ 14.380 $14.480 $13.665 $12.845 $11.160
Unit value at end of period $ 14.915 $14.380 $14.480 $13.665 $12.845
Number of units outstanding at end of period 2,821 3,195 3,092 2,871 2,774
Zero Coupon - 2000 Fund
Unit value at beginning of period $ 15.373 $16.717 $14.595 $13.570 $11.446
Unit value at end of period $ 17.368 $15.373 $16.717 $14.595 $13.570
Number of units outstanding at end of period 5,682 4,953 3,787 2,886 2,012
Zero Coupon - 2005 Fund
Unit value at beginning of period $ 16.096 $18.050 $14.975 $13.705 $11.545
Unit value at end of period $ 19.061 $16.096 $18.050 $14.975 $13.705
Number of units outstanding at end of period 3,247 2,780 2,020 1,090 795
Zero Coupon - 2010 Fund
Unit value at beginning of period $ 15.930 $18.144 $14.670 $13.482 $11.390
Unit value at end of period $ 19.596 $15.930 $18.144 $14.670 $13.482
Number of units outstanding at end of period 3,173 2,589 1,405 849 1,150
Global Income Fund
Unit value at beginning of period $ 13.726 $14.650 $12.733 $12.962 $11.706
Unit value at end of period $ 14.725 $13.726 $14.650 $12.733 $12.962
Number of units outstanding at end of period 15,389 16,855 13,054 5,487 2,979
Investment Grade Intermediate Bond Fund
Unit value at beginning of period $ 14.257 $14.389 $13.442 $12.879 $11.281
Unit value at end of period $ 14.984 $14.257 $14.389 $13.442 $12.879
Number of units outstanding at end of period 9,877 9,772 7,677 3,333 1,311
Income Securities Fund
Unit value at beginning of period $ 16.392 $17.734 $15.163 $13.580 $9.842
Unit value at end of period $ 18.242 $16.392 $17.734 $15.163 $13.580
Number of units outstanding at end of period 58,283 56,569 38,967 11,397 4,472
Adjustable U.S. Government Fund
Unit value at beginning of period $ 11.077 $11.254 $11.020 $10.698 $9.999
Unit value at end of period $ 11.610 $11.077 $11.254 $11.020 $10.698
Number of units outstanding at end of period 16,212 19,865 24,975 21,858 12,077
Templeton Pacific Growth Fund **
Unit value at beginning of period $ 12.802 $14.233 $9.761 $10.000**** NA
Unit value at end of period $ 13.015 $12.802 $14.233 $9.761 NA
<PAGE>
Number of units outstanding at end of period 24,775 27,231 14,240 534 NA
Rising Dividends Fund
Unit value at beginning of period $ 9.769 $10.327 $10.848 $10.000**** NA
Unit value at end of period $ 11.035 $9.769 $10.327 $10.848 NA
Number of units outstanding at end of period 31,335 28,778 26,256 8,388 NA
Templeton International Equity Fund ***
Unit value at beginning of period $ 12.161 $12.226 $9.642 $10.000**** NA
Unit value at end of period $ 13.005 $12.161 $12.226 $9.642 NA
Number of units outstanding at end of period 59,054 60,464 24,026 1,329 NA
Templeton Developing Markets Equity Fund
Unit value at beginning of period $ 9.454 $10.000**** NA NA NA
Unit value at end of period $ 9.678 $9.454 NA NA NA
Number of units outstanding at end of period 12,870 9,774 NA NA NA
Templeton Global Growth Fund
Unit value at beginning of period $ 10.201 $10.000**** NA NA NA
Unit value at end of period $ 10.855 $10.201 NA NA NA
Number of units outstanding at end of period 21,842 14,637 NA NA NA
Templeton Global Asset Allocation Fund
Unit value at beginning of period $ 10.000**** NA NA NA NA
Unit value at end of period $ 10.097 NA NA NA NA
Number of units outstanding at end of period 400 NA NA NA NA
<S> <C> <C>
(Number of units in thousands) January 9,
Year ended 1989 to
December 31, December 31
Franklin Valuemark Funds: 1990 1989
____________ ___________
Money Market Fund
Unit value at beginning of period $10.637 $10.000
Unit value at end of period $11.288 $10.637
Number of units outstanding at end of period 5,768 1,199
Growth and Income Fund*
Unit value at beginning of period $10.180 $10.000
Unit value at end of period $9.803 $10.180
Number of units outstanding at end of period 5,356 1,662
Precious Metals Fund
Unit value at beginning of period $12.247 $10.000
Unit value at end of period $10.387 $12.247
Number of units outstanding at end of period 1,015 167
High Income Fund
Unit value at beginning of period $10.021 $10.000
Unit value at end of period $9.026 $10.021
Number of units outstanding at end of period 1,056 612
Real Estate Securities Fund
Unit value at beginning of period $10.368 $10.000
Unit value at end of period $9.000 $10.368
Number of units outstanding at end of period 200 57
<PAGE>
U.S. Government Securities Fund
Unit value at beginning of period $10.427 $10.000
Unit value at end of period $11.199 $10.427
Number of units outstanding at end of period 5,450 1,102
Utility Equity Fund
Unit value at beginning of period $12.010 $10.000
Unit value at end of period $12.062 $12.010
Number of units outstanding at end of period 6,300 1,173
Zero Coupon - 1995 Fund
Unit value at beginning of period $10.358 $10.000
Unit value at end of period $11.160 $10.358
Number of units outstanding at end of period 2,098 244
Zero Coupon - 2000 Fund
Unit value at beginning of period $10.961 $10.000
Unit value at end of period $11.446 $10.961
Number of units outstanding at end of period 1,041 162
Zero Coupon - 2005 Fund
Unit value at beginning of period $11.406 $10.000
Unit value at end of period $11.545 $11.406
Number of units outstanding at end of period 406 86
Zero Coupon - 2010 Fund
Unit value at beginning of period $11.486 $10.000
Unit value at end of period $11.390 $11.486
Number of units outstanding at end of period 581 194
Global Income Fund
Unit value at beginning of period $10.813 $10.000
Unit value at end of period $11.706 $10.813
Number of units outstanding at end of period 1,322 278
Investment Grade Intermediate Bond Fund
Unit value at beginning of period $10.635 $10.000
Unit value at end of period $11.281 $10.635
Number of units outstanding at end of period 595 200
Income Securities Fund
Unit value at beginning of period $10.783 $10.000
Unit value at end of period $9.842 $10.783
Number of units outstanding at end of period 3,011 1,508
Adjustable U.S. Government Fund
Unit value at beginning of period $10.000**** NA
Unit value at end of period $9.999 NA
Number of units outstanding at end of period 75 NA
Templeton Pacific Growth Fund **
Unit value at beginning of period NA NA
Unit value at end of period NA NA
Number of units outstanding at end of period NA NA
Rising Dividends Fund
Unit value at beginning of period NA NA
Unit value at end of period NA NA
Number of units outstanding at end of period NA NA
Templeton International Equity Fund ***
Unit value at beginning of period NA NA
Unit value at end of period NA NA
Number of units outstanding at end of period NA NA
Templeton Developing Markets Equity Fund
Unit value at beginning of period NA NA
Unit value at end of period NA NA
Number of units outstanding at end of period NA NA
Templeton Global Growth Fund
Unit value at beginning of period NA NA
Unit value at end of period NA NA
Number of units outstanding at end of period NA NA
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
# As of June 30,1995, the Small Cap Fund had not yet commenced operations.
* Prior to May 1, 1995, the Growth and Income Fund was known as the Equity Growth Fund
** Prior to October 15, 1993, the Templeton Pacific Growth Fund was known as the Pacific Growth Fund
*** Prior to October 15, 1993, the Templeton International Equity Fund was known as the International Equity Fund
**** Unit Value at inception was $10.00
</TABLE>
Accumulation Unit Value at the inception was $10.00 for each Fund. Inception
was 1/24/89 for the Growth and Income, Global Income, High Income, Income
Securities, Precious Metals, Real Estate Securities, Utility Equity,
Investment Grade Intermediate Bond and Money Market Funds; 3/13/89 for the
U.S. Government Securities and the four Zero Coupon Funds; 12/3/90 for the
Adjustable U.S. Government Fund; 1/24/92 for the Rising Dividends Fund, the
Templeton International Equity Fund and the Templeton Pacific Growth Fund;
3/15/94 for the Templeton Global Growth Fund and the Templeton Developing
Markets Equity Fund; and 5/1/95 for the Templeton Global Asset Allocation
Fund. The Small Cap Fund is new in 1995.
THE COMPANY
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. On April 1, 1993, the Company changed its name from North American Life
and Casualty Company ("NALAC") to its present name. 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. Both NALAC and Fidelity Union Life Insurance Company of Dallas,
Texas have been owned by Allianz since 1979. Over the last decade there has
been a gradual consolidation of operations. On May 31, 1993, Fidelity Union
was consolidated into the Company. The Company offers fixed and variable life
insurance and annuities, and group life, accident and health insurance.
<PAGE>
NALAC Financial Plans, Inc. is a wholly-owned subsidiary of the Company. It
provides marketing services for the Company and is the principal underwriter
of the Contracts. NALAC Financial Plans, Inc. is reimbursed for
expenses incurred in the distribution of the Contracts.
Administration for the Contracts is provided at the Company's Valuemark
Service Center: 300 Berwyn Park, P.O. Box 3031, Berwyn, Pennsylvania
19312-0031, (800) 624-0197.
THE VARIABLE ACCOUNT
The Variable Account was established pursuant to a resolution of the Board of
Directors 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 contract
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
Contracts, 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 Contracts 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 of the Funds of the Franklin Valuemark Funds.
Currently, there are twenty- two Funds available under the Franklin
Valuemark Funds.
FRANKLIN VALUEMARK FUNDS
Each of the twenty- two Sub-Accounts of the Variable Account is invested
solely in the shares of one of the twenty- two Funds of Franklin Valuemark
Funds ("Trust"). The Trust is an open-end management investment company
registered under the 1940 Act. While a brief summary of the investment
objectives is set forth below, more comprehensive information, including a
discussion of potential risks, is 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. ("Advisers"), 777 Mariners Island Blvd., San Mateo,
California 94404, serves as each Fund's (except the Templeton Global Growth
Fund, the Templeton Developing Markets Equity Fund and the Templeton Global
<PAGE>
Asset Allocation Fund) investment manager. The investment manager for the
Templeton Global Growth Fund and the Templeton Global Asset Allocation Fund is
Templeton, Galbraith & Hansberger, Ltd., Lyford Cay Nassau, N.P. Bahamas. As
of October 1, 1995, the investment manager for the Templeton Developing
Markets Equity Fund is Templeton Investment Management (Singapore) Pte Ltd.,
20 Raffles Place, Ocean Towers, Singapore. All investment managers or
advisers 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 and 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 Sub-Advisers to
handle the day-to-day management of a Fund. Advisers act as investment
manager or administrator to 33 U.S. registered investment companies (111
separate series) with aggregate assets of over $75 billion.
Templeton Global Investors, Inc., Broward Financial Centre, Suite 2100, Ft.
Lauderdale, Florida, provides certain administrative facilities and services
for certain of the Funds.
Franklin Templeton Investor Services, Inc., 777 Mariners Island Blvd., San
Mateo, California 94404, 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.
Description of The Funds
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
The Money Market Fund seeks high current income, consistent with capital
preservation and liquidity. The Fund will pursue its objective by investing
exclusively in high quality money market instruments. An investment in the
Fund is neither insured nor guaranteed by the U.S. Government. The Fund
attempts to maintain a stable net asset value of $1.00 per share, although no
assurances can be given that the Fund will be able to do so.
FUNDS SEEKING CURRENT INCOME
Adjustable U.S. Government Fund
The Adjustable U.S. Government Fund seeks a high level of current income,
consistent with lower volatility of principal, by investing primarily in
<PAGE>
adjustable rate securities which are issued or guaranteed by the U.S.
government , its agencies or instrumentalities.
Global Income Fund
The Global Income Fund seeks a high level of current income, consistent with
preservation of capital, with capital appreciation as a secondary
consideration, through investing in foreign and domestic debt obligations,
including up to 25% in high yield, high risk, lower rated debt obligations
(commonly referred to as "junk bonds") and related currency transactions.
Investing in a non-diversified fund of global securities including those of
developing markets issuers involves increased susceptibility to the
special risks associated with foreign investing.
High Income Fund
The High Income Fund seeks a high level of current income, with capital
appreciation as a secondary objective, by investing in debt obligations and
dividend-paying common and preferred stocks. Debt obligations include high
yield, high risk, lower rated obligations (commonly referred to as
"junk bonds") which involve increased risks related to the
creditworthiness of their issuers.
Investment Grade Intermediate Bond Fund
The Investment Grade Intermediate Bond Fund seeks current income, consistent
with preservation of capital, primarily through investment in
intermediate-term, investment grade corporate obligations and in U.S.
government securities.
The U.S. Government Securities Fund
The U.S. Government Securities Fund seeks current income and safety of capital
by investing exclusively in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
Zero Coupon Funds
There are four Zero Coupon Funds. Each of the Funds matures in the specified
target year as follows:
Zero Coupon Fund - 1995
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
The four Zero Coupon Funds seek a high investment return consistent with the
preservation of capital, by investing primarily in zero coupon securities. In
<PAGE>
response to interest rate changes, these securities may experience greater
fluctuations in market value than interest paying securities of similar
maturities. The funds may not be appropriate for short-term investors or
those who intend to withdraw money before the maturity date.
Additional Zero Coupon Funds may be added to the Trust in the future. Should
any such Funds be available for investment at the maturity date of any
existing Zero Coupon Fund, such Funds will be available as an investment
option for Contract Owners who select such option. If no selection has been
made by a Contract Owner prior to the maturity date of a Zero Coupon Fund, the
Account Value held in the Sub-Account underlying the Owner's Contract will be
automatically transferred to the Money Market Sub-Account. The Company will
notify the Owner of a maturing Zero Coupon Fund in writing at least 30 days
prior to the maturity. Included with the notification will be investment
options available at that time as well as the automatic Money Market option.
THE ZERO COUPON FUND-1995 WILL MATURE DECEMBER 15, 1995. The Zero Coupon Funds
may not be appropriate for Contract Owners who do not plan to have their
purchase payments invested in the Zero Coupon Sub-Accounts for the long-term
or until maturity of the portfolio.
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
The Growth and Income Fund (formerly the Equity Growth Fund) seeks capital
appreciation, with current income return as a secondary objective, by
investing primarily in U.S. common stocks, securities convertible into common
stocks, preferred stocks and debt securities.
Income Securities Fund
The Income Securities Fund seeks to maximize income while maintaining
prospects for capital appreciation by investing, in a diversified portfolio of
domestic and foreign, including developing markets, debt obligations and/
or equity securities. Debt obligations include high yield, high risk,
lower rated obligations (commonly referred to as "junk bonds") which involve
increased risks related to the creditworthiness of their issuers.
Rising Dividends Fund
The Rising Dividends Fund seeks capital appreciation, primarily through
investment in the equity securities of companies that have paid consistently
rising dividends over the past ten years. Preservation of capital is also an
important consideration. The Fund seeks current income incidental to capital
appreciation.
<PAGE>
Templeton Global Asset Allocation Fund
The Templeton Global Asset Allocation Fund seeks a high level of total return
through a flexible policy of investing in equity securities, debt obligations,
and money market instruments of issuers in any nation, including developing
markets nations. The mix of investments among the three market segments will
be adjusted in an attempt to capitalize on total return potential produced by
changing economic conditions throughout the world. Foreign investing involves
special risks.
Utility Equity Fund
The Utility Equity Fund seeks both capital appreciation and current income by
investing in securities of domestic and foreign, including developing markets,
issuers engaged in the public utilities industry.
FUNDS SEEKING CAPITAL GROWTH
Precious Metals Fund
The Precious Metals Fund seeks capital appreciation, with current income
return as a secondary objective, by concentrating its investments in,
securities of U.S. and foreign companies, including those in developing
markets, engaged in mining, processing or dealing in gold and other
precious metals.
Real Estate Securities Fund
The Real Estate Securities Fund seeks capital appreciation, with current
income return as a secondary objective, by concentrating its investments in
publicly traded securities of U.S. companies in the real estate industry.
Small Cap Fund
The Small Cap Fund seeks long-term capital growth. The Fund seeks to
accomplish its objective by investing primarily in equity securities of small
capitalization growth companies. The Fund may also invest in foreign
securities, including those of developing markets issuers. Because of the
Fund's investments in small capitalization companies, an investment in the
Fund may involve greater risks and higher volatility and should not be
considered a complete investment program.
Templeton Developing Markets Equity Fund
The Templeton Developing Markets Equity Fund seeks long-term capital
appreciation. The Fund seeks to achieve this objective by investing primarily
in equities of issuers in countries having developing markets. The Fund
is subject to the heightened foreign securities investment risks that
<PAGE>
accompany foreign developing markets and an investment in the Fund may
be considered speculative.
Templeton Global Growth Fund
The Templeton Global Growth Fund seeks long-term capital growth. The Fund
hopes to achieve its objective through a flexible policy of investing in
stocks and debt obligations of companies and governments of any nation,
including developing markets. The realization of income, if any, is only
incidental to accomplishment of the Fund's objective of long-term capital
growth. Foreign investing involves special risks.
Templeton International Equity Fund
The Templeton International Equity Fund seeks long-term growth of capital.
Under normal conditions, the International Equity Fund will invest at least
65% of its total assets in an internationally mixed portfolio of foreign
equity securities which trade on markets in countries other than the U.S.,
including developing markets, and are (i) issued by companies domiciled in
countries other than the U.S. or (ii) issued by companies that derive at least
50% of either their revenues or pre-tax income from activities outside of the
U.S. Foreign investing involves special risks.
Templeton Pacific Growth Fund
The Templeton Pacific Growth Fund seeks long-term growth of capital, primarily
through investing at least 65% of its total assets in equity securities which
trade on markets in the Pacific Rim, including developing markets, and (i) are
issued by companies domiciled in the Pacific Rim, including developing markets
or (ii) issued by companies that derive at least 50% of either their revenues
or pre-tax income from activities in the Pacific Rim. Investing in a portfolio
of geographically concentrated foreign securities, including developing
markets, involves increased susceptibility to the special risks of foreign
investing and an investment in the Fund may be considered speculative.
The Templeton Global Asset Allocation Fund, Templeton Developing Markets
Equity Fund, Templeton Global Growth Fund, Global Income Fund, Income
Securities Fund, Investment Grade Intermediate Bond Fund, Templeton
International Equity Fund, Money Market Fund, Templeton Pacific Growth Fund,
Precious Metals Fund, Small Cap Fund and Utility Equity Fund may invest more
than 10% of their total net assets in foreign securities which are subject to
special and additional risks related to currency fluctuations, market
volatility and economic, social and political uncertainty; investing in
developing markets involves similar but heightened risks related to the
relatively small size and lesser liquidity of these markets. See "Highlighted
Risk Considerations - Foreign Transactions" in the Trust Prospectus.
<PAGE>
The High Income Fund and the Income Securities Fund may invest up to 100% of
their respective net assets in debt obligations rated below investment grade,
commonly known as "junk bonds", or in obligations which have not been rated by
any rating agency. Investments rated below investment grade involve greater
risks, including price volatility and risk of default than investments in
higher rated obligations. Investors should carefully consider the risks
associated with an investment in these Funds in light of the securities in
which they invest. See "Highlighted Risk Considerations - Lower Rated Debt
Obligations" in the Trust Prospectus.
General
There is no assurance that the investment objectives of any of the Funds will
be met. Contract Owners bear the complete investment risk for Contract Values
allocated to a Sub-Account.
Additional Funds and/or additional Eligible Investments may, from time to
time, be made available as investments to underlie the Contract. However, the
right to make such selections will be limited by the terms and conditions
imposed on such transactions by the Company. (See "Purchase Payments and
Contract Value - Allocation of Purchase Payments.")
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,
further investment in such shares should become inappropriate in view of the
purpose of the Contract, the Company may substitute shares of another Eligible
Investment (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.
Voting Rights
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
persons having the voting interest in the Variable Account. The Company will
vote shares for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. The Trust does not hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined as
of a 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 the meeting.
<PAGE>
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 Contract 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.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Contract Values, the Variable
Account and the Fixed Account. These charges and deductions are:
Deduction for Contingent Deferred Sales Charge (Sales Load)
If all or a portion of the Surrender Value (see "Surrenders") is surrendered,
a Contingent Deferred Sales Charge (sales load) will be calculated at the time
of each surrender and will be deducted from the Contract Value. This charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. The Contingent Deferred Sales Charge
applies only to those purchase payments received within five (5) years of the
date of surrender. In calculating the Contingent Deferred Sales Charge,
purchase payments are allocated to the amount surrendered on a first-in,
first-out basis. The amount of the Contingent Deferred Sales Charge is
calculated by: (a) allocating purchase payments to the amount surrendered;
(b) multiplying each such allocated purchase payment that has been held under
the Contract for the period shown below by the charge shown below:
<TABLE>
<CAPTION>
<C> <S>
Years Since Payment Charge
___________________ ______
0-1 6%
1-2 5%
2-3 4%
3-4 3%
4-5 1.5%
5+ 0
</TABLE>
<PAGE>
and (c) adding the products of each multiplication in (b) above. The charge
will not exceed 6% of the purchase payments.
Once each Contract Year, Contract Owners may surrender up to fifteen percent
(15%) of purchase payments paid less any prior surrenders without incurring a
Contingent Deferred Sales Charge. If no withdrawal is made during a Contract
Year, the 15% is cumulative into future years. If less than 15% is withdrawn
in a Contract Year, the remaining percentage is not available in future years.
No Contingent Deferred Sales Charge will be deducted from purchase payments
which have been held under the Contract for more than five (5) Contract Years
or as annuity payments. See also "Surrenders - Systematic Withdrawal." The
Company may also eliminate or reduce the Contingent Deferred Sales Charge
under the Company procedures then in effect. (See "Charges and Deductions -
Reduction or Elimination of Contingent Deferred Sales Charge.")
For a partial surrender, the Contingent Deferred Sales Charge will be deducted
from the remaining Contract Value, if sufficient; otherwise it will be
deducted from the amount surrendered. The amount deducted from the Contract
Value will be determined by canceling Accumulation Units from each applicable
Sub-Account and/or subtracting values from the Fixed Account in the ratio that
the value of each Sub-Account and/or the Fixed Account bears to the total
Contract Value. The Contract Owner must specify in writing in advance which
units are to be canceled or values are to be reduced if other than the above
method of cancellation is desired.
To the extent that the Contingent Deferred Sales Charge is insufficient to
cover the actual costs of distribution, the Company may use any of its
corporate assets, including potential profit which may arise from the
Mortality and Expense Risk Charge, to make up any difference.
Reduction or Elimination of Contingent Deferred Sales Charge
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or
to a group of individuals in a manner that results in savings of sales
expenses. The entitlement to reduction of the Contingent Deferred Sales Charge
will be determined by the Company after examination of the following factors:
(1) the size of the group; (2) the total amount of purchase payments expected
to be received from the group; (3) the nature of the group for which the
Contracts are purchased, and the persistency expected in that group; (4) the
purpose for which the Contracts are purchased and whether that purpose makes
it likely that expenses will be reduced; and (5) any other circumstances which
the Company believes to be relevant to determining whether reduced sales or
administrative expenses may be expected. None of the reductions in charges
for sales is contractually guaranteed.
<PAGE>
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Company or any of its
affiliates. The Contingent Deferred Sales Charge may also be eliminated when
the Contract is sold by an agent of the Company to any members of his or her
family. In no event will reductions or elimination of the Contingent Deferred
Sales Charge be permitted where reductions or elimination will unfairly
discriminate against any person.
Deduction for Mortality and Expense Risk Charge
The Company deducts on each Valuation Date a Mortality and Expense Risk Charge
which is equal, on an annual basis, to 1.25% of the average daily net assets
of the Variable Account (consisting of approximately .90% for mortality risks
and approximately .35% for expense risks). The mortality risk borne by the
Company arises from its contractual obligation to make annuity payments
(determined in accordance with the Annuity Options and other provisions
contained in the Contracts) regardless of how long all Annuitants may live.
This undertaking assures that neither an Annuitant's own longevity, nor an
improvement in life expectancy greater than expected, will have any adverse
effect on the annuity payments the Annuitant will receive under the Contract.
Furthermore, the Company bears a mortality risk, regardless of the Annuity
Option selected, in that it guarantees the purchase rates for the annuity
income options available under the Contract whether for fixed payment options
or variable payment options. In addition, the Company assumes a mortality risk
for the guaranteed minimum death benefit provided under the Contract. The
expense risk assumed by the Company is that all actual expenses involved in
administering the Contracts, including Contract maintenance costs,
administrative costs, mailing costs, data processing costs, legal fees,
accounting fees, filing fees, and the costs of other services may exceed the
amount recovered from the Contract Maintenance Charge and the Administrative
Expense Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects to profit from this charge.Mortality and Expense
Risk Charge is guaranteed by the Company and cannot be increased.
Deduction for Administrative Expense Charge
The Company deducts on each Valuation Date an Administrative Expense Charge
which is equal, on an annual basis, to 0.15% of the average daily net assets
of the Variable Account. This charge, together with the Contract Maintenance
Charge (see below), is to reimburse the Company for the expenses it incurs in
the establishment and maintenance of the Contracts and the Variable Account.
These expenses include, but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Contract Owner
records, maintenance of Variable Account records, administrative personnel
<PAGE>
costs, mailing costs, data processing costs, legal fees, accounting fees,
filing fees, the costs of other services necessary for Contract Owner
servicing, and all accounting, valuation, regulatory and reporting
requirements. The Company does not intend to profit from this charge. This
charge will be reduced to the extent that the amount of this charge is in
excess of that necessary to reimburse the Company for its administrative
expenses. Should this charge prove to be insufficient, the Company will not
increase this charge and will incur the loss.
Deduction for Contract Maintenance Charge
The Company deducts an annual Contract Maintenance Charge of $30 from the
Contract Value on each Contract Anniversary. Prior to the Income Date, the
charge is waived for Contracts having Contract Values or purchase payments
less withdrawals of $100,000 or more. This charge is to reimburse the Company
for its administrative expenses (see above). Prior to the Income Date, this
charge is deducted by canceling Accumulation Units from each applicable
Sub-Account and/or by subtracting values from the Fixed Account in the ratio
that the value of each Sub-Account or, the Fixed Account bears to the total
Contract Value. When the Contract is surrendered for its full Surrender Value
on other than a Contract Anniversary, the entire Contract Maintenance Charge
will be deducted at the time of surrender. On and after the Income Date, the
Contract Maintenance Charge will be collected pro rata on a monthly basis
($2.50 per month) and will result in a reduction of the monthly annuity
payments.
Deduction for Premium Taxes
Premium taxes or other taxes payable to a state, municipality or other
governmental entity will be charged against the Contract Values. Premium
taxes currently imposed by certain states on the Contracts offered hereby
range from 0% to 3.5% of premiums paid. Some states assess premium taxes at
the time purchase payments are made; others assess premium taxes at the time
annuity payments begin. The Company will, in its sole discretion, determine
when taxes have resulted from: the investment experience of the Variable
Account; receipt by the Company of the purchase payment(s); or commencement of
annuity payments. The Company may, at its sole discretion, pay taxes when due
and deduct that amount from the Contract Value at a later date. Payment at an
earlier date does not waive any right the Company may have to deduct amounts
at a later date.
Deduction for Income Taxes
While the Company is not currently maintaining a provision for federal income
taxes, the Company has reserved the right to establish a provision for income
taxes if it determines, in its sole discretion, that it will incur a tax as a
result of the operation of the Variable Account. The Company will deduct for
any income taxes incurred by it as a result of the operation of the Variable
<PAGE>
Account whether or not there was a provision for taxes and whether or not it
was sufficient. Currently, no federal income taxes are assessed against the
Variable Account. However, if the tax laws should change, the Company
reserves the right to deduct the amount of such taxes from the Variable
Account. The Company will deduct any withholding taxes required by applicable
law.
Deduction for Trust Expenses
There are other deductions from, and expenses paid out of, the assets of the
Trust which are described in the accompanying Trust prospectus.
Deduction for Transfer Fee
Prior to the Income Date, a Contract Owner may transfer all or a part of the
Contract Owner's interest in a Sub-Account to another Sub-Account or to or
from the Fixed Account without the imposition of any fee or charge if there
have been no more than three transfers made in the Contract Year. The
Contract provides that if more than three transfers have been made in the
Contract Year, the Company reserves the right to deduct a transfer fee. The
maximum transfer fee that the Company may deduct, per transfer, is the lesser
of $25 or 2% of the amount transferred. Currently 12 transfers may be made in
a Contract Year without a charge. Thereafter, the fee is $25 (or 2% of the
amount transferred, if less). Currently, prescheduled automatic dollar
cost averaging transfers are not counted. The Company reserves the right to
charge a fee for all transfers after the Income Date, which fee, per transfer,
will not exceed the lesser of $25 or 2% of the amount transferred. 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.
THE CONTRACTS
Ownership
The Contract Owner and any Joint Owner as named on the Contract Schedule, have
all rights and may receive all benefits under the Contract. The Contract
Owner may change the Contract Owner at any time. Any Joint Owner must be the
spouse of the other Joint Owner (except in Pennsylvania). Upon death of the
Contract Owner, the surviving Joint Owner may elect to keep the Contract in
force and become the new Contract Owner when the Joint Owner is the spouse of
the Contract Owner. In those states where a non-spousal Joint Owner is
permitted, the death benefit must be paid in accordance with the Internal
Revenue Code and the surviving Joint Owner cannot continue the Contract in
force. A change of Contract Owner will automatically revoke any prior
designation of Contract Owner. A request for change must be: (1) made in
writing; and (2) received by the Company at its Valuemark Service Center.
After the transfer is recorded, the change will become effective as of the
date the written request is signed. A new designation of Contract Owner or
<PAGE>
Joint Owners will not apply to any payment made or action taken by the Company
prior to the time it was received. The Annuitant becomes the Owner on and
after the Income Date.
For Non-Qualified Contracts, in accordance with Code Section 72(u), a deferred
annuity contract held by a corporation or other entity that is not a natural
person is not treated as an annuity contract for tax purposes. Income on the
contract is treated as ordinary income received by the owner during the
taxable year. However, for purposes of Code Section 72(u), an annuity contract
held by a trust or other entity as agent for a natural person is considered
held by a natural person and treated as an annuity contract for tax purposes.
Tax advice should be sought prior to purchasing a Contract which is to be
owned by a trust or other non-natural person.
Assignment
The Contract Owner may assign the Contract at any time during his or her
lifetime. The Company will not be bound by any assignment until written
notice is received by the Company at its Valuemark Service Center. The
Company is not responsible for the validity of any assignment. The Contract
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 the Company may take before such assignment has been recorded at
its Valuemark Service Center.
If the Contract is issued pursuant to a Qualified Plan, it may not be
assigned, pledged or otherwise transferred except as may be allowed under
applicable law.
Beneficiary
One or more Beneficiaries and/or Contingent Beneficiaries are named by the
Contract Owner and, unless changed, are entitled to receive any death benefits
to be paid. Upon the death of either Joint Owner prior to the Income Date,
the surviving Joint Owner, if any, will be the designated Beneficiary and any
other Beneficiary named will be treated as a Contingent Beneficiary, unless
otherwise indicated.
Change of Beneficiary
The Contract Owner may change a Beneficiary or Contingent Beneficiary by
filing a written request with the Company at its Valuemark Service Center
unless an irrevocable Beneficiary designation was previously filed. After the
change is recorded, it will take effect as of the date the request was signed.
If the request reaches the Valuemark Service Center after the Contract Owner
dies but before any payment is made, the change will be valid. The Company
will not be liable for any payment made or action taken before it records the
change.
<PAGE>
If all of the Beneficiaries and Contingent Beneficiaries die prior to the
Contract Owner's death, the Company will pay the death benefit in one sum to
the Contract Owner's estate.
Annuitant
The Annuitant must be a natural person. The maximum age of the Annuitant on
the Effective Date is 80 years old. The Annuitant may be changed at any time
prior to the Income Date unless the Contract is owned by a non-natural person.
(See "Death of the Annuitant Prior to the Income Date".) Joint Annuitants
are allowed at the time of annuitization only. The Annuitant has no rights or
privileges prior to the Income Date. When an Annuity Option is elected, the
amount payable as of the Income Date is based on the age (and sex, where
permissible) of the Annuitant, as well as the Option selected and the Contract
Value. The Annuitant becomes the Contract Owner on or after the Income Date.
Death of the Contract Owner Before the Income Date
In those Contracts where Joint Owners have been named, upon the death of
either Joint Contract Owner prior to the Income Date, the surviving Joint
Owner, if any, becomes the designated Beneficiary and any other Beneficiary
named will be treated as a Contingent Beneficiary, unless otherwise indicated.
Only the Owner's spouse may be a Joint Owner (except in Pennsylvania). If
there is no surviving Joint Owner, a death benefit is payable to the
Beneficiary designated by the Contract Owner. The value of the death benefit
will be determined as of the Valuation Period next following the date both due
proof of death and a payment election are received by the Company. The
guaranteed death benefit is:
1. On the date of issue, the guaranteed death benefit is equal to the
purchase payment.
2. On each Contract Anniversary, but not beyond the Contract Anniversary
following the Contract Owner's 80th birthday, the guaranteed death benefit
will be determined as follows:
a. the guaranteed death benefit as of the previous Contract
Anniversary;
b. plus any purchase payments made during the previous Contract Year;
c. minus any amounts surrendered during the previous Contract Year;
d. the sum of a, b and c multiplied by 1.05.
<PAGE>
3. On dates other than a Contract Anniversary and on Contract
Anniversaries following the Contract Owner's 81st birthday, the guaranteed
death benefit equals the guaranteed death benefit on the previous Contract
Anniversary, plus purchase payments made since the previous Contract
Anniversary, less amounts surrendered since the previous Contract Anniversary.
For purposes of the guaranteed death benefit calculation, reference to the
Contract Owner's age shall be the age of the oldest Joint Owner when
applicable. The guaranteed death benefit will always be calculated as in
point (3) above after the date of death of the Contract Owner unless the
primary Beneficiary is the spouse of the Contract Owner and elects to continue
the Contract as the new Contract Owner.
The Beneficiary may, at any time before the end of a sixty (60) day period
following receipt of proof of death, elect the death benefit to be paid under
one of the following options:
A. Lump sum payment of the death benefit; (The value of the death benefit is
equal to the greater of the guaranteed death benefit or the Surrender Value as
of the Valuation Period next following the date due proof of death and a
payment election are received by the Company.)
B. The payment of the entire death benefit within 5 years of the date of the
Contract Owner's death; (The value of the death benefit under Option B is
determined by comparing the guaranteed death benefit to the Contract Value as
of the Valuation Period next following the date both due proof of death and a
payment election are received by the Company. If the Contract Value is the
greater, it will be the death benefit. If the guaranteed death benefit is the
greater, it will be the death benefit. The death benefit will no longer
be guaranteed by the Company. Any distribution of death benefit will be
reduced by the sum of any applicable premium taxes, Contract Maintenance
Charge and Contingent Deferred Sales Charge.)
C. Payment over the lifetime of the designated Beneficiary or over a period
not extending beyond the life expectancy of the designated Beneficiary with
distribution beginning within one year of the death of the Contract owner (See
"Annuity Provisions - Annuity Options"). (The value of the death benefit
under Option C is determined by comparing the guaranteed death benefit to the
Contract Value as of the Valuation Period next following the date both due
proof of death and a payment election are received by the Company. If the
Contract Value is greater it will be treated as the death benefit. If
the guaranteed death benefit is the greater, it will be the death benefit.)
D. If the Beneficiary is the Contract Owner's spouse, he/she can continue
the Contract in his/her own name. (The value of the death benefit under
Option D is determined by comparing the guaranteed death benefit to the
Contract Value as of the Valuation Period next following the date both due
proof of death and a payment election are received by the Company. If the
<PAGE>
Contract Value is greater, it will remain the Contract Value. If the
guaranteed death benefit is greater, it will become the new Contract Value.
Any distribution by the new Owner will be reduced by the sum of any applicable
premium taxes, Contract Maintenance Charges and Contingent Deferred Sales
Charges.)
If no payment option is elected, a single sum settlement will be made at the
end of the sixty (60) day period following receipt of proof of death.
Death of the Annuitant Prior to the Income Date
If the Annuitant dies on or before the Income Date and the Annuitant is
different from the Contract Owner, the Contract Owner may designate a new
Annuitant. If one is not designated, the Contract Owner will be the
Annuitant, provided the Contract Owner is a natural person. If the Contract
Owner is a non-natural person, then for the purposes of the death benefit, the
Annuitant shall be treated as the Contract Owner and the death of the
Annuitant shall be treated as a death of the Contract Owner.
Death of the Annuitant After the Income Date
If the Annuitant dies after the Income Date, the death benefit, if any, will
be payable to the Beneficiary as specified in the Annuity Option elected. The
Company will require proof of the Annuitant's death. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
ANNUITY PROVISIONS
Income Date
The Contract Owner selects an Income Date at the time of issue. The Income
Date must always be the first day of a calendar month. The earliest Income
Date is one month after the Effective Date. The Income Date may not be later
than the month following the Annuitant's 85th birthday or 10 years (8 years in
Pennsylvania) from the Effective Date, if later.
Change in Income Date and Annuity Option
The Contract Owner may, upon at least thirty (30) days prior written notice to
the Company, at any time prior to the Income Date, change the Income Date. The
Income Date must always be the first day of a calendar month. The Income Date
may not be later than the month following the Annuitant's 85th birthday or 10
years (8 years in Pennsylvania) from the Effective Date, if later.
The Contract Owner may, upon at least thirty (30) days prior written notice to
the Company, at any time prior to the Income Date, select and/or change the
Annuity Option.
<PAGE>
Annuity Options
Instead of having the proceeds paid in one sum, the Contract Owner may select
one of the Annuity Options. The Annuity Options are available on a fixed or
variable basis or a combination of fixed and variable (not available in all
states), except the LIFE ANNUITY WITH CASH REFUND Option which is only
available on a fixed basis.
The amount of the initial annuity payment is dependent on (i) the Contract
Value at the time of annuitization, (ii) the Annuity Option selected, (iii)
the Age of the Annuitant and any joint Annuitant, and (iv) the sex of the
Annuitant and any joint Annuitant where allowed (see "Tax Status - Qualified
Plans"). Under a fixed option, the dollar value of subsequent annuity payments
will not vary. Under a variable option, subsequent annuity payments will vary
based on the investment performance of the Sub-Account selected. Current
purchase rates available may be more favorable than those guaranteed in the
Contract.
The following Annuity Options are available.
LIFE ANNUITY. Monthly annuity payments are paid during the life of an
Annuitant, ceasing with the last annuity payment due prior to the Annuitant's
death.
LIFE ANNUITY WITH GUARANTEE FOR A MINIMUM PERIOD. The Company will make
monthly payments during the life of the Annuitant, but at least for the
minimum period shown in the annuity tables contained in the Contract. The
amount of each monthly payment per $1,000 of proceeds is based on the age (and
sex, where permissible) of the Annuitant when the first payment is made and on
the guaranteed period chosen. If the Annuitant dies within the guaranteed
period, the discounted value of the unpaid guaranteed payments will be paid by
the Company as a final payment.
JOINT AND LAST SURVIVOR ANNUITY. Monthly annuity payments are paid during the
joint lifetime of the Annuitant and a designated second person and are paid
thereafter during the remaining lifetime of the survivor, ceasing with the
last annuity payment due prior to the survivor's death.
LIFE ANNUITY WITH CASH REFUND. The Company will pay equal monthly payments
during the life of the Annuitant. Upon the death of the Annuitant, after
payments have started, the Company will pay in one sum any excess of the
amount of the proceeds applied under this Option over the total of all
payments made under this Option. The amount of each monthly payment per
$1,000 of proceeds is based on the age (and sex, where permissible) of the
Annuitant when the first payment is made.
<PAGE>
Annuity Units
The dollar amount of the first monthly variable annuity payment is determined
by applying the available value (after deduction of any premium taxes not
previously deducted) to the table using the age (and sex, where permissible)
of the Annuitant and any joint Annuitant. The number of Annuity Units is then
determined by dividing this dollar amount by the then current Annuity Unit
value. Thereafter, the number of Annuity Units remains unchanged during the
period of annuity payments. This determination is made separately for each
Sub-Account of the Variable Account. The number of Annuity Units is
determined for each Sub-Account and is based upon the available value in each
Sub-Account as of the date annuity payments are to begin.
The dollar amount determined for each Sub-Account will then be aggregated for
purposes of making payments. The pro rata portion of the Contract Maintenance
Charge is deducted.
The dollar amount of the second and later variable annuity payments is equal
to the number of Annuity Units determined for each Sub-Account times the
Annuity Unit value for that Sub-Account as of the due date of the payment.
This amount may increase or decrease from month to month. The pro rata
portion of the Contract Maintenance Charge is deducted each month.
The annuity tables contained in the Contract are based on a five percent (5%)
assumed investment rate. If the actual net investment rate exceeds five
percent (5%), payments will increase. Conversely, if the actual rate is less
than five percent (5%), annuity payments will decrease. If a higher assumed
investment rate was used, the initial payment would be higher, but the actual
net investment rate would have to be higher in order for annuity payments to
increase.
The Annuitant receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the
investment performance of the Sub-Account selected and the amount of each
annuity payment will vary accordingly.
Annuity Unit Value
The value of an Annuity Unit for a Sub-Account is determined (see below) by
subtracting (2) from (1) and dividing the result by (3) and multiplying the
result by .999866337248 (.999866337248 is the daily factor to neutralize the
assumed net investment rate, discussed above, of 5% per annum which is built
into the annuity rate table) where:
<PAGE>
1. is the net result of
a. the assets of the Sub-Account attributable to the Annuity Units; plus
or minus
b. the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation of the
Sub-Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Expense Charge; and
3. is the number of Annuity Units outstanding at the end of the Valuation
Period.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments
The Contracts may be purchased under a flexible purchase payment plan.
Purchase payments are payable in the frequency and in the amount selected by
the Contract Owner. The initial purchase payment is due on the Effective
Date. The initial purchase payment must be at least $2,000. Subsequent
purchase payments must be at least $250. These minimum amounts are not waived
for Qualified Plans. The Company reserves the right to decline any
application (except in New Jersey) or purchase payment. Amounts in excess of
$1 million require preapproval by the Company. The Company may, at its sole
discretion, waive the minimum payment requirements. The Contract Owner may
elect to increase, decrease or change the frequency of purchase payments.
Allocation of Purchase Payments
Purchase payments are allocated to one or more of the Sub-Accounts within the
Variable Account or to the Fixed Account as selected by the Contract Owner.
THE FIXED ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES. IN CALIFORNIA, THE FIXED
ACCOUNT, THE TEMPLETON GLOBAL ASSET ALLOCATION FUND AND THE SMALL CAP FUND ARE
NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK
WITH YOUR AGENT REGARDING AVAILABILITY.) For each Sub-Account, purchase
payments are converted into Accumulation Units. The number of Accumulation
Units credited to the Contract is determined by dividing the purchase payment
allocated to the Sub-Account by the value of the Accumulation Unit for the
Sub-Account. Purchase payments allocated to the Fixed Account are credited in
dollars.
<PAGE>
The Company has reserved the right to allocate initial purchase payments to
the Money Market Sub-Account (except those allocated to the Fixed Account)
until the expiration of the Free Look Period. In the event that the Company
does so allocate initial purchase payments to the Money Market Sub-Account, at
the end of the Free Look Period the Contract Value will be allocated to the
Sub-Account(s) selected by the Contract Owner. Currently, however, the
Company will allocate the initial purchase payment directly to the
Sub-Account(s) and/or the Fixed Account as selected by the Contract Owner.
do not change the allocation instructions for payments. Subsequent payments
will be allocated as directed by the Contract Owner in instructions
accompanying a payment; if no direction is given, the allocation will be that
which has been most recently directed for payments by the Contract Owner. The
Contract Owner may change the allocation of future payments without fee,
penalty or other charge upon written notice or telephone instructions to the
Valuemark Service Center. A change will be effective for payments received on
or after receipt of the written notice or telephone instructions.
The Company reserves the right to limit the number of Accounts that a Contract
Owner may have at any one time. Currently, the Contract Owner may initially
select up to nine Accounts. The Company reserves the right to change
the maximum number of Accounts in the future.
For initial purchase payments, if the forms required to issue a Contract are
received in good order, the Company will apply the purchase payment to the
Variable Account and credit the Contract with Accumulation Units and/or to the
Fixed Account and credit the Contract with dollars within two business days of
receipt.
In addition to the underwriting requirements of the Company, good order means
that the Company has received federal funds (monies credited to a bank's
account with its regional Federal Reserve Bank). If the forms required to
issue a Contract are not in good order, the Company will attempt to get them
in good order or the Company will return the forms and the purchase payment
within five business days. The Company will not retain purchase payments for
more than five business days while processing incomplete forms unless it has
been so authorized by the purchaser.
For subsequent purchase payments, the Company will apply purchase payments to
the Variable Account and credit the Contract with Accumulation Units and/or to
Fixed Account and credit the Contract with dollars during the Valuation Period
next following the Valuation Period during which the purchase payment was
received in good order.
Transfer of Contract Values
Prior to the Income Date, the Contract Owner may transfer all or part of the
Contract Owner's interest in a Sub-Account to another Sub-Account or to or
from the Fixed Account without the imposition of any fee or charge if there
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have been no more than three transfers made in the Contract Year. If more
than three transfers have been made in the Contract Year, the Company reserves
the right to deduct a transfer fee. Currently, 12 transfers may be made in a
Contract Year without a charge. (See "Charges and Deductions - Deduction for
Transfer Fee.")
Neither the Variable Account nor the Trust are designed for professional
market timing organizations or other entities using programmed and frequent
transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Fund. In coordination with the Trust, the
Company reserves the right to restrict the transfer privilege or reject any
specific purchase payment allocation request for any person whose transactions
seem to follow a timing pattern.
After the Income Date, provided a variable annuity option was selected, the
Contract Owner may make transfers. The Company reserves the right to charge
for all transfers after the Income Date.
All transfers are subject to the following:
a. The deduction of any transfer fee that may be imposed. The transfer
fee will be deducted from the amount which is transferred if the entire amount
in the Sub-Account or the Fixed Account is being transferred; otherwise from
the remaining amount in the Sub-Account or the Fixed Account from which the
transfer is made.
b. The minimum amount which may be transferred is the lesser of (i)
$1,000 from each Sub-Account or the Fixed Account; or (ii) the Contract
Owner's entire interest in the Sub-Account or the Fixed Account.
c. No partial transfer will be made if the Contract Owner's remaining
Contract Value in the Sub-Account or the Fixed Account will be less than
$1,000.
d. Transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer request (or by telephone, if
authorized) containing all required information. However, no transfer may be
made effective within seven calendar days of the date on which the first
annuity payment is due. No transfers may occur until the end of the Free-Look
Period. (See "Highlights.")
e. On or after the Income Date, the Contract Owner may not make a
transfer from the Fixed Account to the Variable Account. Currently, on or
after the Income Date, one transfer to the Fixed Account will be allowed.
f. After the Income Date, no transfer may be made if it would result in
any selected Sub-Account or the Fixed Account providing less than 10% of the
annuity benefits under the Contract.
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g. Any transfer direction must clearly specify the amount which is to be
transferred and the Accounts which are to be affected.
h. The Company reserves the right at any time and without prior notice
to any party to terminate, suspend or modify the transfer privileges described
above, subject to applicable state law and regulation.
A Contract Owner may elect to make transfers by telephone. To elect this
option the Contract 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 instructions.
Transfers do not change the allocation instructions for future payments. (See
"Purchase Payments and Contract Value - Allocation of Purchase Payments.")
Dollar Cost Averaging
Dollar Cost Averaging is a program which, if elected, enables a Contract Owner
to systematically allocate specified dollar amounts from the Money Market
Sub-Account, the Adjustable U.S. Government Sub-Account or the Fixed Account
to the Contract's other Sub-Accounts (maximum of eight ) at regular
intervals. By allocating on a regularly scheduled basis as opposed to
allocating the total amount at one particular time, a Contract Owner may be
less susceptible to the impact of market fluctuations.
Dollar Cost Averaging may be selected for 12 to 36 months. The minimum amount
per period to allocate is $1,000. All Dollar Cost Averaging transfers will be
made effective the tenth of the month (or the next Valuation Date if the tenth
of the month is not a Valuation Date). Election into this program may occur
at any time by properly completing the Dollar Cost Averaging election form,
returning it to the Company by the first of the month, to be effective that
month, and insuring that sufficient value is in either the Money Market
Sub-Account, the Adjustable U.S. Government Sub-Account or the Fixed Account.
When utilizing the Dollar Cost Averaging program, a Contract Owner must be
invested in either the Money Market Sub-Account, the Adjustable U.S.
Government Sub-Account or the Fixed Account and may invest in a maximum of
eight of the other Sub-Accounts.
Dollar Cost Averaging will terminate when any of the following occurs: (1) the
number of designated transfers has been completed; (2) the value of the Money
Market Sub-Account, the Adjustable U.S. Government Sub-Account or the Fixed
Account (as applicable) is insufficient to complete the next transfer; (3) the
Contract Owner requests termination in writing and such writing is received by
the first of the month in order to cancel the transfer scheduled to take
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effect that month; or (4) the Contract is terminated. The Dollar Cost
Averaging program may not be active following the Income Date. There is no
current charge for Dollar Cost Averaging but the Company reserves the right to
charge for this program. In the event there are additional transfers, the
transfer fee may be charged. The Company does not intend to profit from any
such charge. Transfers made pursuant to the Dollar Cost Averaging Program are
not counted in determining the applicability of the transfer fee.
Contract Value
The value of the Contract is the sum of the values attributable to the
Contract for each Sub-Account and the Fixed Account. The value of each
Sub-Account is determined by multiplying the number of Accumulation Units
attributable to the Contract in the Sub-Account by the value of an
Accumulation Unit for the Sub-Account.
Accumulation Unit
For each Sub-Account, purchase payments are converted into Accumulation Units.
This is done by dividing each purchase payment by the value of an
Accumulation Unit for the Valuation Period during which the purchase payment
is allocated to the Sub-Account. The Accumulation Unit value for each
Sub-Account was arbitrarily set initially at $10. The Accumulation Unit value
for any later Valuation Period is determined by subtracting (b) from (a) and
dividing the result by (c) where:
a. is the net result of
1) the assets of the Sub-Account attributable to Accumulation Units
(i.e., the aggregate value of the underlying Eligible Investments held at the
end of such Valuation Period); plus or minus
2) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation of the
Sub-Account;
b. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Expense Charge (See "Charges and Deductions"); and
c. is the number of Accumulation Units outstanding at the end of such
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
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DISTRIBUTOR
NALAC Financial Plans, Inc. ("NFP"), 1750 Hennepin Avenue, Minneapolis,
Minnesota, acts as the distributor of the Contracts. NFP is a wholly-owned
subsidiary of the Company. The Contracts are offered on a continuous basis.
NFP has subcontracted with Franklin Advisers, Inc. ("Advisers") 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 Contracts.
Broker-dealers will be paid commissions, up to an amount currently equal to
6.0% of purchase payments, for promotional or distribution expenses associated
with the marketing of the Contracts. The Company may, by agreement with the
broker/dealer, pay commissions as a combination of a certain percentage amount
at the time of sale and a trail commission (which when combined could exceed
6.0% of purchase payments). In addition, under certain circumstances, the
Company and/or Advisers, or certain of its affiliates, under a marketing
support agreement with NFP may pay certain sellers for other services not
directly related to the sale of the Contracts such as special marketing
support allowances. Commissions may be recovered from broker-dealers if a full
or partial surrender occurs within 12 months of a purchase payment.
SURRENDERS
While the Contract is in force and before the Income Date, the Company will,
upon written request to the Company by the Contract Owner, allow the surrender
of all or a portion of the Contract for its Surrender Value. Surrenders will
result in the cancellation of Accumulation Units from each applicable
Sub-Account and/or a reduction in the Fixed Account value in the ratio that
the value of each Sub-Account and/or the Fixed Account value bears to the
total Contract Value. The Contract Owner must specify in writing in advance
which units are to be canceled or values are to be reduced if other than the
above mentioned method of cancellation is desired. The Company will pay the
amount of any surrender from the Variable Account within seven (7) days of
receipt of a valid request, unless the "Delay of Payments" provision is in
effect. (See "Surrenders - Delay of Payments.")
Certain tax withdrawal penalties and restrictions may apply to surrenders from
Contracts. (See "Tax Status.") For Contracts purchased in connection with
403(b) plans, the Code limits the withdrawal of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in
Section 403(b)(11) of the Code) to circumstances only when the Contract Owner:
(1) attains age 59 1/2; (2) separates from service; (3) dies; (4) becomes
disabled (within the meaning of Section 72(m)(7) of the Code); or (5) in the
case of hardship.
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However, withdrawals for hardship are restricted to the portion of the
Contract Owner's Contract Value which represents contributions made by the
Contract Owner and does not include any investment results. The limitations
on withdrawals became effective on January 1, 1989 and apply only to salary
reduction contributions made after December 31, 1988, to income attributable
to such contributions and to income attributable to amounts held as of
December 31, 1988. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Contract Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
Systematic Withdrawal
The Company permits a systematic withdrawal plan which enables a Contract
Owner to pre-authorize a periodic exercise of the contractual withdrawal
rights described above. Systematic withdrawal is not available for
Non-Qualified Contracts where the Contract Owner is under age 59 1/2. Certain
tax penalties and restrictions may apply to systematic withdrawals from the
Contracts. (See "Tax Status - Tax Treatment of Withdrawals - Qualified
Contracts.") Contract Owners entering into such a plan instruct the Company to
withdraw a level dollar amount from the Contract on a monthly or quarterly
basis. Currently, systematic withdrawal on a monthly or quarterly basis is
available to Contract Owners who have a Contract Value of $50,000 or more and
on a quarterly basis only to Contract Owners who have a Contract Value of at
least $20,000 but less than $50,000. The amount deducted will result in the
cancellation of Accumulation Units from each applicable Sub-Account and/or
reducing values in the Fixed Account in the ratio that the value of each
Sub-Account and/or the Fixed Account bears to the total Contract Value. The
Contract Owner must specify in writing in advance which units are to be
canceled or values are to be reduced if other than the above mentioned method
of cancellation is desired. The Company reserves the right to modify the
eligibility rules at any time, without notice. The total systematic
withdrawal in a Contract Year which can be made without incurring a Contingent
Deferred Sales Charge is limited to not more than 9% of the Contract Value.
However, the 9% limit may be increased to allow systematic withdrawals to meet
the applicable minimum distribution requirements for Qualified Contracts. The
exercise of the systematic withdrawal plan in any Contract Year replaces the
15% amount which is allowable per year without incurring a Contingent Deferred
Sales Charge. Any other withdrawal in a year when the systematic withdrawal
plan has been utilized will be subject to the Contingent Deferred Sales
Charge.
Delay of Payments
The Company reserves the right to suspend or postpone payments for any period
when:
<PAGE>
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. 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
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
The applicable rules and regulations of the Securities and Exchange Commission
will govern as to whether the conditions described in 2. and 3. exist.
The Company reserves the right to defer payment for a withdrawal or transfer
from the Fixed Account for the period permitted by law but not for more than
six months after written election is received by the Company.
ADMINISTRATION OF THE CONTRACTS
While the Company has primary responsibility for all administration of the
Contracts, it has retained the services of Delaware Valley Financial Services,
Inc. ("DVFS" or "Valuemark Service Center") pursuant to an Administration
Agreement. Such administrative services include issuance of the Contracts and
maintenance of Contract Owners' records. The Company pays all fees and
charges of 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 Contracts could be
adversely affected should DVFS elect to terminate the Agreement.
PERFORMANCE DATA
Money Market Sub-Account
From time to time, the Company or NFP may advertise the "yield" and
"effective yield" of the Money Market Sub-Account. Both yield figures will
be based on historical earnings and are not intended to indicate future
performance. The "yield" of the Money Market Sub-Account refers to the
income generated by Contract Values in the Money Market Sub-Account over a
seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the Contract Values
in the Money Market Sub-Account. The "effective yield" is calculated
similarly but, when annualized, the income earned by Contract Values in the
Money Market Sub-Account is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the
<PAGE>
compounding effect of this assumed reinvestment. The computation of the
yield calculation includes a deduction for the Mortality and Expense Risk
Charge, Administrative Expense Charge and the Contract Maintenance Charge.
Other Sub-Accounts
From time to time, the Company or NFP may publish the current yields
and total returns of the other Sub-Accounts in advertisements and communications
to Contract Owners. The current yield for each Sub-Account will be calculated
by dividing the annualization of the interest income earned by the
underlying Fund during a recent 30-day period by the maximum Accumulation Unit
value at the end of such period. Total return information will include the
underlying Fund's average annual compounded rate of return over the most recent
four calendar quarters and the period from the underlying Fund's inception of
operations, based upon the value of the Accumulation Units acquired through a
hypothetical $1,000 investment at the Accumulation Unit value at the beginning
of the specified period and the value of the Accumulation Unit at the end of
such period, assuming reinvestment of all distributions and the deduction of
the Mortality and Expense Risk Charge, the Administrative Expense Charge and
the prorated Contract Maintenance Charge. Each Sub-Account may also advertise
aggregate and average total return information over different periods of time.
In each case, the yield and total return figures will reflect all recurring
charges against the Sub-Account's income, including the deduction for the
Mortality and Expense Risk Charge, the Administrative Expense Charge and the
Contract Maintenance Charge for the applicable time period. The Company or
NFP may, in addition, advertise or present yield or total return performance
information computed on different basis, or for the Funds. Contract Owners
should note that the investment results of each Sub-Account will fluctuate
over time, and any presentation of a Sub-Account's current yield or total
return for any prior period should not be considered as a representation of
what an investment may earn or what a Contract Owner's yield or total return
may be in any future period. Hypothetical performance illustrations, for a
hypothetical contract, may be prepard for sales literature or advertisements.
See "Calculation of Performance Data" in the Statement of Additional
Information.
Performance Ranking
The performance of each or all of the Sub-Accounts of the Variable Account may
be compared in its advertisements and sales literature to the performance of
other variable annuity issuers in general or to the performance of particular
types of variable annuities investing in mutual funds, or series of mutual
funds with investment objectives similar to each of the Sub-Accounts of the
Variable Account or indices. Lipper Analytical Services, Inc. ("Lipper") and
the Variable Annuity Research and Data Service ("VARDS") are independent
services which monitor and rank the performance of variable annuity issuers in
each of the major categories of investment objectives on an industry-wide
<PAGE>
basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS rank such issuers on the
basis of total return, assuming reinvestment of distributions, but do not take
sales charges, redemption fees or certain expense deductions at the separate
account level into consideration. In addition, VARDS prepares risk adjusted
rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger and Morningstar.
TAX STATUS
NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to annuities 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. The Company does not guarantee the tax status of
the Contracts. Purchasers bear the complete risk that the Contracts may not
be treated as "annuity contracts" under federal income tax laws. 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. Moreover, no attempt has been made to consider any applicable
state or other tax laws.
General
Section 72 of the Code governs taxation of annuities in general. A Contract
Owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Settlement Option elected. For a lump sum payment received as a total
surrender (total redemption) or death benefit, the recipient is taxed on the
portion of the payment that exceeds the cost basis of the Contract. For
Non-Qualified Contracts, this cost basis is generally the purchase payments,
while for Qualified Contracts there may be no cost basis. The taxable portion
of the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includable in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period certain
or refund feature) bears to the expected return under the Contract. The
exclusion amount for payments based on a variable annuity option is determined
by dividing the cost basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
<PAGE>
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludable amounts equal the investment
in the Contract) are fully taxable. The taxable portion is taxed at ordinary
income rates. For certain types of Qualified Plans there may be no cost basis
in the Contract within the meaning of Section 72 of the Code. Contract Owners,
Annuitants and Beneficiaries under the Contracts should seek competent
financial advice about the tax consequences of any distributions.
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 annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not
adequately diversified in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"). Disqualification of the
Contract as an annuity contract would result in imposition of federal income
tax to the Contract Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract. The Code contains a safe
harbor provision which provides that annuity contracts such as the Contracts
meet the diversification requirements if, as of the end of each quarter, the
underlying assets meet the diversification standards for a regulated
investment company and no more than fifty-five percent (55%) of the total
assets consist of cash, cash items, U.S. government securities and securities
of other regulated investment companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. 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: (1) no more than 55% of the value of the
total assets of the portfolio is represented by any one investment; (2) no
more than 70% of the value of the total assets of the portfolio is represented
by any two investments; (3) no more than 80% of the value of the total assets
of the portfolio is represented by any three investments; and (4) 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."
<PAGE>
The Company intends that all Funds of the Trust underlying the Contracts 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 Contract Owner
control of the investments of the Variable Account will cause the Contract
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 Contract. 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 Contract Owner control which may be exercised under the Contract
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 Contract Owner's ability to
transfer among investment choices or the number and type of investment choices
available, would cause the Contract Owner to be considered as the owner of the
assets of the Variable Account resulting in the imposition of federal income
tax to the Contract Owner with respect to earnings allocable to the Contract
prior to receipt of payments under the Contract.
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
Contract 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 Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year period to the same contract owner by one company
or its affiliates are treated as one annuity contract for purposes of
determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. Contract Owners
should consult a tax adviser prior to purchasing more than one non-qualified
annuity contract in any calendar year period.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign
<PAGE>
their Contracts.
Income Tax Withholding
All distributions or the portion thereof which is includible in the gross
income of the Contract Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as
wages and at the rate of 10% from non-periodic payments. However, the
Contract Owner, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement does not apply to: a) distributions for the life or life
expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary; or b) distributions for a specified
period of 10 years or more; or c) distributions which are required minimum
distributions. Participants should consult their own tax counsel or other tax
advisor regarding withholding.
Tax Treatment of Withdrawals - Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of
the Contract Owner; (c) if the taxpayer is totally disabled (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or for the joint lives (or
joint life expectancies) of the taxpayer and his Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.")
<PAGE>
Qualified Plans
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase
payment requirements, these Contracts may not be appropriate for some periodic
payment retirement plans. Taxation of participants in each Qualified Plan
varies with the type of plan and terms and conditions of each specific plan.
Contract Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other
requirements that are not incorporated into the Company's administrative
procedures. Contract Owners, participants and beneficiaries are responsible
for determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Following are general
descriptions of the types of Qualified Plans with which the Contracts may be
used. Such descriptions are not exhaustive and are for general informational
purposes only. The tax rules regarding Qualified Plans are very complex and
will have differing applications, depending on individual facts and
circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection
with Qualified Plans will utilize annuity tables which do not differentiate on
the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in violation
of applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts.")
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary,
depending upon the particular Plan design. However, the Code places
limitations and restrictions on all Plans, including on such items as:
<PAGE>
amounts of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals
- - Qualified Contracts.") Purchasers of Contracts for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
b. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includable in the gross income of the
employee until the employee receives distributions from the Contract. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals -
Qualified Contracts.") Employee loans are not allowed under these Contracts.
Any employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which may be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.")
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Contracts to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the Plan.
Contributions to the Plan for the benefit of employees will not be includable
in the gross income of the employee until distributed from the Plan. The tax
<PAGE>
consequences to participants may vary, depending upon the particular Plan
design. However, the Code places limitations and restrictions on all Plans,
including on such items as: amount of allowable contributions; form, manner
and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Participant loans are not allowed under the Contracts purchased
in connection with these Plans. (See "Tax Treatment of Withdrawals -
Qualified Contracts.") Purchasers of Contracts for use with Corporate Pension
or Profit- Sharing Plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
Tax Treatment of Withdrawals - Qualified Contracts
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty
tax on the taxable portion of any distribution from qualified retirement
plans, including Contracts issued and qualified under Code Sections 401 (H.R.
10 and Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered
Annuities) and 408(b) (Individual Retirement Annuities). To the extent
amounts are not includable in gross income because they have been properly
rolled over to an IRA or to another eligible Qualified Plan, no tax penalty
will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Contract Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) after separation from service,
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the
Contract Owner or Annuitant (as applicable) or the joint lives (or joint life
expectancies) of such Contract Owner or Annuitant (as applicable) and his
designated beneficiary; (d) distributions to a Contract Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Contract Owner or Annuitant (as applicable) to the
extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Contract Owner or Annuitant (as applicable) for
amounts paid during the taxable year for medical care; and (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order.
The exceptions stated in items (d), (e) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in item (c) applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
<PAGE>
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the year in which the employee attains
age 70 1/2. Required distributions must be over a period not exceeding the
life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exception applies.
Tax-Sheltered Annuities - Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59
1/2; (2) separates from service; (3) dies; (4) becomes disabled (within the
meaning of Section 72(m)(7) of the Code); or (5) in the case of hardship.
However, withdrawals for hardship are restricted to the portion of the
Contract Owner's Contract Value which represents contributions by the Contract
Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989 and apply only to salary
reduction contributions made after December 31, 1988, and to income
attributable to such contributions and to income attributable to amounts held
as of December 31, 1988. The limitations on withdrawals do not affect
rollovers and transfers between certain Qualified Plans. Contract Owners
should consult their own tax counsel or other tax adviser regarding any
distributions.
Contracts Owned by Other than Natural Persons
Generally, investment earnings on premiums for Contracts will be taxed
currently to the Contract Owner if the Owner is a non-natural person, e.g., a
corporation, or certain other entities. Such Contracts generally will not be
treated as annuities for federal income tax purposes. However, this rule does
not apply to Contracts held by a trust or other entity as an agent for a
natural person.
FINANCIAL STATEMENTS
Audited consolidated financial statements of the Company and audited financial
statements of the Variable Account as of December 31, 1994 are included in the
Statement of Additional Information. Unaudited financial statements of the
Variable Account as of June 30, 1995 are also included in the Statement of
Additional Information.
<PAGE>
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.
<PAGE>
TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION
Item Page
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Performance Data. . . . . . . . . . . . . . . . . . .
Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Annuity Payout . . . . . . . . . . . . . . . . . . . . .
Fixed Annuity Payout . . . . . . . . . . . .. . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
(Formerly NALAC Variable Account B)
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
(Formerly North American Life and Casualty Company)
November 1, 1995
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE
THE COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800)
542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED
NOVEMBER 1, 1995, AND AS MAY BE AMENDED FROM TIME TO TIME.
<PAGE>
TABLE OF CONTENTS
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTOR
CALCULATION OF PERFORMANCE DATA
ANNUITY PROVISIONS
Variable Annuity Payout
Fixed Annuity Payout
FINANCIAL STATEMENTS
<PAGE>
COMPANY
Information regarding Allianz Life Insurance Company of North America (the
"Company") and its ownership is contained in the Prospectus. On April 1,
1993, the Company changed its name from North American Life and Casualty
Company to its present name. The Company is rated A+ (Superior) by A.M. BEST,
an independent analyst of the insurance industry. The financial strength of an
insurance company may be relevant insofar as the ability of a company to make
fixed annuity payments from its general account.
EXPERTS
The financial statements of Allianz Life Variable Account B and the
consolidated financial statements of Allianz Life Insurance Company of North
America as of December 31, 1994, included in this Statement of Additional
Information have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their reports included in this Statement of Additional
Information 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 Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
NALAC Financial Plans, Inc., a wholly owned subsidiary of the Company, acts as
the distributor. The offering is on a continuous basis.
CALCULATION OF PERFORMANCE DATA
The Money Market Sub-Account. The Money Market Sub-Account's current yield
may vary each day, depending upon, among other things, the average maturity of
the underlying Fund's investment securities and changes in interest rates,
operating expenses, the deduction of the Mortality and Expense Risk Charge,
the Administrative Expense Charge and the Contract Maintenance Charge and, in
certain instances, the value of the underlying Fund's investment securities.
The fact that the Sub-Account's current yield will fluctuate and that the
principal is not guaranteed should be taken into consideration when using the
Sub-Account's current yield as a basis for comparison with savings accounts or
other fixed-yield investments. The Sub-Account's yield at any particular time
is not indicative of what the yield may be at any other time. For the seven
calendar days ended June 30, 1995, the yield for the Money Market
Sub-Account was 4.07% .
<PAGE>
The Money Market Sub-Account's current yield is computed on a base period
return of a hypothetical Contract having a beginning balance of one
Accumulation Unit for a particular period of time (generally seven days). The
return is determined by dividing the net change (exclusive of any capital
changes) in such Accumulation Unit by its beginning value, and then
multiplying it by 365/7 to get the annualized current yield. The calculation
of net change reflects the value of additional shares purchased with the
dividends paid by the Fund, and the deduction of the Mortality and Expense
Risk Charge, the Administrative Expense Charge and Contract Maintenance
Charge.effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. (Effective
yield = [(Base Period Return + 1)365/7]-1.)
Other Sub-Accounts. From time to time, the other Sub-Accounts may state their
total return in advertisements and Contract Owner communications. Any
statements of total return or other performance data of a Sub-Account will be
accompanied by information on that Sub-Account's average annual compounded
rate of return over the most recent four calendar quarters and the period from
the Sub-Account's inception of operations. Each Sub-Account may also
advertise aggregate and average total return information over different
periods of time.
Each Sub-Account's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 Contract Value, according to the following
formula:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
Purchase Payment at the end of the period
</TABLE>
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that no sales load is
deducted from the initial $1,000 of payment at the time it is allocated to the
Sub-Account and assumes that the income earned by the investment in the
Sub-Account is reinvested.
<PAGE>
Each Sub-Account may also quote its current yield in advertisements and
Contract Owner communications. Each Sub-Account (other than the Money Market
Sub-Account) will publish standardized total return information with any
quotation of current yield.
The yield computation is determined by dividing the net investment income per
Accumulation Unit earned during the period (minus the deduction for the
Mortality and Expense Risk Charge, Administrative Expense Charge and the
Contract Maintenance Charge) by the Accumulation Unit Value on the last day of
the period and annualizing the resulting figure, according to the following
formula:
6
Yield = 2 [(a-b) + 1] - 1]
_____
cd
Where:
<TABLE>
<CAPTION>
<S> <C> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Sub-Account
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the
period
d = the maximum offering price per Accumulation Unit on the last day of
the period
</TABLE>
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in the advertisement or communication.
Yield calculations assume no sales load.
Each Sub-Account's current yield and total return may be compared to relevant
indices, including U. S. domestic and international taxable bond indices and
data from Lipper Analytical Services, Inc., Standard & Poor's Indices, or
VARDS.
From time to time, evaluations of each Sub-Account's performance by
independent sources may also be used in advertisements and in information
furnished to present or prospective Contract Owners.
Contract Owners should note that the investment results of the Sub-Account
will fluctuate over time, and any presentation of the Sub-Account's current
yield or total return for any period should not be considered as a
<PAGE>
representation of what an investment may earn or what a Contract Owner's total
return or yield may be in any future period.
ANNUITY PROVISIONS
Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable Sub-Account(s) of the Variable Account.
At the Income Date, the Contract Value in each Sub-Account will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. Both sex distinct and unisex Annuity Tables are
utilized by the Company, depending on the state and type of Contract. If, as
of the Income Date, the then current Annuity Option rates applicable to this
class of Contracts provide a larger income than that guaranteed for the same
form of annuity under this Contract, the larger amount will be paid. The
dollar amount of annuity payments after the first is determined as follows:
<TABLE>
<CAPTION>
<S> <C>
1. The dollar amount of the first annuity payment is divided by the value
of an Annuity Unit as of the Income Date. This establishes the number
of Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the annuity payment period.
2. The fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month
for which the payment is due. This result is the dollar amount of the
payment.
3. The total dollar amount of each Variable Annuity variable payout is the
sum of all Sub-Account Variable Annuity payments, reduced by the
Contract Maintenance Charge.
</TABLE>
Fixed Annuity Payout
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
Variable Account. The Fixed Account value on the day immediately preceding
the Annuity Date will be used to determine the Fixed Annuity monthly payment.
The monthly Annuity Payment will be based upon the Contract Value at the time
of annuitization, the Annuity Option selected, the age of the annuitant and
any joint annuitant and the sex of the annuitant and joint annuitant where
allowed.
<PAGE>
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of December
31, 1994, included herein should be considered only as bearing upon the
ability of the Company to meet its obligations under the Contracts. The
audited financial statements of the Variable Account as of December 31, 1994
are included herein. In addition, unaudited financial statements of the
Variable Account as of June 30, 1995 are included herein.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
June 30, 1995 (unaudited)
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities
June 30, 1995 (unaudited)
(In thousands)
U.S.
Money Growth and Precious High Real Estate Government Utility
Market Income Metals Income Securities Securities Equity
Fund Fund Fund Fund Fund Fund Fund
-------- ---------- -------- ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 415,389 shares,
cost $415,389 $415,389 - - - - - -
Growth and Income Fund, 40,611 shares,
cost $531,696 - 603,485 - - - - -
Precious Metals Fund, 8,034 shares,
cost $109,500 - - 111,598 - - - -
High Income Fund, 22,888 shares,
cost $285,054 - - - 295,943 - - -
Real Estate Securities Fund, 11,758
shares, cost $176,121 - - - - 181,420 - -
U.S. Government Securities Fund,
42,308 shares, cost $547,411 - - - - - 557,622 -
Utility Equity Fund, 76,321 shares,
cost $1,191,565 - - - - - - 1,172,296
-------- ---------- -------- ------- ----------- ---------- ---------
Total assets 415,389 603,485 111,598 295,943 181,420 557,622 1,172,296
-------- ---------- -------- ------- ----------- ---------- ---------
Liabilities:
Accrued mortality and expense
risk charges 301 316 66 166 105 311 638
Accrued administrative charges 36 38 8 20 13 37 77
-------- ---------- -------- ------- ----------- ---------- ---------
<PAGE>
Total liabilities 337 354 74 186 118 348 715
-------- ---------- -------- ------- ----------- ---------- ---------
Net Assets 415,052 603,131 111,524 295,757 181,302 557,274 1,171,581
======== ========== ======== ======= =========== ========== =========
Contract Owners Equity:
Contracts in accumulation
period (note 6) 415,007 602,748 111,524 295,757 181,302 557,274 1,171,106
Contracts in annuity payment
period (note 2) 45 383 - - - - 475
-------- ---------- -------- ------- ----------- ---------- ---------
Total contract owner's equity $415,052 603,131 111,524 295,757 181,302 557,274 1,171,581
======== ========== ======== ======= =========== ========== =========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
June 30, 1995 (unaudited)
(In thousands)
Zero Zero Zero Zero Investment
Coupon Coupon Coupon Coupon Global Grade Income
Fund - Fund - Fund - Fund - Income Intermediate Securities
1995 2000 2005 2010 Fund Bond Fund Fund
------- ------ ------ ------ ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Zero Coupon Fund - 1995, 3,597 shares,
cost $42,853 $42,117 - - - - - -
Zero Coupon Fund - 2000, 6,658 shares,
cost $91,320 - 98,743 - - - - -
Zero Coupon Fund - 2005, 3,937 shares,
cost $56,006 - - 61,935 - - - -
Zero Coupon Fund - 2010, 3,976 shares,
cost $55,953 - - - 62,220 - - -
Global Income Fund, 17,884 shares,
cost $227,698 - - - - 226,768 - -
Investment Grade Intermediate Bond Fund,
10,955 shares, cost $144,592 - - - - - 148,114 -
Income Securities Fund, 70,594 shares,
cost $1,037,100 - - - - - - 1,064,559
------- ------ ------ ------ ------- ------------ ----------
Total assets 42,117 98,743 61,935 62,220 226,768 148,114 1,064,559
------- ------ ------ ------ ------- ------------ ----------
Liabilities:
Accrued mortality and expense
risk charges 28 59 38 38 130 86 579
Accrued administrative charges 3 7 5 5 16 10 69
------- ------ ------ ------ ------- ------------ ----------
<PAGE>
Total liabilities 31 66 43 43 146 96 648
------- ------ ------ ------ ------- ------------ ----------
Net Assets 42,086 98,677 61,892 62,177 226,622 148,018 1,063,911
======= ====== ====== ====== ======= ============ ==========
Contract Owners Equity:
Contracts in accumulation
period (note 6) 42,086 98,677 61,892 62,177 226,622 148,018 1,063,210
Contracts in annuity payment
period (note 2) - - - - - - 701
------- ------ ------ ------ ------- ------------ ----------
Total contract owner's equity $42,086 98,677 61,892 62,177 226,622 148,018 1,063,911
======= ====== ====== ====== ======= ============ ==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
June 30, 1995 (unaudited)
(In thousands)
Templeton Templeton
Adjustable Templeton Templeton Developing Templeton Global
U.S. Pacific Rising International Markets Global Asset Total
Government Growth Dividends Equity Equity Growth Allocation All
Fund Fund Fund Fund Fund Fund Fund Funds
----------- --------- --------- ------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Adjustable U.S. Government
Fund, 18,145 shares,
cost $196,928 $ 188,344 - - - - - -
Templeton Pacific Growth Fund,
24,484 shares, cost $324,914 - 322,940 - - - - -
Rising Dividends Fund, 31,204
shares, cost $328,218 - - 346,362 - - - -
Templeton International Equity
Fund, 59,256 shares,
cost $732,004 - - - 768,548 - - -
Templeton Developing Markets
Equity Fund, 12,747 shares,
cost $127,301 - - - - 125,050 - -
Templeton Global Growth Fund,
21,285 shares, cost $224,327 - - - - - 237,751 -
Templeton Global Asset
Allocation Fund,
399 shares,cost $4,011 - - - - - - 4,038
----------- --------- --------- ------------- ---------- --------- ----------
Total assets 188,344 322,940 346,362 768,548 125,050 237,751 4,038 7,035,242
----------- --------- --------- ------------- ---------- --------- ---------- ---------
<PAGE>
Liabilities:
Accrued mortality and expense
risk charges 107 170 191 454 47 122 9 3,961
Accrued administrative charges 13 20 23 54 6 15 1 476
----------- --------- --------- ------------- ---------- --------- ---------- ---------
Total liabilities 120 190 214 508 53 137 10 4,437
----------- --------- --------- ------------- ---------- --------- ---------- ---------
Net Assets 188,224 322,750 346,148 768,040 124,997 237,614 4,028 7,030,805
=========== ========= ========= ============= ========== ========= ========== =========
Contract Owners Equity:
Contracts in accumulation
period (note 6) 188,224 322,458 345,792 767,989 124,552 237,091 4,028 7,027,534
Contracts in annuity payment
period (note 2) - 292 356 51 445 523 - 3,271
----------- --------- --------- ------------- ---------- --------- ---------- ---------
Total contract owner's equity $ 188,224 322,750 346,148 768,040 124,997 237,614 4,028 7,030,805
=========== ========= ========= ============= ========== ========= ========== =========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations
For the period ended June 30, 1995 (unaudited)
(In thousands)
Growth Real U.S.
Money and Precious High Estate Government Utility
Market Income Metals Income Securities Securities Equity
Fund Fund Fund Fund Fund Fund Fund
---------- -------- --------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in fund shares $ 12,431 7,314 1,546 19,247 5,958 37,956 65,100
---------- -------- --------- -------- ----------- ----------- --------
Expenses:
Mortality and expense risk charges 2,746 3,313 680 1,675 1,110 3,358 7,089
Administrative charges 329 398 82 201 133 403 851
---------- -------- --------- -------- ----------- ----------- --------
Total expenses 3,075 3,711 762 1,876 1,243 3,761 7,940
---------- -------- --------- -------- ----------- ----------- --------
Investment income (loss), net 9,356 3,603 784 17,371 4,715 34,195 57,160
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions - 15,921 1,145 - - - -
---------- -------- --------- -------- ----------- ----------- --------
on mutual funds
Realized gains (losses) on
sales of investments:
Proceeds from sales 211,549 22,810 35,170 21,592 18,078 39,330 63,393
Cost of investments sold (211,549) (20,328) (34,901) (19,993) (17,790) (38,151) (64,295)
---------- -------- --------- -------- ----------- ----------- --------
Total realized gains (losses) on
sales of investments, net - 2,482 269 1,599 288 1,179 (902)
---------- -------- --------- -------- ----------- ----------- --------
<PAGE>
Realized gains (losses)
on investments, net - 18,403 1,414 1,599 288 1,179 (902)
Net change in unrealized
appreciation (depreciation)
on investments - 48,514 (2,626) 12,277 986 23,345 70,115
---------- -------- --------- -------- ----------- ----------- --------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net - 66,917 (1,212) 13,876 1,274 24,524 69,213
---------- -------- --------- -------- ----------- ----------- --------
Net increase (decrease)
in net assets from operations $ 9,356 70,520 (428) 31,247 5,989 58,719 126,373
========== ======== ========= ======== =========== =========== ========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the period ended June 30, 1995 (unaudited)
(In thousands)
Zero Zero Zero Zero Investment
Coupon Coupon Coupon Coupon Global Grade Income
Fund - Fund - Fund - Fund - Income Intermediate Securities
1995 2000 2005 2010 Fund Bond Fund Fund
-------- ------- ------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in fund shares $ 2,930 4,248 2,593 1,881 8,424 5,974 58,967
-------- ------- ------- -------- -------- ------------- -----------
Expenses:
Mortality and expense risk charges 281 564 343 333 1,410 893 6,141
Administrative charges 34 68 41 40 169 107 737
-------- ------- ------- -------- -------- ------------- -----------
Total expenses 315 632 384 373 1,579 1,000 6,878
-------- ------- ------- -------- -------- ------------- -----------
Investment income (loss), net 2,615 3,616 2,209 1,508 6,845 4,974 52,089
Realized gains (losses) and
unrealized appreciation (depreciation)
on investments:
Realized capital gain distributions 14 - - - - - 4,746
-------- ------- ------- -------- -------- ------------- -----------
on mutual funds
Realized gains (losses)
on sales of investments:
Proceeds from sales 10,250 6,716 3,750 16,583 26,611 7,603 26,978
Cost of investments sold (9,888) (6,065) (3,455) (15,250) (27,220) (7,350) (26,746)
-------- ------- ------- -------- -------- ------------- -----------
Total realized gains (losses) on
sales of investments, net 362 651 295 1,333 (609) 253 232
-------- ------- ------- -------- -------- ------------- -----------
<PAGE>
Realized gains (losses)
on investments, net 376 651 295 1,333 (609) 253 4,978
Net change in unrealized appreciation
(depreciation) on investments (1,333) 6,761 6,818 8,077 9,499 1,874 48,953
-------- ------- ------- -------- -------- ------------- -----------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net (957) 7,412 7,113 9,410 8,890 2,127 53,931
-------- ------- ------- -------- -------- ------------- -----------
Net increase (decrease) in
net assets from operations $ 1,658 11,028 9,322 10,918 15,735 7,101 106,020
======== ======= ======= ======== ======== ============= ===========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the period ended June 30, 1995 (unaudited)
(In thousands)
Templeton Templeton
Adjustable Templeton Templeton Developing Templeton Global
U.S. Pacific Rising International Markets Global Asset
Government Growth Dividends Equity Equity Growth Allocation
Fund Fund Fund Fund Fund Fund Fund
------------ ---------- ---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in fund shares $ 12,390 6,144 7,357 12,759 465 1,261 -
------------ ---------- ---------- -------------- ----------- ---------- -----------
Expenses:
Mortality and expense risk charges 1,248 2,053 1,955 4,579 624 1,167 9
Administrative charges 150 246 235 549 75 140 1
------------ ---------- ---------- -------------- ----------- ---------- -----------
Total expenses 1,398 2,299 2,190 5,128 699 1,307 10
------------ ---------- ---------- -------------- ----------- ---------- -----------
Investment income (loss), net 10,992 3,845 5,167 7,631 (234) (46) (10)
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - 2,555 - 15,808 109 - -
------------ ---------- ---------- -------------- ----------- ---------- -----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 54,158 81,608 7,738 53,818 6,086 2,426 -
Cost of investments sold (54,610) (82,256) (7,812) (52,646) (6,425) (2,397) -
------------ ---------- ---------- -------------- ----------- ---------- -----------
Total realized gains (losses)
on sales of investments, net (452) (648) (74) 1,172 (339) 29 -
------------ ---------- ---------- -------------- ----------- ---------- -----------
<PAGE>
Realized gains (losses)
on investments, net (452) 1,907 (74) 16,980 (230) 29 -
Net change in unrealized
appreciation (depreciation)
on investments (1,121) (631) 32,488 24,944 4,137 13,067 27
------------ ---------- ---------- -------------- ----------- ---------- -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on
investments, net (1,573) 1,276 32,414 41,924 3,907 13,096 27
------------ ---------- ---------- -------------- ----------- ---------- -----------
Net increase (decrease) in
net assets from operations $ 9,419 5,121 37,581 49,555 3,673 13,050 17
============ ========== ========== ============== =========== ========== ===========
Total
All
Funds
---------
<S> <C>
Investment Income:
Dividends reinvested in fund shares 274,945
---------
Expenses:
Mortality and expense risk charges 41,571
Administrative charges 4,989
---------
Total expenses 46,560
---------
Investment income (loss), net 228,385
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds 40,298
---------
<PAGE>
Realized gains (losses)
on sales of investments:
Proceeds from sales 716,247
Cost of investments sold (709,127)
---------
Total realized gains (losses)
on sales of investments, net 7,120
---------
Realized gains (losses)
on investments, net 47,418
Net change in unrealized
appreciation (depreciation)
on investments 306,171
---------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on
investments, net 353,589
---------
Net increase (decrease) in
net assets from operations 581,974
=========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Money Market Fund Growth and Income Fund Precious Metals Fund
-------------- -------- ----------- ------------ --------- ------------
1995 1994 1995 1994 1995 1994
-------------- -------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 9,356 2,297 3,603 (138) 784 (13)
Realized gains (losses)
on investments, net - - 18,403 7,195 1,414 1,150
Net change in unrealized appreciation
(depreciation) on investments - - 48,514 (29,738) (2,626) (7,177)
-------------- -------- ----------- ------------ --------- ------------
Net increase (decrease) in net assets
from operations 9,356 2,297 70,520 (22,681) (428) (6,040)
-------------- -------- ----------- ------------ --------- ------------
Contract transactions:
Purchase payments 93,045 208,236 38,720 84,755 5,515 26,009
Transfers between funds (107,153) 127,258 56,617 24,393 (3,012) 9,922
Surrenders and terminations (66,274) (21,599) (33,681) (12,659) (6,186) (1,596)
Rescissions (1,569) (4,156) (1,014) (1,092) (211) (211)
Other transactions (note 2) 408 51 196 23 18 (1)
-------------- -------- ----------- ------------ --------- ------------
Net increase (decrease) in net assets
resulting from contract transactions (81,543) 309,790 60,838 95,420 (3,876) 34,123
-------------- -------- ----------- ------------ --------- ------------
Increase (decrease) in net assets (72,187) 312,087 131,358 72,739 (4,304) 28,083
-------------- -------- ----------- ------------ --------- ------------
Net assets at beginning of period 487,239 123,639 471,773 338,082 115,828 67,770
-------------- -------- ----------- ------------ --------- ------------
<PAGE>
Net assets at end of period $ 415,052 435,726 603,131 410,821 111,524 95,853
============== ======== =========== ============ ========= ============
High Income Fund
------------ --------
1995 1994
------------ --------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net 17,371 8,094
Realized gains (losses)
on investments, net 1,599 2,920
Net change in unrealized appreciation
(depreciation) on investments 12,277 (19,395)
------------ --------
Net increase (decrease) in net assets
from operations 31,247 (8,381)
------------ --------
Contract transactions:
Purchase payments 20,870 53,756
Transfers between funds 33,534 (13,259)
Surrenders and terminations (18,143) (6,461)
Rescissions (822) (565)
Other transactions (note 2) 45 8
------------ --------
Net increase (decrease) in net assets
resulting from contract transactions 35,484 33,479
------------ --------
Increase (decrease) in net assets 66,731 25,098
------------ --------
Net assets at beginning of period 229,026 178,627
------------ --------
Net assets at end of period 295,757 203,725
============ ========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Real Estate Securities Fund U.S. Government Securities Fund Utility
------------- ---------------- ---------------- ---------------- ----------
1995 1994 1995 1994 1995
------------- ---------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 4,715 845 34,195 24,045 57,160
Realized gains (losses)
on investments, net 288 265 1,179 3,527 (902)
Net change in unrealized appreciation
(depreciation) on investments 986 67 23,345 (65,312) 70,115
------------- ---------------- ---------------- ---------------- ----------
Net increase (decrease) in net assets
from operations 5,989 1,177 58,719 (37,740) 126,373
------------- ---------------- ---------------- ---------------- ----------
Contract transactions:
Purchase payments 10,942 46,279 20,853 82,493 37,040
Transfers between funds (8,300) 34,800 14,023 (61,691) 18,454
Surrenders and terminations (8,850) (2,520) (40,155) (24,545) (68,216)
Rescissions (181) (292) (917) (2,604) (1,162)
Other transactions (note 2) 103 4 (86) 41 561
------------- ---------------- ---------------- ---------------- ----------
Net increase (decrease) in net assets
resulting from contract transactions (6,286) 78,271 (6,282) (6,306) (13,323)
------------- ---------------- ---------------- ---------------- ----------
Increase (decrease) in net assets (297) 79,448 52,437 (44,046) 113,050
------------- ---------------- ---------------- ---------------- ----------
Net assets at beginning of period 181,599 85,896 504,837 593,842 1,058,531
------------- ---------------- ---------------- ---------------- ----------
<PAGE>
Net assets at end of period $ 181,302 165,344 557,274 549,796 1,171,581
============= ================ ================ ================ ==========
Equity Fund
------------
1994
------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net 39,233
Realized gains (losses)
on investments, net 7,898
Net change in unrealized appreciation
(depreciation) on investments (281,192)
------------
Net increase (decrease) in net assets
from operations (234,061)
------------
Contract transactions:
Purchase payments 158,186
Transfers between funds (244,657)
Surrenders and terminations (41,052)
Rescissions (2,822)
Other transactions (note 2) (252)
------------
Net increase (decrease) in net assets
resulting from contract transactions (130,597)
------------
Increase (decrease) in net assets (364,658)
------------
Net assets at beginning of period 1,458,533
------------
Net assets at end of period 1,093,875
============
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Zero Coupon Fund-1995 Zero Coupon Fund-2000 Zero Coupon Fund-2005
------------- ---------- ------------ ---------- ------------ ----------
1995 1994 1995 1994 1995 1994
------------- ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 2,615 2,340 3,616 2,681 2,209 1,320
Realized gains (losses)
on investments, net 376 553 651 764 295 706
Net change in unrealized appreciation
(depreciation) on investments (1,333) (3,478) 6,761 (8,072) 6,818 (6,204)
------------- ---------- ------------ ---------- ------------ ----------
Net increase (decrease) in net
assets from operations 1,658 (585) 11,028 (4,627) 9,322 (4,178)
------------- ---------- ------------ ---------- ------------ ----------
Contract transactions:
Purchase payments 1,264 2,588 9,882 13,398 6,791 10,167
Transfers between funds 1,303 1,128 6,290 (2,303) 3,359 (2,515)
Surrenders and terminations (8,146) (1,500) (4,430) (1,995) (2,200) (1,096)
Rescissions (41) (11) (216) (133) (137) (246)
Other transactions (note 2) 107 (3) (17) (15) 1 (8)
------------- ---------- ------------ ---------- ------------ ----------
Net increase (decrease) in
net assets resulting
from contract transactions (5,513) 2,202 11,509 8,952 7,814 6,302
------------- ---------- ------------ ---------- ------------ ----------
Increase (decrease) in net assets (3,855) 1,617 22,537 4,325 17,136 2,124
------------- ---------- ------------ ---------- ------------ ----------
Net assets at beginning of period 45,941 44,771 76,140 63,301 44,756 36,469
------------- ---------- ------------ ---------- ------------ ----------
<PAGE>
Net assets at end of period $ 42,086 46,388 98,677 67,626 61,892 38,593
============= ========== ============ ========== ============ ==========
Zero Coupon Fund-2010
------------ ----------
1995 1994
------------ ----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net 1,508 933
Realized gains (losses)
on investments, net 1,333 559
Net change in unrealized appreciation
(depreciation) on investments 8,077 (5,133)
------------ ----------
Net increase (decrease) in net
assets from operations 10,918 (3,641)
------------ ----------
Contract transactions:
Purchase payments 5,479 4,962
Transfers between funds 7,576 54
Surrenders and terminations (2,777) (1,194)
Rescissions (323) (35)
Other transactions (note 2) 49 (4)
------------ ----------
Net increase (decrease) in
net assets resulting
from contract transactions 10,004 3,783
------------ ----------
Increase (decrease) in net assets 20,922 142
------------ ----------
Net assets at beginning of period 41,255 25,489
------------ ----------
Net assets at end of period 62,177 25,631
============ ==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Global Income Fund Investment Grade Intermediate Bond Fund Income
--------- ------------ ----------------- ----------------------- ----------
1995 1994 1995 1994 1995
--------- ------------ ----------------- ----------------------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 6,845 4,718 4,974 2,693 52,089
Realized gains (losses)
on investments, net (609) 2,556 253 634 4,978
Net change in unrealized
appreciation (depreciation)
on investments 9,499 (27,015) 1,874 (5,362) 48,953
--------- ------------ ----------------- ----------------------- ----------
Net increase (decrease) in
net assets from operations 15,735 (19,741) 7,101 (2,035) 106,020
--------- ------------ ----------------- ----------------------- ----------
Contract transactions:
Purchase payments 6,804 65,081 8,157 29,237 65,659
Transfers between funds (12,429) 9,885 2,531 (3,068) 27,627
Surrenders and terminations (14,558) (6,559) (8,938) (3,353) (61,711)
Rescissions (263) (1,008) (189) (375) (1,756)
Other transactions (note 2) (35) (1) 31 (11) 729
--------- ------------ ----------------- ----------------------- ----------
Net increase (decrease) in
net assets resulting from
contract transactions (20,481) 67,398 1,592 22,430 30,548
--------- ------------ ----------------- ----------------------- ----------
Increase (decrease) in net assets (4,746) 47,657 8,693 20,395 136,568
--------- ------------ ----------------- ----------------------- ----------
<PAGE>
Net assets at beginning of period 231,368 191,246 139,325 110,466 927,343
--------- ------------ ----------------- ----------------------- ----------
Net assets at end of period $226,622 238,903 148,018 130,861 1,063,911
========= ============ ================= ======================= ==========
Securities Fund
----------------
1994
----------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net 19,888
Realized gains (losses)
on investments, net 4,562
Net change in unrealized
appreciation (depreciation)
on investments (81,483)
----------------
Net increase (decrease) in
net assets from operations (57,033)
----------------
Contract transactions:
Purchase payments 243,562
Transfers between funds 32,591
Surrenders and terminations (23,687)
Rescissions (3,826)
Other transactions (note 2) (58)
----------------
Net increase (decrease) in
net assets resulting from
contract transactions 248,582
----------------
Increase (decrease) in net assets 191,549
----------------
Net assets at beginning of period 691,056
----------------
Net assets at end of period 882,605
================
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Adjustable U.S. Templeton Pacific Templeton
Government Fund Growth Fund Rising Dividends Fund Equity
------------ -------- ---------- -------- -------- --------------- ----------
1995 1994 1995 1994 1995 1994 1995
------------ -------- ---------- -------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 10,992 9,941 3,845 (1,223) 5,167 2,705 7,631
Realized gains (losses) on investments, net (452) 331 1,907 1,895 (74) (428) 16,980
Net change in unrealized appreciation
(depreciation) on investments (1,121) (12,515) (631) (21,024) 32,488 (18,241) 24,944
------------ -------- ---------- -------- -------- --------------- ----------
Net increase (decrease) in net assets
from operations 9,419 (2,243) 5,121 (20,352) 37,581 (15,964) 49,555
------------ -------- ---------- -------- -------- --------------- ----------
Contract transactions:
Purchase payments 19,399 82,815 14,806 108,979 17,392 43,892 51,997
Transfers between funds (44,949) (76,561) (26,911) 34,934 24,881 (23,244) (32,763)
Surrenders and terminations (14,959) (13,410) (18,171) (5,663) (14,529) (6,897) (34,873)
Rescissions (737) (921) (740) (1,453) (409) (297) (1,362)
Other transactions (note 2) 9 54 (10) 33 87 (43) 147
------------ -------- ---------- -------- -------- --------------- ----------
Net increase (decrease) in net assets
resulting from contract transactions (41,237) (8,023) (31,026) 136,830 27,422 13,411 (16,854)
------------ -------- ---------- -------- -------- --------------- ----------
Increase (decrease) in net assets (31,818) (10,266) (25,905) 116,478 65,003 (2,553) 32,701
------------ -------- ---------- -------- -------- --------------- ----------
Net assets at beginning of period 220,042 281,061 348,655 202,676 281,145 271,147 735,339
------------ -------- ---------- -------- -------- --------------- ----------
<PAGE>
Net assets at end of period $ 188,224 270,795 322,750 319,154 346,148 268,594 768,040
============ ======== ========== ======== ======== =============== ==========
International
Fund
--------------
1994
--------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net (1,778)
Realized gains (losses) on investments, net 4,684
Net change in unrealized appreciation
(depreciation) on investments (15,900)
--------------
Net increase (decrease) in net assets
from operations (12,994)
--------------
Contract transactions:
Purchase payments 201,003
Transfers between funds 111,939
Surrenders and terminations (8,255)
Rescissions (1,897)
Other transactions (note 2) 59
--------------
Net increase (decrease) in net assets
resulting from contract transactions 302,849
--------------
Increase (decrease) in net assets 289,855
--------------
Net assets at beginning of period 293,740
--------------
Net assets at end of period 583,595
==============
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the periods ended June 30, 1995 and 1994 (unaudited)
(In thousands)
Templeton Developing Templeton Global Templeton Global
Markets Equity Fund Growth Fund Asset Allocation Fund Total All
----------- ------------ ---------- ------- ---------- --------------- ----------
1995 1994 1995 1994 1995 1994 1995
----------- ------------ ---------- ------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($234) (58) (46) (92) (10) - 228,385
Realized gains (losses)
on investments, net (230) - 29 1 - - 47,418
Net change in unrealized appreciation
(depreciation) on investments 4,137 (117) 13,067 (139) 27 - 306,171
----------- ------------ ---------- ------- ---------- --------------- ----------
Net increase (decrease) in
net assets from operations 3,673 (175) 13,050 (230) 17 - 581,974
----------- ------------ ---------- ------- ---------- --------------- ----------
Contract transactions:
Purchase payments 21,837 15,650 57,067 20,836 600 - 514,119
Transfers between funds 10,797 15,930 25,599 24,464 2,926 - -
Investment by Allianz Life - - - 500 500 - 500
Surrenders and terminations (3,099) (136) (6,323) (233) (15) - (436,234)
Rescissions (668) (59) (1,179) (87) - - (13,896)
Other transactions (note 2) (12) (1) 7 (1) - - 2,338
----------- ------------ ---------- ------- ---------- --------------- ----------
Net increase (decrease) in
net assets resulting
from contract transactions 28,855 31,384 75,171 45,479 4,011 - 66,827
----------- ------------ ---------- ------- ---------- --------------- ----------
Increase (decrease) in net assets 32,528 31,209 88,221 45,249 4,028 - 648,801
----------- ------------ ---------- ------- ---------- --------------- ----------
<PAGE>
Net assets at beginning of period 92,469 - 149,393 - - - 6,382,004
----------- ------------ ---------- ------- ---------- --------------- ----------
Net assets at end of period $ 124,997 31,209 237,614 45,249 4,028 - 7,030,805
=========== ============ ========== ======= ========== =============== ==========
Funds
----------
1994
----------
<S> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net 118,431
Realized gains (losses)
on investments, net 39,772
Net change in unrealized appreciation
(depreciation) on investments (607,430)
----------
Net increase (decrease) in
net assets from operations (449,227)
----------
Contract transactions:
Purchase payments 1,501,884
Transfers between funds -
Investment by Allianz Life 500
Surrenders and terminations (184,410)
Rescissions (22,090)
Other transactions (note 2) (125)
----------
Net increase (decrease) in
net assets resulting
from contract transactions 1,295,759
----------
Increase (decrease) in net assets 846,532
----------
Net assets at beginning of period 5,057,811
----------
Net assets at end of period 5,904,343
==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements
June 30, 1995 (unaudited)
1. ORGANIZATION
Allianz Life Variable Account B (Variable Account) is a segregated investment
account of Allianz Life Insurance Company of North America (Allianz Life) and
is 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 January 24, 1989. 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 annuity contracts 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., in accordance with the selection made by the contract 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
INVESTMENTS
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
<PAGE>
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.
The Templeton Developing Markets Equity Fund and Templeton Global Growth Fund
were added as available investment options on March 15, 1994. The Templeton
Global Asset Allocation Fund was added as an available investment option on
May 1, 1995.
In April 1995, the Equity Growth Fund name was changed to Growth and Income
Fund.
CONTRACTS IN ANNUITY PAYMENT PERIOD
Annuity reserves are computed for currently payable contracts according to the
1983 Individual Annuity Mortality Table, using an assumed investment return
(AIR) equal to the AIR of the specific contracts, either 3% or 5%. Charges to
annuity reserves for mortality and risk expense are reimbursed to Allianz Life
if the reserves required are less than originally estimated. If additional
reserves are required, Allianz Life reimburses the account.
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 1.25% 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 contract maintenance charge is paid by the contract owner annually from each
contract by liquidating contract units at the end of the contract year and at
the time of full surrender. The amount of the charge is $30 each year.
Contract maintenance charges paid by the contract owners during the periods
ended June 30, 1995 and 1994 were $2,169,639 and $1,260,106, respectively.
These contract charges are reflected in the unaudited financial statements as
other transactions.
<PAGE>
A contingent deferred sales charge is deducted from the contract value at the
time of a surrender. This charge applies only to a surrender of purchase
payments received within five years of the date of surrender. For this
purpose, purchase payments are allocated on a first-in, first-out basis. The
amount of the contingent deferred sales charge is calculated by: (a)
allocating purchase payments to the amount surrendered; and (b) multiplying
each allocated purchase payment that has been held under the contract for the
period shown below by the charge shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VALUEMARK II VALUEMARK III
- -------------------- -------------------
Years Since Payment Charge Years Since Payment Charge
- -------------------- ------- ------------------- -------
0-1 5% 0-1 6%
1-2 5% 1-2 5%
2-3 4% 2-3 4%
3-4 3% 3-4 3%
4-5 1.5% 4-5 1.5%
5+ 0 5+ 0
</TABLE>
and (c) adding the products of each multiplication in (b) above.
A contract owner may, not more frequently than once annually on a cumulative
basis, make a surrender each contract year of fifteen percent (15%) of
purchase payments paid, less any prior surrenders, without incurring a
contingent deferred sales charge.
For a partial surrender, the contingent deferred sales charge will be deducted
from the remaining contract value, if sufficient; otherwise it will be
deducted from the amount surrendered.
Total contingent deferred sales charges paid by the contract owners for the
periods ended June 30, 1995 and 1994 were $6,597,070 and $3,056,630,
respectively.
Currently, twelve transfers are permitted each contract year. Thereafter, the
fee is $25 per transfer, or 2% of the amount transferred, if less. Currently,
transfers associated with the dollar cost averaging program are not counted.
Total transfer charges paid by the contract owners for the periods ended June
30, 1995 and 1994 were $66,942 and $36,245, respectively. Transfer charges
<PAGE>
are reflected in the unaudited financial statements as other transactions.
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the contract values. Allianz Life may, in its sole
discretion, pay taxes when due and deduct that amount from the contract value
at a later date. Payment at an earlier date does not waive any right Allianz
Life may have to deduct such amounts at a later date.
On certain contracts, a systematic withdrawal plan is available which allows
an owner to withdraw up to 9% of purchase payments less prior surrenders
annually, paid monthly or quarterly, without incurring a contingent deferred
sales charge. The exercise of the systematic withdrawal plan in any contract
year replaces the 15% penalty free privilege for that year.
A rescission is defined as a contract that is returned to the Company by the
Contract Owner and canceled within the free-look period, generally within 10
days.
3. CAPITALIZATION
On January 5, 1994, $100 and $500,100 was provided by Allianz Life for the
establishment of the Templeton Developing Markets Equity Fund and Templeton
Global Growth Fund, respectively. All investments were withdrawn by Allianz
Life on August 29, 1994 at the then-current market value of $535,212.
On April 18, 1995, $500,000 was provided by Allianz Life for the establishment
of the Templeton Global Asset Allocation Fund. On June 30, 1995, the market
value of this investment was $506,500.
4. INVESTMENT TRANSACTIONS
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the period ended June 30, 1995 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund $139,590
Growth and Income Fund 103,485
Precious Metals Fund 33,284
High Income Fund 74,611
Real Estate Securities Fund 16,605
U.S. Government Securities Fund 67,547
Utility Equity Fund 107,858
Zero Coupon Fund - 1995 7,387
<PAGE>
Zero Coupon Fund - 2000 21,895
Zero Coupon Fund - 2005 13,807
Zero Coupon Fund - 2010 28,129
Global Income Fund 13,097
Investment Grade Intermediate Bond Fund 14,250
Income Securities Fund 114,924
Adjustable U.S. Government Fund 24,011
Templeton Pacific Growth Fund 57,140
Rising Dividends Fund 40,515
Templeton International Equity Fund 60,839
Templeton Developing Markets Equity Fund 34,852
Templeton Global Growth Fund 77,671
Templeton Global Asset Allocation Fund 4,011
</TABLE>
5. 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.
<TABLE>
<CAPTION>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA)
Transactions in units for each fund for the period ended June 30, 1995 and the year ended December 31, 1994 were as follows:
Growth Real U.S. Zero
Money and Precious High Estate Government Utility Coupon
Market Income Metals Income Securities Securities Equity Fund -
Fund Fund Fund Fund Fund Fund Fund 1995
--------- -------- --------- -------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units
outstanding at
December 31, 1993 10,247 24,719 4,685 11,787 5,589 40,402 84,217 3,092
Contract transactions:
Purchase payments 33,071 9,135 2,732 4,967 4,417 7,429 12,472 344
Transfers between funds 2,902 4,379 1,303 422 2,206 (6,649) (19,941) 224
Surrenders and terminations (6,011) (2,397) (409) (1,428) (525) (4,458) (6,391) (462)
Rescissions (792) (137) (26) (75) (41) (239) (264) (2)
<PAGE>
Other transactions 20 (4) - 6 (1) 5 (11) (1)
--------- -------- --------- -------- ----------- ----------- ---------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 29,190 10,976 3,600 3,892 6,056 (3,912) (14,135) 103
--------- -------- --------- -------- ----------- ----------- ---------- -------
Accumulation units
outstanding at
December 31, 1994 39,437 35,695 8,285 15,679 11,645 36,490 70,082 3,195
========= ======== ========= ======== =========== =========== ========== =======
Accumulation unit value per
unit at December 31, 1994 $ 12.354 13.215 13.979 14.608 15.594 13.835 15.104 14.380
========= ======== ========= ======== =========== =========== ========== =======
Contract transactions (unaudited):
Purchase payments 7,421 2,692 406 1,324 708 1,409 2,291 86
Transfers between funds (8,574) 3,930 (266) 2,193 (542) 979 1,185 92
Surrenders and terminations (5,313) (2,377) (455) (1,161) (572) (2,743) (4,250) (556)
Rescissions (126) (70) (15) (53) (12) (61) (72) (3)
Other transactions 33 15 1 3 7 (6) 36 7
--------- -------- --------- -------- ----------- ----------- ---------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions (6,559) 4,190 (329) 2,306 (411) (422) (810) (374)
--------- -------- --------- -------- ----------- ----------- ---------- -------
Accumulation units
outstanding at
June 30, 1995 (unaudited) 32,878 39,885 7,956 17,985 11,234 36,068 69,272 2,821
========= ======== ========= ======== =========== =========== ========== =======
Accumulation unit value per
unit at June 30, 1995 (unaudited) $ 12.622 15.112 14.016 16.444 16.139 15.451 16.906 14.915
========= ======== ========= ======== =========== =========== ========== =======
Accumulation net assets
at June 30, 1995 (unaudited) $415,007 602,748 111,524 295,757 181,302 557,274 1,171,106 42,086
========= ======== ========= ======== =========== =========== ========== =======
<PAGE>
Zero Zero Zero
Coupon Coupon Coupon
Fund - Fund - Fund -
2000 2005 2010
------- ------- -------
<S> <C> <C> <C>
Accumulation units
outstanding at
December 31, 1993 3,787 2,020 1,405
Contract transactions:
Purchase payments 1,434 942 541
Transfers between funds 114 (4) 864
Surrenders and terminations (357) (154) (204)
Rescissions (24) (18) (17)
Other transactions (1) (6) -
------- ------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 1,166 760 1,184
------- ------- -------
Accumulation units
outstanding at
December 31, 1994 4,953 2,780 2,589
======= ======= =======
Accumulation unit value per
unit at December 31, 1994 15.373 16.096 15.930
======= ======= =======
Contract transactions (unaudited):
Purchase payments 607 393 320
Transfers between funds 404 207 437
Surrenders and terminations (268) (125) (157)
Rescissions (13) (8) (19)
Other transactions (1) - 3
------- ------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 729 467 584
------- ------- -------
Accumulation units
outstanding at
June 30, 1995 (unaudited) 5,682 3,247 3,173
======= ======= =======
<PAGE>
Accumulation unit value per
unit at June 30, 1995 (unaudited) 17.368 19.061 19.596
======= ======= =======
Accumulation net assets
at June 30, 1995 (unaudited) 98,677 61,892 62,177
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT PER UNIT DATA) (CONTINUED)
Investment Adjustable Templeton Templeton
Global Grade Income U.S. Pacific Rising International
Income Intermediate Securities Government Growth Dividends Equity
Fund Bond Fund Fund Fund Fund Fund Fund
--------- ------------- ----------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units
outstanding at
December 31, 1993 13,054 7,677 38,967 24,975 14,240 26,256 24,026
Contract transactions:
Purchase payments 5,526 2,779 19,487 10,678 10,676 6,295 23,800
Transfers between funds (465) (28) 2,539 (12,898) 3,849 (1,955) 15,240
Surrenders and
terminations (1,178) (619) (4,065) (2,716) (1,371) (1,748) (2,341)
Rescissions (92) (37) (364) (184) (164) (83) (268)
Other transactions 10 - 5 10 1 13 7
--------- ------------- ----------- ----------- ---------- ---------- --------------
Net increase (decrease)
in accumulation units
resulting from
contract transactions 3,801 2,095 17,602 (5,110) 12,991 2,522 36,438
--------- ------------- ----------- ----------- ---------- ---------- --------------
Accumulation units
outstanding at
December 31, 1994 16,855 9,772 56,569 19,865 27,231 28,778 60,464
========= ============= =========== =========== ========== ========== ==============
Accumulation unit value
per unit at
December 31, 1994 $ 13.726 14.257 16.392 11.077 12.802 9.769 12.161
========= ============= =========== =========== ========== ========== ==============
Contract transactions
(unaudited):
Purchase payments 483 556 3,784 1,702 1,157 1,643 4,235
Transfers between funds (895) 173 1,593 (3,973) (2,113) 2,334 (2,704)
Investment by
Allianz Life - - - - - - -
Surrenders and
terminations (1,033) (613) (3,607) (1,318) (1,441) (1,390) (2,842)
Rescissions (19) (13) (101) (65) (59) (39) (111)
<PAGE>
Other transactions (2) 2 45 1 - 9 12
--------- ------------- ----------- ----------- ---------- ---------- --------------
Net increase (decrease)
in accumulation units
resulting from
contract transactions (1,466) 105 1,714 (3,653) (2,456) 2,557 (1,410)
--------- ------------- ----------- ----------- ---------- ---------- --------------
Accumulation units
outstanding at
June 30, 1995 (unaudited) 15,389 9,877 58,283 16,212 24,775 31,335 59,054
========= ============= =========== =========== ========== ========== ==============
Accumulation unit value
per unit at
June 30, 1995 (unaudited) $ 14.725 14.984 18.242 11.610 13.015 11.035 13.005
========= ============= =========== =========== ========== ========== ==============
Accumulation net
assets at
June 30, 1995 (unaudited) $226,622 148,018 1,063,210 188,224 322,458 345,792 767,989
========= ============= =========== =========== ========== ========== ==============
Templeton Templeton
Developing Templeton Global
Markets Global Asset Total
Equity Growth Allocation All
Fund Fund Fund Funds
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Accumulation units
outstanding at
December 31, 1993 - - - 341,145
Contract transactions:
Purchase payments 5,673 8,665 - 171,063
Transfers between funds 4,296 6,300 - 2,698
Surrenders and
terminations (146) (215) - (37,195)
Rescissions (49) (114) - (2,990)
Other transactions - 1 - 54
----------- ---------- ----------- ----------
Net increase (decrease)
in accumulation units
resulting from
contract transactions 9,774 14,637 - 133,630
----------- ---------- ----------- ----------
<PAGE>
Accumulation units
outstanding at
December 31, 1994 9,774 14,637 - 474,775
=========== ========== =========== ==========
Accumulation unit value
per unit at
December 31, 1994 9.454 10.201 -
=========== ========== ===========
Contract transactions
(unaudited):
Purchase payments 2,349 5,465 60 39,091
Transfers between funds 1,153 2,458 291 (1,638)
Investment by
Allianz Life - - 50 50
Surrenders and
terminations (334) (608) (1) (31,164)
Rescissions (72) (112) - (1,043)
Other transactions - 2 - 167
----------- ---------- ----------- ----------
Net increase (decrease)
in accumulation units
resulting from
contract transactions 3,096 7,205 400 5,463
----------- ---------- ----------- ----------
Accumulation units
outstanding at
June 30, 1995 (unaudited) 12,870 21,842 400 480,238
=========== ========== =========== ==========
Accumulation unit value
per unit at
June 30, 1995 (unaudited) 9.678 10.855 10.097
=========== ========== ===========
Accumulation net
assets at
June 30, 1995 (unaudited) 124,552 237,091 4,028 7,027,534
=========== ========== =========== ==========
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1994
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Allianz Life Insurance Company of North America and
Contract Owners of Allianz Life Variable Account B:
We have audited the accompanying statements of assets and liabilities of the
sub-accounts of Allianz Life Variable Account B as of December 31, 1994, the
related statements of operations for the year ended December 31, 1994 and the
statements of changes in net assets for each of the years in the two-year
period ended December 31, 1994. 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 B at December 31, 1994, the results of their
operations for the year ended December 31, 1994 and the changes in their net
assets for each of the years in the two-year period ended December 31, 1994,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 20, 1995
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities
December 31, 1994
(In Thousands)
Real U.S.
Money Equity Precious High Estate Government Utility
Market Growth Metals Income Securities Securities Equity
Fund Fund Fund Fund Fund Fund Fund
-------- ------- -------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund,
487,348 shares, cost $487,348 $487,348 - - - - - -
Equity Growth Fund,
35,158 shares, cost $448,538 - 471,814 - - - - -
Precious Metals Fund,
8,222 shares, cost $111,118 - - 115,842 - - - -
High Income Fund, 18,759 shares,
cost $230,437 - - - 229,049 - - -
Real Estate Securities Fund,
11,863 shares, cost $177,305 - - - - 181,618 - -
U.S. Government Securities Fund,
40,166 shares, cost $518,015 - - - - - 504,881 -
Utility Equity Fund, 73,413
shares, cost $1,148,001 - - - - - - 1,058,618
-------- ------- -------- ------- ---------- ---------- ---------
Total assets 487,348 471,814 115,842 229,049 181,618 504,881 1,058,618
-------- ------- -------- ------- ---------- ---------- ---------
Liabilities:
Accrued mortality and expense
risk charges 97 37 12 20 17 39 78
Accrued administrative charges 12 4 2 3 2 5 9
-------- ------- -------- ------- ---------- ---------- ---------
<PAGE>
Total liabilities 109 41 14 23 19 44 87
-------- ------- -------- ------- ---------- ---------- ---------
Net Assets:
Contracts in accumulation
period (note 6) 487,204 471,693 115,828 229,026 181,599 504,837 1,058,511
Contracts in annuity payment
period (note 2) 35 80 - - - - 20
-------- ------- -------- ------- ---------- ---------- ---------
Total net assets $487,239 471,773 115,828 229,026 181,599 504,837 1,058,531
======== ======= ======== ======= ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
December 31, 1994
(In Thousands)
Zero Zero Zero Zero Investment
Coupon Coupon Coupon Coupon Global Grade Income
Fund - Fund - Fund - Fund - Income Intermediate Securities
1995 2000 2005 2010 Fund Bond Fund Fund
------- ------ ------ ------ ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Zero Coupon Fund - 1995,
3,813 shares, cost $45,353 $45,950 - - - - - -
Zero Coupon Fund - 2000,
5,591 shares, cost $75,490 - 76,151 - - - - -
Zero Coupon Fund - 2005,
3,253 shares, cost $45,654 - - 44,765 - - - -
Zero Coupon Fund - 2010,
3,169 shares, cost $43,073 - - - 41,264 - - -
Global Income Fund,
18,982 shares, cost $241,821 - - - - 231,391 - -
Investment Grade
Intermediate Bond Fund,
10,469 shares, cost $137,692 - - - - - 139,341 -
Income Securities Fund,
64,810 shares, cost $948,922 - - - - - - 927,428
------- ------ ------ ------ ------- ------------ ----------
Total assets 45,950 76,151 44,765 41,264 231,391 139,341 927,428
------- ------ ------ ------ ------- ------------ ----------
Liabilities:
Accrued mortality and expense
risk charges 8 10 8 8 20 14 76
Accrued administrative charges 1 1 1 1 3 2 9
------- ------ ------ ------ ------- ------------ ----------
<PAGE>
Total liabilities 9 11 9 9 23 16 85
------- ------ ------ ------ ------- ------------ ----------
Net Assets:
Contracts in accumulation
period (note 6)
45,941 76,140 44,756 41,255 231,368 139,325 927,253
Contracts in annuity payment
period (note 2) - - - - - - 90
------- ------ ------ ------ ------- ------------ ----------
Total net assets $45,941 76,140 44,756 41,255 231,368 139,325 927,343
======= ====== ====== ====== ======= ============ ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
December 31, 1994
(In Thousands)
Templeton
Adjustable Templeton Templeton Developing Templeton
U.S. Pacific Rising International Markets Global Total
Government Growth Dividends Equity Equity Growth All
Fund Fund Fund Fund Fund Fund Funds
----------- --------- --------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Adjustable U.S. Government Fund,
20,899 shares, cost $227,528 $ 220,064 - - - - -
Templeton Pacific Growth Fund,
26,336 shares, cost $350,029 - 348,686 - - - -
Rising Dividends Fund,
28,202 shares, cost $295,515 - - 281,172 - - -
Templeton International
Equity Fund, 58,786 shares,
cost $723,811 - - - 735,411 - -
Templeton Developing Markets
Equity Fund, 9,674 shares,
cost $98,874 - - - - 92,486 -
Templeton Global Growth Fund,
14,257 shares, cost $149,053 - - - - - 149,410
----------- --------- --------- ------------- ---------- ---------
Total assets 220,064 348,686 281,172 735,411 92,486 149,410 6,382,689
----------- --------- --------- ------------- ---------- --------- ---------
Liabilities:
Accrued mortality and expense
risk charges 20 28 24 64 15 15 610
Accrued administrative charges 2 3 3 8 2 2 75
----------- --------- --------- ------------- ---------- --------- ---------
<PAGE>
Total liabilities 22 31 27 72 17 17 685
----------- --------- --------- ------------- ---------- --------- ---------
Net Assets:
Contracts in accumulation
period (note 6) 220,042 348,598 281,128 735,332 92,406 149,311 6,381,553
Contracts in annuity payment
period (note 2) - 57 17 7 63 82 451
----------- --------- --------- ------------- ---------- --------- ---------
Total net assets $ 220,042 348,655 281,145 735,339 92,469 149,393 6,382,004
=========== ========= ========= ============= ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations
For the year ended December 31, 1994
(In Thousands)
Real U.S.
Money Equity Precious High Estate Government Utility
Market Growth Metals Income Securities Securities Equity
Fund Fund Fund Fund Fund Fund Fund
---------- -------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in
fund shares $ 14,638 2,893 552 9,459 1,746 28,032 47,836
---------- -------- --------- --------- ----------- ----------- ---------
Expenses:
Mortality and expense
risk charges 4,534 5,225 1,201 2,560 1,878 6,862 14,527
Administrative charges 544 627 144 307 225 823 1,743
---------- -------- --------- --------- ----------- ----------- ---------
Total expenses 5,078 5,852 1,345 2,867 2,103 7,685 16,270
---------- -------- --------- --------- ----------- ----------- ---------
Investment income (loss), net 9,560 (2,959) (793) 6,592 (357) 20,347 31,566
Realized gains (losses) and
unrealized appreciation
(depreciation)on investments:
Realized capital gain
distributions on mutual funds - 5,956 - 1,286 - 2,196 8,479
---------- -------- --------- --------- ----------- ----------- ---------
Realized gains (losses) on
sales of investments:
Proceeds from sales 317,558 31,239 43,462 101,761 17,373 100,459 278,974
Cost of investments sold (317,558) (29,050) (40,445) (100,914) (17,294) (101,142) (291,958)
---------- -------- --------- --------- ----------- ----------- ---------
<PAGE>
Total realized gains (losses)
on sales of investments, net - 2,189 3,017 847 79 (683) (12,984)
---------- -------- --------- --------- ----------- ----------- ---------
Realized gains (losses) on
investments, net - 8,145 3,017 2,133 79 1,513 (4,505)
Net change in unrealized
appreciation (depreciation)
on investments - (21,586) (5,762) (15,346) (466) (57,407) (209,171)
---------- -------- --------- --------- ----------- ----------- ---------
Total realized gains (losses)
and unrealized appreciation
depreciation) on
(investments, net - (13,441) (2,745) (13,213) (387) (55,894) (213,676)
---------- -------- --------- --------- ----------- ----------- ---------
Net increase (decrease) in
net assets from operations $ 9,560 (16,400) (3,538) (6,621) (744) (35,547) (182,110)
========== ======== ========= ========= =========== =========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the year ended December 31, 1994
(In Thousands)
Zero Zero Zero Zero Investment
Coupon Coupon Coupon Coupon Global Grade Income
Fund - Fund - Fund - Fund - Income Intermediate Securities
1995 2000 2005 2010 Fund Bond Fund Fund
--------- ------- ------- ------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in
fund shares $ 2,684 3,176 1,569 1,127 6,330 3,642 26,183
--------- ------- ------- ------- -------- ------------- -----------
Expenses:
Mortality and expense
risk charges 568 848 484 349 2,933 1,615 10,870
Administrative charges 68 102 58 42 352 194 1,304
--------- ------- ------- ------- -------- ------------- -----------
Total expenses 636 950 542 391 3,285 1,809 12,174
--------- ------- ------- ------- -------- ------------- -----------
Investment income (loss), net 2,048 2,226 1,027 736 3,045 1,833 14,009
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds 110 452 490 547 2,610 562 3,920
--------- ------- ------- ------- -------- ------------- -----------
Realized gains (losses) on
sales of investments:
Proceeds from sales 12,290 4,866 4,709 8,890 33,342 7,212 58,236
Cost of investments sold (11,787) (4,523) (4,573) (9,302) (34,299) (7,097) (57,639)
--------- ------- ------- ------- -------- ------------- -----------
<PAGE>
Total realized gains (losses)
on sales of investments, net 503 343 136 (412) (957) 115 597
--------- ------- ------- ------- -------- ------------- -----------
Realized gains (losses) on
investments, net 613 795 626 135 1,653 677 4,517
Net change in unrealized
appreciation (depreciation)
on investments (2,957) (8,436) (5,757) (3,733) (20,889) (3,562) (86,577)
--------- ------- ------- ------- -------- ------------- -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on
investments, net (2,344) (7,641) (5,131) (3,598) (19,236) (2,885) (82,060)
--------- ------- ------- ------- -------- ------------- -----------
Net increase (decrease) in
net assets from operations ($296) (5,415) (4,104) (2,862) (16,191) (1,052) (68,051)
========= ======= ======= ======= ======== ============= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the year ended December 31, 1994
(In Thousands)
Templeton
Adjustable Templeton Templeton Developing Templeton
U.S. Pacific Rising International Markets Global Total
Government Growth Dividends Equity Equity Growth All
Fund Fund Fund Fund Fund Fund Funds
------------ ---------- ---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends reinvested in
fund shares $ 11,850 743 4,560 1,656 - - 168,676
------------ ---------- ---------- -------------- ----------- ---------- -----------
Expenses:
Mortality and expense
risk charges 3,255 3,939 3,405 7,518 484 725 73,780
Administrative charges 391 473 409 902 58 87 8,853
------------ ---------- ---------- -------------- ----------- ---------- -----------
Total expenses 3,646 4,412 3,814 8,420 542 812 82,633
------------ ---------- ---------- -------------- ----------- ---------- -----------
Investment income (loss), net 8,204 (3,669) 746 (6,764) (542) (812) 86,043
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - 1,376 - 2,989 - - 30,973
------------ ---------- ---------- -------------- ----------- ---------- -----------
Realized gains (losses) on
sales of investments:
Proceeds from sales 157,880 47,636 27,207 58,868 7,269 578 1,319,809
Cost of investments sold (160,190) (46,471) (28,244) (55,696) (7,346) (563) (1,326,091)
------------ ---------- ---------- -------------- ----------- ---------- -----------
<PAGE>
Total realized gains (losses)
on sales of investments, net (2,310) 1,165 (1,037) 3,172 (77) 15 (6,282)
------------ ---------- ---------- -------------- ----------- ---------- -----------
Realized gains (losses) on
investments, net (2,310) 2,541 (1,037) 6,161 (77) 15 24,691
Net change in unrealized
appreciation (depreciation)
on investments (10,031) (32,730) (14,714) (22,558) (6,388) 356 (527,714)
------------ ---------- ---------- -------------- ----------- ---------- -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on
investments, net (12,341) (30,189) (15,751) (16,397) (6,465) 371 (503,023)
------------ ---------- ---------- -------------- ----------- ---------- -----------
Net increase (decrease) in
net assets from operations ($4,137) (33,858) (15,005) (23,161) (7,007) (441) (416,980)
============ ========== ========== ============== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets
For the years ended December 31, 1994 and 1993
(In Thousands)
Money Equity Precious High
Market Fund Growth Fund Metals Fund Income Fund
--------- -------- -------- -------- --------- ------- -------- --------
1994 1993 1994 1993 1994 1993 1994 1993
--------- -------- -------- -------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net $ 9,560 1,099 (2,959) (1,563) (793) (238) 6,592 2,525
Realized gains (losses) on
investments, net - - 8,145 4,093 3,017 1,664 2,133 2,402
Net change in unrealized
appreciation (depreciation)
on investments - - (21,586) 21,847 (5,762) 11,900 (15,346) 9,807
--------- -------- -------- -------- --------- ------- -------- --------
Net increase (decrease) in
net assets from operations 9,560 1,099 (16,400) 24,377 (3,538) 13,326 (6,621) 14,734
--------- -------- -------- -------- --------- ------- -------- --------
Contract transactions:
Purchase payments 402,816 122,594 124,695 126,751 38,433 25,359 73,592 91,182
Transfers between funds 34,121 (68,315) 59,547 (12,991) 19,303 17,479 5,342 17,392
Surrenders and terminations (73,487) (12,526) (32,245) (14,558) (5,784) (1,627) (20,894) (7,065)
Rescissions (9,660) (2,123) (1,852) (910) (354) (127) (1,104) (1,038)
Other transactions (note 2) 250 (34) (54) (146) (2) (14) 84 (40)
--------- -------- -------- -------- --------- ------- -------- --------
Net increase (decrease) in
net assets resulting from
contract transactions 354,040 39,596 150,091 98,146 51,596 41,070 57,020 100,431
--------- -------- -------- -------- --------- ------- -------- --------
Increase (decrease) in net assets 363,600 40,695 133,691 122,523 48,058 54,396 50,399 115,165
--------- -------- -------- -------- --------- ------- -------- --------
<PAGE>
Net assets at beginning of year 123,639 82,944 338,082 215,559 67,770 13,374 178,627 63,462
--------- -------- -------- -------- --------- ------- -------- --------
Net assets at end of year $487,239 123,639 471,773 338,082 115,828 67,770 229,026 178,627
========= ======== ======== ======== ========= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1994 and 1993
(In Thousands)
Real Estate U.S. Government Utility
Securities Fund Securities Fund Equity Fund
------------ ------- ----------- ----------- ---------- ----------
1994 1993 1994 1993 1994 1993
------------ ------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net ($357) (183) 20,347 9,932 31,566 4,950
Realized gains (losses) on
investments, net 79 330 1,513 4,729 (4,505) 890
Net change in unrealized
appreciation (depreciation)
on investments (466) 3,404 (57,407) 17,192 (209,171) 49,240
------------ ------- ----------- ----------- ---------- ----------
Net increase (decrease) in
net assets from operations (744) 3,551 (35,547) 31,853 (182,110) 55,080
------------ ------- ----------- ----------- ---------- ----------
Contract transactions:
Purchase payments 69,260 54,354 105,968 304,061 196,908 866,311
Transfers between funds 35,863 16,570 (93,935) (46,503) (313,095) (32,222)
Surrenders and terminations (8,032) (1,600) (62,167) (28,470) (97,394) (46,020)
Rescissions (635) (745) (3,388) (7,299) (4,132) (9,935)
Other transactions (note 2) (9) (16) 64 (191) (179) (484)
------------ ------- ----------- ----------- ---------- ----------
Net increase (decrease) in
net assets resulting from
contract transactions 96,447 68,563 (53,458) 221,598 (217,892) 777,650
------------ ------- ----------- ----------- ---------- ----------
Increase (decrease) in net assets 95,703 72,114 (89,005) 253,451 (400,002) 832,730
------------ ------- ----------- ----------- ---------- ----------
<PAGE>
Net assets at beginning of year 85,896 13,782 593,842 340,391 1,458,533 625,803
------------ ------- ----------- ----------- ---------- ----------
Net assets at end of year $ 181,599 85,896 504,837 593,842 1,058,531 1,458,533
============ ======= =========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1994 and 1993
(In Thousands)
Zero Zero Zero Zero
Coupon Coupon Coupon Coupon
Fund - 1995 Fund - 2000 Fund - 2005 Fund - 2010
-------- ------- ------- ------- ------- ------- ------- -------
1994 1993 1994 1993 1994 1993 1994 1993
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net $ 2,048 1,939 2,226 1,351 1,027 502 736 710
Realized gains (losses) on
investments, net 613 1,428 795 1,719 626 620 135 1,930
Net change in unrealized
appreciation (depreciation)
on investments (2,957) (955) (8,436) 3,716 (5,757) 3,070 (3,733) 563
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net assets from operations (296) 2,412 (5,415) 6,786 (4,104) 4,192 (2,862) 3,203
-------- ------- ------- ------- ------- ------- ------- -------
Contract transactions:
Purchase payments 4,941 11,091 22,614 25,224 15,613 21,399 8,813 13,407
Transfers between funds 3,202 (3,600) 1,608 (6,729) (294) (4,253) 13,300 (1,871)
Surrenders and terminations (6,634) (4,254) (5,586) (3,819) (2,526) (988) (3,226) (1,480)
Rescissions (35) (95) (371) (261) (306) (192) (265) (216)
Other transactions (note 2) (8) (19) (11) (24) (96) (10) 6 (10)
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting from
contract transactions 1,466 3,123 18,254 14,391 12,391 15,956 18,628 9,830
-------- ------- ------- ------- ------- ------- ------- -------
<PAGE>
Increase (decrease) in net assets 1,170 5,535 12,839 21,177 8,287 20,148 15,766 13,033
-------- ------- ------- ------- ------- ------- ------- -------
Net assets at beginning of year 44,771 39,236 63,301 42,124 36,469 16,321 25,489 12,456
-------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of year $45,941 44,771 76,140 63,301 44,756 36,469 41,255 25,489
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1994 and 1993
(In Thousands)
Global Investment Grade Income
Income Fund Intermediate Bond Fund Securites Fund
--------- -------- ------------- ---------- ---------- --------
1994 1993 1994 1993 1994 1993
--------- -------- ------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets:
Operations:
Investment income (loss), net $ 3,045 2,093 1,833 678 14,009 1,869
Realized gains (losses) on
investments, net 1,653 1,282 677 518 4,517 1,722
Net change in unrealized
appreciation (depreciation)
on investments (20,889) 10,867 (3,562) 2,929 (86,577) 52,071
--------- -------- ------------- ---------- ---------- --------
Net increase (decrease) in
net assets from operations (16,191) 14,242 (1,052) 4,125 (68,051) 55,662
--------- -------- ------------- ---------- ---------- --------
Contract transactions:
Purchase payments 78,997 80,340 39,681 63,463 334,009 393,144
Transfers between funds (5,062) 33,135 (430) 1,932 44,929 91,338
Surrenders and terminations (16,449) (5,694) (8,811) (3,354) (68,497) (17,757)
Rescissions (1,310) (586) (527) (481) (6,184) (4,000)
Other transactions (note 2) 137 (51) (2) (26) 81 (138)
--------- -------- ------------- ---------- ---------- --------
Net increase (decrease) in
net assets resulting from
contract transactions 56,313 107,144 29,911 61,534 304,338 462,587
--------- -------- ------------- ---------- ---------- --------
Increase (decrease) in net assets 40,122 121,386 28,859 65,659 236,287 518,249
--------- -------- ------------- ---------- ---------- --------
<PAGE>
Net assets at beginning of year 191,246 69,860 110,466 44,807 691,056 172,807
--------- -------- ------------- ---------- ---------- --------
Net assets at end of year $231,368 191,246 139,325 110,466 927,343 691,056
========= ======== ============= ========== ========== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1994 and 1993
(In Thousands)
Adjustable U.S. Templeton Pacific Rising Templeton
Government Fund Growth Fund Dividends Fund Equity
------------ --------- ---------- -------- ---------- -------- ----------
1994 1993 1994 1993 1994 1993 1994
------------ --------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net $ 8,204 6,641 (3,669) (718) 746 (2,148) (6,764)
Realized gains (losses) on
investments, net (2,310) 2,400 2,541 100 (1,037) 102 6,161
Net change in unrealized
appreciation (depreciation)
on investments (10,031) (3,822) (32,730) 31,444 (14,714) (3,957) (22,558)
------------ --------- ---------- -------- ---------- -------- ----------
Net increase (decrease) in
net assets from operations (4,137) 5,219 (33,858) 30,826 (15,005) (6,003) (23,161)
------------ --------- ---------- -------- ---------- -------- ----------
Contract transactions:
Purchase payments 119,427 210,848 145,620 98,961 62,677 199,641 301,166
Transfers between funds (144,039) (155,628) 54,656 69,963 (19,751) (4,761) 196,400
Surrenders and terminations (30,329) (18,252) (18,242) (1,628) (17,224) (6,834) (29,507)
Rescissions (2,051) (1,904) (2,213) (643) (821) (1,830) (3,386)
Other transactions (note 2) 110 (97) 16 (12) 122 (61) 87
------------ --------- ---------- -------- ---------- -------- ----------
Net increase (decrease) in
net assets resulting from
contract transactions (56,882) 34,967 179,837 166,641 25,003 186,155 464,760
------------ --------- ---------- -------- ---------- -------- ----------
Increase (decrease) in net assets (61,019) 40,186 145,979 197,467 9,998 180,152 441,599
------------ --------- ---------- -------- ---------- -------- ----------
<PAGE>
Net assets at beginning of year 281,061 240,875 202,676 5,209 271,147 90,995 293,740
------------ --------- ---------- -------- ---------- -------- ----------
Net assets at end of year $ 220,042 281,061 348,655 202,676 281,145 271,147 735,339
============ ========= ========== ======== ========== ======== ==========
International
Fund
--------------
1993
--------------
<S> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net (1,037)
Realized gains (losses) on
investments, net 165
Net change in unrealized
appreciation (depreciation)
on investments 34,282
--------------
Net increase (decrease) in
net assets from operations 33,410
--------------
Contract transactions:
Purchase payments 162,170
Transfers between funds 89,064
Surrenders and terminations (2,514)
Rescissions (1,181)
Other transactions (note 2) (21)
--------------
Net increase (decrease) in
net assets resulting from
contract transactions 247,518
--------------
Increase (decrease) in net assets 280,928
--------------
Net assets at beginning of year 12,812
--------------
Net assets at end of year 293,740
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1994 and 1993
(In Thousands)
Templeton
Developing Markets Templeton Global Total
Equity Fund Growth Fund All Funds
------------ ------- ---------- ------ ---------- ----------
1994 1993 1994 1993 1994 1993
------------ ------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Investment income (loss), net $ (542) - (812) - 86,043 28,402
Realized gains (losses) on
investments, net (77) - 15 - 24,691 26,094
Net change in unrealized
appreciation (depreciation)
on investments (6,388) - 356 - (527,714) 243,598
------------ ------- ---------- ------ ---------- ----------
Net increase (decrease) in
net assets from operations (7,007) - (441) - (416,980) 298,094
------------ ------- ---------- ------ ---------- ----------
Contract transactions:
Purchase payments 57,484 - 88,828 - 2,291,542 2,870,300
Transfers between funds 43,967 - 64,368 - - -
Surrenders and terminations (1,472) - (2,202) - (510,708) (178,440)
Rescissions (501) - (1,166) - (40,261) (33,566)
Other transactions (note 2) (2) - 6 - 600 (1,394)
------------ ------- ---------- ------ ---------- ----------
Net increase (decrease) in
net assets resulting from
contract transactions 99,476 - 149,834 - 1,741,173 2,656,900
------------ ------- ---------- ------ ---------- ----------
<PAGE>
Increase (decrease) in net assets 92,469 - 149,393 - 1,324,193 2,954,994
------------ ------- ---------- ------ ---------- ----------
Net assets at beginning of year - - - - 5,057,811 2,102,817
------------ ------- ---------- ------ ---------- ----------
Net assets at end of year $ 92,469 - 149,393 - 6,382,004 5,057,811
============ ======= ========== ====== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements
December 31, 1994
1. ORGANIZATION
Allianz Life Variable Account B (Variable Account) is a segregated investment
account of Allianz Life Insurance Company of North America (Allianz Life) and
is 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 January 24, 1989. 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 annuity contracts 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., in accordance with the selection made by the contract 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
INVESTMENTS
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
<PAGE>
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.
The Templeton Developing Markets Equity Fund and Templeton Global Growth Fund
were added as available investment options on March 15, 1994.
CONTRACTS IN ANNUITY PAYMENT PERIOD
Annuity reserves are computed for currently payable contracts according to the
1983 Individual Annuity Mortality Table, using an assumed investment return
(AIR) equal to the AIR of the specific contracts, either 3% or 5%. Charges to
annuity reserves for mortality and risk expense are reimbursed to Allianz Life
if the reserves required are less than originally estimated. If additional
reserves are required, Allianz Life reimburses the account.
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 1.25% 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 contract maintenance charge is paid by the contract owner annually from each
contract by liquidating contract units at the end of the contract year and at
the time of full surrender. The amount of the charge is $30 each year.
Contract maintenance charges paid by the contract owners during the years
ended December 31, 1994 and 1993 were $3,070,519 and $1,437,136, respectively.
These contract charges are reflected in the financial statements as other
transactions.
A contingent deferred sales charge is deducted from the contract value at the
time of a surrender. This charge applies only to a surrender of purchase
payments received within five years of the date of surrender. For this
purpose, purchase payments are allocated on a first-in, first-out basis. The
amount of the contingent deferred sales charge is calculated by: (a)
allocating purchase payments to the amount surrendered; and (b) multiplying
each allocated purchase payment that has been held under the contract for the
<PAGE>
period shown below by the charge shown below:
<TABLE>
<CAPTION>
VALUEMARK II VALUEMARK III
- ------------------- -------------------
Years Since Payment Charge Years Since Payment Charge
- ------------------- ------- ------------------- -------
<S> <C> <C> <C>
0-1 5% 0-1 6%
1-2 5% 1-2 5%
2-3 4% 2-3 4%
3-4 3% 3-4 3%
4-5 1.5% 4-5 1.5%
5+ 0 5+ 0
</TABLE>
and (c) adding the products of each multiplication in (b) above.
A contract owner may, not more frequently than once annually on a cumulative
basis, make a surrender each contract year of fifteen percent (15%) of
purchase payments paid, less any prior surrenders, without incurring a
contingent deferred sales charge.
For a partial surrender, the contingent deferred sales charge will be deducted
from the remaining contract value, if sufficient; otherwise it will be
deducted from the amount surrendered.
Total contingent deferred sales charges paid by the contract owners for the
years ended December 31, 1994 and 1993 were $8,600,401 and $2,064,797,
respectively.
Currently, twelve transfers are permitted each contract year. Thereafter, the
fee is $25 per transfer, or 2% of the amount transferred, if less. Currently,
transfers associated with the dollar cost averaging program are not counted.
Total transfer charges paid by the contract owners for the years ended
December 31, 1994 and 1993 were $88,989 and $36,967, respectively. Transfer
charges are reflected in the financial statements as other transactions.
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the contract values. Allianz Life may, in its sole
discretion, pay taxes when due and deduct that amount from the contract value
at a later date. Payment at an earlier date does not waive any right Allianz
Life may have to deduct such amounts at a later date.
<PAGE>
On certain contracts, a systematic withdrawal plan is available which allows
an owner to withdraw up to 9% of purchase payments less prior surrenders
annually, paid monthly or quarterly, without incurring a contingent deferred
sales charge. The exercise of the systematic withdrawal plan in any contract
year replaces the 15% penalty free privilege for that year.
A rescission is defined as a contract that is returned to the Company by the
Contract Owner and canceled within the free-look period, generally within 10
days.
3. CAPITALIZATION
On January 5, 1994, $100 and $500,100 was provided by Allianz Life for the
establishment of the Templeton Developing Markets Equity Fund and Templeton
Global Growth Fund, respectively. All investments were withdrawn by Allianz
Life on August 29, 1994 at the then-current market value of $535,212.
4. INVESTMENT TRANSACTIONS
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund $681,250
Equity Growth Fund 184,352
Precious Metals Fund 94,275
High Income Fund 166,671
Real Estate Securities Fund 113,476
U.S. Government Securities Fund 69,564
Utility Equity Fund 101,156
Zero Coupon Fund - 1995 15,919
Zero Coupon Fund - 2000 25,805
Zero Coupon Fund - 2005 18,623
Zero Coupon Fund - 2010 28,805
Global Income Fund 95,324
Investment Grade Intermediate Bond Fund 39,528
Income Securities Fund 380,559
Adjustable U.S. Government Fund 109,211
Templeton Pacific Growth Fund 225,199
Rising Dividends Fund 52,970
Templeton International Equity Fund 519,911
Templeton Developing Markets Equity Fund 106,220
Templeton Global Growth Fund 149,616
</TABLE>
<PAGE>
5. 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.
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA)
Transactions in units for each fund for the years ended December 31, 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
Real U.S. Zero
Money Equity Precious High Estate Government Utility Coupon
Market Growth Metals Income Securities Securities Equity Fund -
Fund Fund Fund Fund Fund Fund Fund 1995
--------- -------- --------- -------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at
December 31, 1992 6,951 17,144 1,419 4,780 1,052 25,054 39,387 2,871
Contract transactions:
Purchase payments 10,209 9,802 2,010 6,363 3,591 21,055 49,976 781
Transfers between funds (5,690) (1,016) 1,404 1,213 1,102 (3,217) (1,886) (254)
Surrenders and terminations (1,043) (1,128) (136) (493) (107) (1,971) (2,660) (298)
Rescissions (177) (71) (11) (72) (49) (506) (572) (7)
Other transactions (3) (12) (1) (4) - (13) (28) (1)
--------- -------- --------- -------- ----------- ----------- ---------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 3,296 7,575 3,266 7,007 4,537 15,348 44,830 221
--------- -------- --------- -------- ----------- ----------- ---------- -------
Accumulation units outstanding at
December 31, 1993 10,247 24,719 4,685 11,787 5,589 40,402 84,217 3,092
========= ======== ========= ======== =========== =========== ========== =======
Accumulation unit value per unit
at December 31, 1993 $ 12.066 13.677 14.464 15.155 15.369 14.698 17.319 14.480
========= ======== ========= ======== =========== =========== ========== =======
<PAGE>
Contract transactions:
Purchase payments 33,071 9,135 2,732 4,967 4,417 7,429 12,472 344
Transfers between funds 2,902 4,379 1,303 422 2,206 (6,649) (19,941) 224
Surrenders and terminations (6,011) (2,397) (409) (1,428) (525) (4,458) (6,391) (462)
Rescissions (792) (137) (26) (75) (41) (239) (264) (2)
Other transactions 20 (4) - 6 (1) 5 (11) (1)
--------- -------- --------- -------- ----------- ----------- ---------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 29,190 10,976 3,600 3,892 6,056 (3,912) (14,135) 103
--------- -------- --------- -------- ----------- ----------- ---------- -------
Accumulation units outstanding at
December 31, 1994 39,437 35,695 8,285 15,679 11,645 36,490 70,082 3,195
========= ======== ========= ======== =========== =========== ========== =======
Accumulation unit value per unit
at December 31, 1994 $ 12.354 13.215 13.979 14.608 15.594 13.835 15.104 14.380
========= ======== ========= ======== =========== =========== ========== =======
Accumulation net assets at
December 31, 1994 $487,204 471,693 115,828 229,026 181,599 504,837 1,058,511 45,941
========= ======== ========= ======== =========== =========== ========== =======
Zero Zero
Coupon Coupon
Fund - Fund -
2000 2005
------- -------
<S> <C> <C>
Accumulation units outstanding at
December 31, 1992 2,886 1,090
Contract transactions:
Purchase payments 1,565 1,240
Transfers between funds (411) (243)
Surrenders and terminations (235) (56)
Rescissions (17) (11)
Other transactions (1) -
------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 901 930
------- -------
Accumulation units outstanding at
December 31, 1993 3,787 2,020
======= =======
<PAGE>
Accumulation unit value per unit
at December 31, 1993 16.717 18.050
======= =======
Contract transactions:
Purchase payments 1,434 942
Transfers between funds 114 (4)
Surrenders and terminations (357) (154)
Rescissions (24) (18)
Other transactions (1) (6)
------- -------
Net increase (decrease) in
accumulation units resulting
from contract transactions 1,166 760
------- -------
Accumulation units outstanding at
December 31, 1994 4,953 2,780
======= =======
Accumulation unit value per unit
at December 31, 1994 15.373 16.096
======= =======
Accumulation net assets at
December 31, 1994 76,140 44,756
======= =======
</TABLE>
<PAGE>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA) (CONTINUED)
<TABLE>
<CAPTION>
Zero Investment Adjustable Templeton
Coupon Global Grade Income U.S. Pacific Rising
Fund - Income Intermediate Securities Government Growth Dividends
2010 Fund Bond Fund Fund Fund Fund Fund
-------- -------- ------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at
December 31, 1992 849 5,487 3,333 11,397 21,858 534 8,388
Contract transactions:
Purchase payments 757 5,699 4,473 23,392 18,818 8,165 19,202
<PAGE>
Transfers between funds (103) 2,322 143 5,478 (13,894) 5,729 (492)
Surrenders and terminations (85) (409) (236) (1,055) (1,628) (134) (661)
Rescissions (12) (42) (34) (237) (170) (53) (176)
Other transactions (1) (3) (2) (8) (9) (1) (5)
-------- -------- ------------- ----------- ----------- ---------- ----------
Net increase (decrease) in
accumulation units resulting
from contract transactions 556 7,567 4,344 27,570 3,117 13,706 17,868
-------- -------- ------------- ----------- ----------- ---------- ----------
Accumulation units outstanding at
December 31, 1993 1,405 13,054 7,677 38,967 24,975 14,240 26,256
======== ======== ============= =========== =========== ========== ==========
Accumulation unit value per unit
at December 31, 1993 $18.144 14.650 14.389 17.734 11.254 14.233 10.327
======== ======== ============= =========== =========== ========== ==========
Contract transactions:
Purchase payments 541 5,526 2,779 19,487 10,678 10,676 6,295
Transfers between funds 864 (465) (28) 2,539 (12,898) 3,849 (1,955)
Surrenders and terminations (204) (1,178) (619) (4,065) (2,716) (1,371) (1,748)
Rescissions (17) (92) (37) (364) (184) (164) (83)
Other transactions - 10 - 5 10 1 13
-------- -------- ------------- ----------- ----------- ---------- ----------
Net increase (decrease) in
accumulation units resulting
from contract transactions 1,184 3,801 2,095 17,602 (5,110) 12,991 2,522
-------- -------- ------------- ----------- ----------- ---------- ----------
Accumulation units outstanding at
December 31, 1994 2,589 16,855 9,772 56,569 19,865 27,231 28,778
======== ======== ============= =========== =========== ========== ==========
Accumulation unit value per unit
at December 31, 1994 $15.930 13.726 14.257 16.392 11.077 12.802 9.769
======== ======== ============= =========== =========== ========== ==========
Accumulation net assets at
December 31, 1994 $41,255 231,368 139,325 927,253 220,042 348,598 281,128
======== ======== ============= =========== =========== ========== ==========
<PAGE>
Templeton
Templeton Developing Templeton
International Markets Global
Equity Equity Growth
Fund Fund Fund
-------------- ----------- ----------
<S> <C> <C> <C>
Accumulation units outstanding at
December 31, 1992 1,329 - -
Contract transactions:
Purchase payments 14,864 - -
Transfers between funds 8,173 - -
Surrenders and terminations (231) - -
Rescissions (107) - -
Other transactions (2) - -
-------------- ----------- ----------
Net increase (decrease) in
accumulation units resulting
from contract transactions 22,697 - -
-------------- ----------- ----------
Accumulation units outstanding at
December 31, 1993 24,026 - -
============== =========== ==========
Accumulation unit value per unit
at December 31, 1993 12.226 - -
============== =========== ==========
Contract transactions:
Purchase payments 23,800 5,673 8,665
Transfers between funds 15,240 4,296 6,300
Surrenders and terminations (2,341) (146) (215)
Rescissions (268) (49) (114)
Other transactions 7 - 1
-------------- ----------- ----------
Net increase (decrease) in
accumulation units resulting
from contract transactions 36,438 9,774 14,637
-------------- ----------- ----------
Accumulation units outstanding at
December 31, 1994 60,464 9,774 14,637
============== =========== ==========
Accumulation unit value per unit
at December 31, 1994 12.161 9.454 10.201
============== =========== ==========
<PAGE>
Accumulation net assets at
December 31, 1994 735,332 92,406 149,311
============== =========== ==========
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1994 and 1993
<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, 1994 and 1993, 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, 1994. 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, 1994 and 1993, and the results of their operations and changes in
stockholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1994, 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 Financial Accounting Standards Board's
Statement of Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities. In 1993, as discussed in notes 1, 8 and 10 to
the consolidated financial statements, the Company adopted the provisions of
<PAGE>
Financial Accounting Standards Board's Statements of Financial Accounting
Standards No. 106, Accounting for Postretirement Benefits Other Than Pensions;
No. 109, Accounting for Income Taxes; and No. 113, Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts.
KPMG Peat Marwick LLP
February 7, 1995
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(in thousands except share data)
Assets 1994 1993
- ----------------------------------------------------------- ----------- ---------
<S> <C> <C>
Investments:
Fixed maturities, at amortized cost $ 90,615 1,985,684
Fixed maturities, at market 1,906,208 0
Equity securities, at market 131,712 143,649
Mortgage loans on real estate 163,099 127,196
Real estate, at cost 4,685 5,071
Investment in real estate partnerships, at equity 12,551 10,566
Certificates of deposit and short-term securities 155,307 58,963
Policy loans 101,899 98,117
Other long-term investments 1,117 650
----------- ---------
Total investments 2,567,193 2,429,896
Cash 63,883 35,488
Accrued investment income 34,786 34,022
Receivables (net of allowance for uncollectible
accounts of $9,607 in 1994 and $10,560 in 1993) 111,874 123,914
Reinsurance receivable:
Funds held on deposit 927,353 781,084
Recoverable on future policy benefit reserves 35,387 28,722
Recoverable on unpaid claims 105,603 90,101
Receivable on paid claims 26,736 20,186
Prepaid insurance premiums 4,317 3,606
Home office property and equipment (net of accumulated
depreciation of $28,547 in 1994 and $26,731 in 1993) 11,612 12,983
Deferred acquisition costs 798,442 666,352
Federal income tax recoverable 3,794 0
Other assets 9,344 10,685
----------- ---------
Assets exclusive of separate account assets 4,700,324 4,237,039
<PAGE>
Separate account assets 6,965,755 5,535,243
----------- ---------
Total assets $11,666,079 9,772,282
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1994 and 1993
(in thousands except share data)
Liabilities 1994 1993
- ----------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Future policy benefit reserves:
Life $ 1,022,537 989,309
Annuity 2,304,560 1,978,203
Policy and contract claims 355,411 322,924
Unearned premiums 40,376 41,570
Reinsurance payable 81,507 61,728
Current income taxes 0 2,461
Deferred income taxes 5,807 28,708
Accrued expenses 29,065 29,210
Commissions due and accrued 24,190 20,874
Other policyholder funds 75,533 83,094
Other liabilities 74,231 19,353
------------ ----------
Liabilities exclusive of separate account liabilities 4,013,217 3,577,434
Separate account liabilities 6,965,755 5,535,243
------------ ----------
Total liabilities 10,978,972 9,112,677
------------ ----------
Minority interest in subsidiary 7,662 8,189
------------ ----------
Stockholder's equity
- -----------------------------------------------------------------
Common stock, $1 par value, 20,000,000 shares
authorized, issued and outstanding 20,000 20,000
Preferred stock, $1 par value, cumulative, 200 million
shares authorized, 40 million shares issued and outstanding 40,000 0
Additional paid-in capital 406,494 401,304
Net unrealized holding loss on available-for-sale
securities, net of deferred federal income taxes (62,073) 0
<PAGE>
Net unrealized gain on equity investments, net of
deferred federal income taxes 0 9,071
Net unrealized Canadian currency loss (3,787) (2,708)
Retained earnings 278,811 223,749
------------ ----------
Total stockholder's equity 679,445 651,416
------------ ----------
Commitments and contingencies (Notes 7 and 12)
Total liabilities and stockholder's equity $11,666,079 9,772,282
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Income
Years Ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 234,498 217,885 228,530
Other life policy considerations 92,254 88,003 78,216
Annuity considerations 117,029 67,202 32,716
Accident and health premiums 547,508 508,785 481,437
---------- --------- ---------
Total premiums and considerations 991,289 881,875 820,899
Premiums ceded 241,978 201,254 174,664
---------- --------- ---------
Net premiums and considerations 749,311 680,621 646,235
Investment income, net 181,291 174,831 169,982
Realized investment gains, net 829 28,318 22,876
Other 12,703 9,347 12,851
---------- --------- ---------
Total revenue 944,134 893,117 851,944
---------- --------- ---------
Benefits and expenses:
Life insurance benefits 254,530 233,862 241,486
Annuity benefits 128,582 111,119 98,998
Accident and health insurance benefits 379,122 341,676 344,067
---------- --------- ---------
Total benefits 762,234 686,657 684,551
Benefit recoveries 209,915 153,393 171,048
---------- --------- ---------
Net benefits 552,319 533,264 513,503
Commissions and other agent compensation 313,715 398,161 274,760
General and administrative expenses 111,116 109,333 87,728
Taxes, licenses and fees 22,514 25,239 20,297
Increase in deferred acquisition costs (132,090) (253,234) (115,379)
<PAGE>
Minority interest in income of consolidated subsidiary (66) 0 0
---------- --------- ---------
Total benefits and expenses 867,508 812,763 780,909
---------- --------- ---------
Income from operations before income taxes 76,626 80,354 71,035
---------- --------- ---------
Income tax expense (benefit):
Current 5,098 30,215 14,330
Deferred 16,053 (6,496) 10,702
---------- --------- ---------
Total income tax expense 21,151 23,719 25,032
---------- --------- ---------
Net income before cumulative effect of
changes in accounting 55,475 56,635 46,003
Cumulative effect of changes in accounting 0 26,875 0
---------- --------- ---------
Net income $ 55,475 83,510 46,003
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Years Ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
---------- -------- --------
<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 0 0 0
Issuance of stock during the year 40,000 0 0
---------- -------- --------
Balance at end of year 40,000 0 0
---------- -------- --------
Additional paid-in capital:
Balance at beginning of year 401,304 401,304 401,304
Additional contribution from parent 5,190 0 0
---------- -------- --------
Balance at end of year 406,494 401,304 401,304
---------- -------- --------
Net unrealized gain (loss) on investments:
Balance at beginning of year 9,071 12,071 19,594
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 74,866 0 0
Net unrealized loss during the year,
net of deferred federal income taxes (146,010) (3,000) (7,523)
---------- -------- --------
Balance at end of year (62,073) 9,071 12,071
---------- -------- --------
Net unrealized Canadian currency gain (loss):
Balance at beginning of year (2,708) (1,835) 1,058
Net unrealized loss during the year,
net of deferred federal income taxes (1,079) (873) (2,893)
---------- -------- --------
<PAGE>
Balance at end of year (3,787) (2,708) (1,835)
---------- -------- --------
Retained earnings:
Balance at beginning of year 223,749 140,239 114,236
Net income 55,475 83,510 46,003
Cash dividend to stockholder (413) 0 (20,000)
---------- -------- --------
Balance at end of year 278,811 223,749 140,239
---------- -------- --------
Total stockholder's equity $ 679,445 651,416 571,779
========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 55,475 83,510 46,003
---------- --------- ---------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized (gains) on investments (829) (28,318) (22,876)
Deferred federal income tax (benefit) expense 16,053 (6,496) 10,702
Cumulative effect of changes in accounting 0 (26,875) 0
Charges to policy account balances (125,488) (105,912) (83,935)
Interest credited to policy account balances 150,490 147,983 134,516
Change in:
Future policy benefit reserves 20,791 (9,557) (1,489)
Policy and contract claims 25,072 40,211 16,673
Deferred acquisition costs (132,090) (253,234) (115,379)
Deferred tax liability 0 15,936 0
Receivables 12,040 (20,206) 3,389
Reinsurance receivables (93,453) (107,809) (177,920)
Reinsurance payable 19,779 31,653 7,374
Unearned premiums (1,194) (2,111) 2,211
Commissions due and accrued 3,316 1,461 (519)
Accrued expenses and other liabilities 54,626 14,657 1,464
Current taxes (6,255) 1,085 (410)
Accrued investment income (764) (2,725) (3,914)
Depreciation and amortization (11,498) (7,681) (816)
Other, net (86) 2,303 9,266
---------- --------- ---------
Total adjustments (69,490) (315,635) (221,663)
---------- --------- ---------
Net cash used in operating activities (14,015) (232,125) (175,660)
---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years Ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
---------- ----------- ---------
<S> <C> <C> <C>
Cash flows used in investing activities:
Purchase of fixed maturities, at amortized cost $ 0 (1,191,749) (863,085)
Purchase of fixed maturities, at market (928,532) 0 0
Purchase of equity securities (145,267) (205,345) (282,780)
Purchase of other long-term investments (467) (650) (6,600)
Funding of mortgage loans (64,808) (20,097) (3,379)
Sale of fixed maturities, at amortized cost 0 666,893 374,388
Sale of fixed maturities, at market 791,659 0 0
Matured or redeemed fixed maturities, at amortized cost 4,342 314,223 223,459
Matured fixed maturities, at market 32,508 0 0
Sale of equity securities 150,347 217,524 247,407
Repayment of mortgage loans 28,206 15,989 29,776
Sale of minority interest in subsidiary 0 8,189 0
Net change in certificates of deposit and
short-term securities (96,344) 33,330 (61,614)
Other (6,232) 782 (701)
---------- ----------- ---------
Net cash used in investing activities (234,588) (160,911) (343,129)
---------- ----------- ---------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 526,918 639,633 606,525
Policyholders' withdrawals from account balances (235,309) (164,911) (118,786)
Change in assets held under reinsurance agreements (59,349) (75,658) 68,901
Net change in mortgage notes payable (39) (36) (33)
Additional paid-in capital from parent 5,190 0 0
Sale of preferred stock 40,000 0 0
Cash dividends paid (413) 0 (20,000)
---------- ----------- ---------
Net cash used in financing activities 276,998 399,028 536,607
---------- ----------- ---------
<PAGE>
Net change in cash 28,395 5,992 17,818
Cash at beginning of year 35,488 29,496 11,678
---------- ----------- ---------
Cash at end of year $ 63,883 35,488 29,496
========== =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(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.
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 subsidiaries, Preferred Life
Insurance Company of New York and Canadian American Financial Corporation and
other less significant subsidiaries have been consolidated. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain amounts as previously reported have been reclassified to be consistent
with the current year's presentation.
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>
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 ACQUISITION 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 1994, 1993 and 1992 were $108,676, $72,431 and $57,264, 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, 1994 and 1993.
<PAGE>
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent an estimate of claims and claim
adjustment expenses on accident and health and life insurance policies that
have been reported but not yet paid and incurred but not yet reported as of
December 31.
REINSURANCE
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 113, Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts. Pursuant to SFAS No. 113,
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.
INVESTMENTS
On January 1, 1994, the Company adopted 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 are reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose of
selling them in the near term are classified as "trading securities" and are
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 are reported at fair value, with unrealized gains and losses
reported in a separate component of stockholders' equity, net of deferred
taxes. SFAS No. 115 does not permit retroactive application of its
provisions. 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 January 1, 1994.
In 1993, prior to adoption of SFAS No. 115, investments in fixed maturities
and nonredeemable preferred stocks were carried at amortized cost reduced by a
provision for loss due to declines in value expected to be other than
temporary. Common stocks were reflected at market value. Unrealized gains or
losses on investments in common stocks, net of deferred income taxes, were
reflected directly in stockholder's equity.
<PAGE>
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.
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, 1994 and 1993, investments with a carrying value of $44,337
and $35,577, respectively, were held on deposit with various insurance
departments 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.
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 accounts assets were determined using the market value
of the investments held in segregated fund accounts. Fair values of separate
accounts liabilities were determined using the cash surrender values of the
contractholder's account.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, Accounting for
Income Taxes. The primary provision of SFAS No. 109 is the change from the
deferred method of accounting for income taxes to the asset and liability
method. The Company implemented the change in accounting principle in 1993
which resulted in a one-time cumulative adjustment to increase income by
$30,881 determined as of January 1, 1993. The 1992 financial statements were
not restated to apply the provisions of this Statement.
<PAGE>
Under the asset and liability method, 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. Under SFAS No. 109, 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.
Under the deferred method of accounting for income taxes prescribed by the
Accounting Principles Board (APB) Opinion 11, which was applied in 1992 and
prior years, deferred income taxes were recognized for income and expense
items reported in different years for financial reporting purposes and income
tax purposes, using the tax rate in effect for the year of the calculation.
Under the deferred method, deferred taxes were not adjusted for subsequent
changes in tax rates.
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
The impact of implementation of SFAS No. 115 in 1994 was an increase in equity
of $74,866 at January 1, 1994.
The table below presents the cumulative effect of changes, net of tax, in
accounting principles implemented in 1993 on after tax net income:
<TABLE>
<CAPTION>
<S> <C>
SFAS No. 106 $(4,006)
SFAS No. 109 30,881
--------
Total cumulative effect on after tax net income
of changes in accounting principles $26,875
========
</TABLE>
<PAGE>
(2) BUSINESS COMBINATION
On May 31, 1993, the Company acquired the majority of the assets and
liabilities of Fidelity Union Life Insurance Company (FULICO), a wholly owned
subsidiary of AZOA, through an assumption reinsurance arrangement. FULICO
remained in existence retaining only its corporate charter and those assets
necessary to maintain its charter and licenses to conduct life insurance and
annuity business until it was sold in 1994.
The Company accounted for this transaction as an "as-if pooling of interests"
involving the combination of entities under the common control of AZOA.
Accordingly, all financial data for periods prior to May 31, 1993 were
restated to include the operations of FULICO and all intercompany transactions
were eliminated.
Total revenues and net income, before adoption of any changes in accounting,
of the separate companies for the five-months ended May 31, 1993 and for the
year ended December 31, 1992 were:
<TABLE>
<CAPTION>
Allianz Life FULICO Combined
------------- ------- --------
<S> <C> <C> <C>
Five-months ended May 31, 1993:
Total revenue $ 309,159 78,814 387,973
Net income 19,224 12,944 32,168
Year ended December 31, 1992:
Total revenue $ 685,997 165,947 851,944
Net income 28,571 17,432 46,003
</TABLE>
(3) INVESTMENTS
Investments at December 31, 1994 consist of:
<PAGE>
<TABLE>
<CAPTION>
Amount
Amortized Estimated shown on
cost market balance
or cost value sheet
---------- --------- ---------
<S> <C> <C> <C>
Fixed maturities - Held-to-maturity:
Corporate securities $ 90,615 85,559 90,615
Fixed maturities - Available-for-sale:
U.S. government 495,048 463,694 463,694
States and political subdivisions 519 498 498
Foreign government 44,818 43,494 43,494
Public utilities 79,170 80,002 80,002
Corporate securities 1,099,623 1,042,867 1,042,867
Mortgage backed securities 228,894 221,079 221,079
Collateralized mortgage obligations 57,739 54,574 54,574
---------- --------- ---------
Total fixed maturities 2,096,426 1,991,767 1,996,823
---------- --------- ---------
Equity securities - Available-for-sale:
Common stocks:
Public utilities 4,001 3,938 3,938
Banks, trusts and insurance companies 4,202 3,700 3,700
Industrial and miscellaneous 111,351 116,798 116,798
Nonredeemable preferred stocks 7,494 7,276 7,276
---------- --------- ---------
Total equity securities 127,048 131,712 131,712
---------- --------- ---------
Other investments:
Mortgage loans on real estate 163,099 XXXXXXXXX 163,099
Real estate:
Investment properties 4,685 XXXXXXXXX 4,685
Partnerships 12,551 XXXXXXXXX 12,551
Certificates of deposit and short term securities 155,307 XXXXXXXXX 155,307
Policy loans 101,899 XXXXXXXXX 101,899
Other long term investments 1,117 XXXXXXXXX 1,117
---------- --------- ---------
<PAGE>
Total other investments 438,658 XXXXXXXXX 438,658
---------- --------- ---------
Total investments $2,662,132 XXXXXXXXX 2,567,193
========== ========= =========
</TABLE>
At December 31, 1994 and 1993, the amortized cost, gross unrealized gains,
gross unrealized losses and estimated market values of marketable securities
are as follows:
<TABLE>
<CAPTION>
Amortized Gross Gross Estimated
cost unrealized unrealized market
or cost gains losses value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
1994:
Held-to maturity:
Corporate securities $ 90,615 110 5,166 85,559
---------- ---------- ---------- ---------
Total held-to-maturity 90,615 110 5,166 85,559
---------- ---------- ---------- ---------
Available-for-sale:
U.S. government 495,048 49 31,403 463,694
States and political subdivisions 519 3 24 498
Foreign government 44,818 562 1,886 43,494
Public utilities 79,170 1,154 322 80,002
Corporate securities 1,099,623 7,034 63,790 1,042,867
Mortgage backed securities 228,894 0 7,815 221,079
Collateralized mortgage obligations 57,739 0 3,165 54,574
---------- ---------- ---------- ---------
Total fixed maturities 2,005,811 8,802 108,405 1,906,208
Equity securities 127,048 18,556 13,892 131,712
---------- ---------- ---------- ---------
Total available-for-sale 2,132,859 27,358 122,297 2,037,920
---------- ---------- ---------- ---------
Total $2,223,474 27,468 127,463 2,123,479
========== ========== ========== =========
<PAGE>
1993:
Available-for-sale:
U.S. government $ 374,160 15,416 1,847 387,729
States and political subdivisions 519 14 0 533
Foreign government 161,190 9,109 62 170,237
Public utilities 108,955 11,694 0 120,649
Corporate securities 1,206,417 86,149 6,307 1,286,259
Mortgage backed securities 72,002 4,928 0 76,930
Collateralized mortgage obligations 62,441 389 1,114 61,716
---------- ---------- ---------- ---------
Total fixed maturities 1,985,684 127,699 9,330 2,104,053
Common stock 123,229 23,454 9,203 137,480
Preferred stock 6,169 689 136 6,722
---------- ---------- ---------- ---------
Total $2,115,082 151,842 18,669 2,248,255
========== ========== ========== =========
</TABLE>
The change in unrealized losses on available-for-sale securities was
$(214,245) 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) from fixed maturities were $33,645
and $(17,852) for the years ended December 31, 1993 and 1992, respectively.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$(9,587), $(2,468) and $(11,398) for the years ended December 31, 1994, 1993
and 1992, respectively.
The amortized cost and estimated market value of fixed maturities at December
31, 1994, 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.
<TABLE>
<CAPTION>
Amortized Estimated
cost market value
---------- ------------
<S> <C> <C>
Held-to-maturity:
Due in one year or less $ 6,000 5,850
Due after one year through five years 11,000 11,110
<PAGE>
Due after five years through ten years 67,615 63,185
Due after ten years 6,000 5,414
---------- ------------
Totals $ 90,615 85,559
========== ============
Available-for-sale:
Due in one year or less $ 42,793 43,097
Due after one year through five years 489,443 480,623
Due after five years through ten years 885,459 834,011
Due after ten years 359,222 327,399
Mortgage backed securities 228,894 221,078
---------- ------------
Totals $2,005,811 1,906,208
========== ============
</TABLE>
Proceeds from sales of investments in available-for-sale securities during
1994 were $791,659. Gross gains of $14,615 and gross losses of $17,327 were
realized on sales of available-for-sale securities in 1994, related taxes were
$0. Proceeds from redemptions of held-to-maturity securities during 1994 were
$4,342 with no gain or loss realized on the transactions. Proceeds from sales
of fixed maturity securities in 1993 and 1992 were $666,893 and $374,388,
respectively. Gross gains of $25,229 and $18,651 and gross losses of $2,102
and $54 were realized on sales of fixed maturities in 1993 and 1992,
respectively. Related taxes were $8,094, and $6,323 in 1993 and 1992,
respectively.
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Fixed maturities, at amortized cost $ 0 23,127 18,597
Fixed maturities, at market (2,712) 0 0
Equity securities 2,745 5,876 4,129
Mortgage loans (1,667) (189) (1,069)
Real estate 2,067 (513) 1,091
Other 396 17 128
-------- ------- -------
<PAGE>
Net gains before taxes 829 28,318 22,876
Tax expense on net realized gains 352 10,329 7,819
-------- ------- -------
Net gains after taxes $ 477 17,989 15,057
======== ======= =======
</TABLE>
The Company may enter 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, 1994, mortgage backed securities underlying the agreements are
carried at market values of $58,174 and other liabilities includes $58,150 for
funds received under these agreements. Average balances outstanding during
1994 were $66,110 and weighted average interest rates were 6.5%. The
agreements at December 31, 1994 mature within 2 months. The agreements may be
rolled over into new agreements at maturity by mutual consent of the Company
and the dealers.
The Company participates in a securities lending program that is administered
by Allianz Investment Corporation. 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 of 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. As of December 31, 1994, the estimated market value of the loaned
securities was $110,063, collateralized by investments in FNMA securities.
The valuation allowances at December 31, 1994, 1993 and 1992 and the changes
in the allowance for the years then ended are summarized as follows:
<TABLE>
<CAPTION>
Beginning End
of year Additions Reductions of year
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
December 31, 1994:
Mortgage loans $ 12,450 1,598 1,598 12,450
<PAGE>
Investment in real estate 1,550 0 0 1,550
---------- --------- ---------- -------
Total valuation allowance $ 14,000 1,598 1,598 14,000
========== ========= ========== =======
December 31, 1993:
Mortgage loans $ 13,602 0 1,152 12,450
Investment in real estate 1,854 973 1,277 1,550
---------- --------- ---------- -------
Total valuation allowance $ 15,456 973 2,429 14,000
========== ========= ========== =======
December 31, 1992:
Mortgage loans $ 18,583 485 5,466 13,602
Investment in real estate 1,854 0 0 1,854
Other long-term investments 428 0 428 0
---------- --------- ---------- -------
Total valuation allowance $ 20,437 485 5,466 15,456
========== ========= ========== =======
</TABLE>
Major categories of net investment income for the respective years ended
December 31 are:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $141,611 142,814 130,239
Fixed maturities, at market 6,966 0 0
Mortgage loans 13,706 12,764 15,357
Policy loans 6,329 6,404 5,840
Short-term investments 3,012 4,159 6,586
Dividends:
Preferred stock 495 231 149
Common stock 2,673 2,496 2,055
Rental income on real estate 3,135 2,540 2,899
Interest on assets held by reinsurers 10,470 10,074 10,207
Other 577 1,131 5,485
-------- ------- -------
<PAGE>
Total investment income 188,974 182,613 178,817
Investment expenses 7,683 7,782 8,835
-------- ------- -------
Net investment income $181,291 174,831 169,982
======== ======= =======
</TABLE>
(4) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1994 1994 1993 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets
- -------------------------------------------------------
Fixed maturities, at amortized cost:
U.S. Government $ 0 $ 0 $ 374,160 $ 387,729
States and political subdivisions 0 0 519 533
Foreign governments 0 0 161,190 170,237
Public utilities 0 0 108,955 120,649
Corporate securities 90,615 85,559 1,206,417 1,286,259
Mortgage backed securities 0 0 72,002 76,930
Collateralized mortgage obligations 0 0 62,441 61,716
Fixed maturities, at market:
U.S. Government 463,694 463,694 0 0
States and political subdivisions 498 498 0 0
Foreign governments 43,494 43,494 0 0
Public utilities 80,002 80,002 0 0
Corporate securities 1,042,867 1,042,867 0 0
Mortgage backed securities 221,079 221,079 0 0
Collateralized mortgage obligations 54,574 54,574 0 0
Equity securities 131,712 131,712 143,649 144,202
Mortgage loans 163,099 162,903 127,196 133,872
Short term investments 155,307 155,307 58,963 58,963
Policy loans 101,899 101,899 98,117 98,117
Other long term investments 1,117 1,117 650 650
Receivables 111,874 111,874 123,914 123,914
Separate accounts assets 6,965,755 6,965,755 5,535,243 5,535,243
<PAGE>
Financial liabilities
- -------------------------------------------------------
Investment contracts 2,753,304 2,319,872 1,921,650 1,605,135
Separate account liabilities 6,965,755 6,715,730 5,535,243 5,340,781
Financial instruments
- -------------------------------------------------------
Commitments to purchase mortgage backed securities 0 0 78,323 78,323
</TABLE>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
(5) RECEIVABLES
Receivables at December 31 consist of the following:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Premiums due $ 76,840 80,732
Agents balances 7,299 13,217
Related party receivables 1,516 3,893
Reinsurance commission receivable 13,723 9,988
Scholarship enrollment fees 6,753 5,933
Due from administrators 2,674 6,373
Other 3,069 3,778
-------- -------
Total receivables $111,874 123,914
======== =======
</TABLE>
(6) 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,
allowing more reliable re-evaluations of such reserves. While management
believes that reserves as of December 31, 1994 are adequate, uncertainties in
<PAGE>
the reserving process could cause such reserves to develop favorably or
unfavorably 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.
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $11,149, $8,742 and $7,247 in
1994, 1993 and 1992, respectively, is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- -------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $86,551, $91,303 and $64,295 $170,123 168,872 156,414
Incurred related to:
Current year 230,995 226,815 225,329
Prior years (7,290) (8,432) 899
--------- -------- -------
Total incurred 223,705 218,383 226,228
--------- -------- -------
Paid related to:
Current year 82,338 84,172 80,015
Prior years 126,462 132,960 133,755
--------- -------- -------
Total paid 208,800 217,132 213,770
--------- -------- -------
Balance at December 31, net of reinsurance
recoverables of $96,090, $86,551 and $91,303 $185,028 170,123 168,872
========= ======== =======
</TABLE>
There were no significant adjustments to accident and health claim liabilities
resulting from changes in estimates of benefits related to prior years.
<PAGE>
(7) 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, 1994 are $867,605 and
$82,600 recoverable from insurers who, as of December 31, 1994, were both
rated A+ 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.
Life insurance, annuities and accident and health business assumed from and
ceded to other companies is as follows:
<TABLE>
<CAPTION>
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, 1994:
Life insurance in force $39,789,859 24,411,513 6,893,030 57,308,342 42.6%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance and annuities 346,567 97,214 40,154 403,627 24.1%
Accident and health insurance 388,760 158,748 201,824 345,684 45.9%
----------- ---------- --------- ---------- -----------
Total premiums 735,327 255,962 241,978 749,311 34.2%
=========== ========== ========= ========== ===========
<PAGE>
December 31, 1993:
Life insurance in force $39,784,564 21,861,833 6,297,943 55,348,454 39.5%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance and annuities 287,060 86,030 47,306 325,784 26.4%
Accident and health insurance 365,894 142,891 153,948 354,837 40.3%
----------- ---------- --------- ---------- -----------
Total premiums 652,954 228,921 201,254 680,621 33.6%
=========== ========== ========= ========== ===========
December 31, 1992:
Life insurance in force $42,573,771 22,113,198 5,978,013 58,708,956 37.7%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance and annuities 244,320 95,142 34,806 304,656 31.2%
Accident and health insurance 384,373 97,064 139,858 341,579 28.4%
----------- ---------- --------- ---------- -----------
Total premiums 628,693 192,206 174,664 646,235 29.7%
=========== ========== ========= ========== ===========
</TABLE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$86,055, $30,841 and $17,189 in 1994, 1993 and 1992, respectively, and life
insurance premiums earned of $203, $98 and $4 in 1994, 1993 and 1992,
respectively, to its affiliate Allianz Aktiengesellshaft. In addition, the
Company ceded accident and health premiums earned of $12,256, $8,966 and
$1,348 in 1994, 1993 and 1992, respectively, to its affiliate Allianz
Versicherungs.
(8) INCOME TAXES
As discussed in note 1, the Company adopted SFAS No. 109 as of January 1, 1993
and the $30,881 cumulative effect of this change is reported in the 1993
Consolidated Statement of Income. The 1992 financial statements have not been
restated to apply the provisions of SFAS No. 109. In accordance with SFAS No.
109, all balances related to previous business combinations accounted for
under the purchase method, pursuant to APB Opinion 16, were written off with
the adoption of SFAS No. 109. The effect of this write-off, which is included
in the $30,881 above, was a net decrease in liabilities of $21,869.
INCOME TAX EXPENSE
<PAGE>
Total income tax expense (benefit) for the years ended December 31, 1994, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- -------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 5,098 30,215 14,330
--------- -------- -------
Deferred tax (benefit) expense 16,053 (10,847) 10,702
Benefit of operating loss carryforwards 0 3,406 0
Adjustment of deferred tax assets and
liabilities for enacted change in tax rates 0 945 0
--------- -------- -------
Total deferred tax (benefit) expense 16,053 (6,496) 10,702
--------- -------- -------
Total income tax expense attributable to operations $ 21,151 23,719 25,032
Income tax effect on equity:
Income tax allocated to cumulative effect of
adoption of SFAS No. 106 0 (2,064) 0
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 40,312 0 0
Attributable to unrealized gains and losses for the year (79,201) 62 (5,432)
--------- -------- -------
Total income tax effect on equity $(17,738) 21,717 19,600
========= ======== =======
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
Income tax expense computed at the statutory rate of 35% in 1994 and 1993 and
34% in 1992, varies from tax expense reported in the Consolidated Statements
of Income for the respective years ended December 31 as follows:
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $26,819 28,125 24,151
Dividends received deductions and tax-exempt interest (3,967) (2,189) (1,653)
Foreign tax (79) (1,324) 250
Interest on tax deficiency (716) 528 (91)
Impact of statutory rate change on deferred tax liability 0 945 0
Acquisition adjustments to future policy benefits 0 0 1,948
Utilization of net operating loss and alternative
minimum tax credits 0 (2,549) 0
Other (906) 183 427
-------- ------- -------
Income tax expense as reported $21,151 23,719 25,032
======== ======= =======
</TABLE>
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
Tax effects of temporary differences giving rise to the significant components
of the net deferred tax liability at December 31, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 1,885 2,147
Allowance for uncollectible accounts 2,961 3,325
Policy reserves 188,602 166,508
Unrealized losses on investments in available for sale securities 35,584 0
-------- -------
Total deferred tax assets 229,032 171,980
-------- -------
<PAGE>
Deferred tax liabilities:
Deferred acquisition costs 229,577 194,942
Net unrealized gain 0 3,305
Other 5,262 2,441
-------- -------
Total deferred tax liabilities 234,839 200,688
-------- -------
Net deferred tax liability $ 5,807 28,708
======== =======
</TABLE>
The Company has determined 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.
DEFERRED TAX EXPENSE UNDER PREVIOUS ACCOUNTING RULES
The components of deferred income tax expense for the year ended December 31,
1992 computed in accordance with APB Opinion 11 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Acquisition costs and future policy benefits $ 651
Foreign income 1,628
Investment income 1,330
Tax allocation adjustments 7,711
Other (618)
--------
Total deferred income tax expense $10,702
========
</TABLE>
As of December 31, 1994, 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
<PAGE>
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 $15,162, $28,465 and $15,511 in 1994, 1993 and 1992,
respectively. At December 31, 1994 the Company has a tax recoverable from
AZOA of $5,095 and a payable to Revenue Canada Taxation of $1,301. At
December 31, 1993 the Company had a tax payable to AZOA of $5,259 and a
recoverable from Revenue Canada Taxation of $2,798.
(9) RELATED PARTY TRANSACTIONS
In March 1994, AZOA contributed additional paid-in capital to the Company of
$5,190.
In June 1994, the Company authorized 200 million shares of preferred stock
with a par value of $1 per share. The preferred stock is issued 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. The Company currently has 40 million shares issued and
outstanding. In June 1994, the Company issued 25 millions shares of Series A
preferred stock with a dividend rate of 6.4% to AZOA for $25,000. In December
1994, the Company issued 15 millions shares of Series B preferred stock with a
dividend rate of 6.95% to AZOA for $15,000.
In December 1993, AZOA purchased 400 non-voting common shares in the Company's
subsidiary, Canadian American Financial Corporation, for $8,189. The
acquisition of the shares reduced the Company's equity ownership to 71% but
the Company maintains its ownership interest in voting common shares of 100%.
As of December 31, 1994 and 1993, Allianz Real Estate (AzRE), a wholly owned
subsidiary of AZOA, owned 100% of the stock of certain corporations whose
assets include mortgage loans issued by the Company amounting to $12,100 and
$17,900, respectively. Included in the mortgage loans are properties
originally foreclosed upon by the Company of which the balances at December
31, 1994 and 1993 are $4,575 and $10,400, respectively.
Allianz Investment Corporation (AIC) manages the Company's investment
portfolio. The Company paid AIC $1,285, $1,207 and $1,505 in 1994, 1993 and
1992, respectively, for investment advisory fees. The Company's liability to
AIC was $0 and $102 at December 31, 1994 and 1993, respectively.
<PAGE>
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $4,228, $4,715 and $2,400
in 1994, 1993 and 1992, respectively. The Company's liability for data center
charges was $457 and $0 at December 31, 1994 and 1993, respectively.
The Company reimbursed AZOA $817, $339, and $285 in 1994, 1993 and 1992,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $264, and $186 at December 31, 1994 and 1993,
respectively.
(10) 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 $918, $1,363 and $1,885 in
1994, 1993 and 1992, 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. In 1994,
the Company matched 50%. Any additional match for 1994 plan participants will
be determined during 1995. In 1993 and 1992, the total Company match 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 $1,266, $1,270 and $1,150 in 1994, 1993 and 1992,
respectively, towards planned contributions.
The Company sponsors an asset accumulation plan for field agents. Under the
Plan provisions, the Company will match 100% of eligible agents' contributions
up to a maximum of 3% of a participant's compensation. Agents are eligible to
participate after one year under a statutory career agent contract and are
fully vested in the Company's matching contribution after five years of
service. The Plan will accept participant's pretax or after tax contributions
up to 10% of participant's compensation. It is the Company's policy to fund
the Plan costs as accrued. Total Company contributions to the Plan were $386,
$319, and $439 in 1994, 1993 and 1992, respectively.
<PAGE>
The Company adopted SFAS No. 106, effective January 1, 1993 which requires
benefits paid to retirees, other than pension benefits, to be accrued. The
transition obligation associated with this adoption was $4,006, which is net
of $2,064 tax benefit. The Company's current plan obligation is $5,386 and
the liability is included in "Other liabilities" in the accompanying balance
sheet.
(11) 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 in determining statutory policyholders'
surplus. These items include, among other, 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
are calculated using more conservative assumptions with no provisions for
withdrawals for statutory accounting.
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,
1994 are as follows:
<TABLE>
<CAPTION>
Stockholder's Net
equity income
--------------- ---------
<S> <C> <C>
Statutory basis $ 294,335 6,895
Adjustments:
Change in reserve basis (339,283) (109,473)
Deferred acquisition costs 798,442 132,090
Net deferred taxes (5,807) (16,053)
Statutory asset valuation reserve 59,169
Statutory interest maintenance reserve 16,305 (4,768)
Modified coinsurance reinsurance (51,947) 44,920
Unrealized losses on investments (99,408)
Nonadmitted assets 2,302
Other 5,337 1,864
--------------- ---------
As reported in the accompanying consolidated
financial statements $ 679,445 55,475
=============== =========
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The statutory capital and surplus as of December 31, 1994 and
1993 was $294,335 and $245,712, respectively, which is in compliance with
these requirements. Statutory income for the years ended December 31, 1994,
1993 and 1992 was $6,895, $657 and $13,381. 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 shall be determined in accordance with the accounting
procedures and practices governing preparation of its 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 1994 the Company paid dividends on
preferred stock in the amount of $413 to AZOA. Dividends of $22,571 could be
paid in 1995 without prior approval of the Commissioner of Commerce.
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:
<PAGE>
<TABLE>
<CAPTION>
Ratio of total adjusted capital to
authorized control level risk-based
Regulatory Event Capital (less than or equal to)
- ------------------------ ------------------------------------
<S> <C>
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7
</TABLE>
The Company met the minimum risk-based capital requirements for the years
ended December 31, 1994 and 1993.
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. 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. Furthermore, the NAIC has a project to codify statutory
accounting practices, the result of which is expected to constitute the only
source of "prescribed" statutory accounting practices. Accordingly, that
project, which is expected to be completed in 1995, will likely change the
definition of what comprises prescribed versus permitted statutory accounting
practices, and may result in changes to the accounting policies that insurance
enterprises use to prepare their statutory financial statements. The Company
does not currently use permitted statutory accounting practices which could
have a significant impact on its statutory financial statements.
(12) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are subject to claims and lawsuits that arise
in the ordinary course of business. In the opinion of management, the ultimate
resolution of such litigation will not have a material adverse effect on the
consolidated financial position of the Company.
<PAGE>
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.
In December 1994, the Company approved a plan to discontinue support of its
individual agency field force and to make strategic changes in administrative
operations. Costs expected to be incurred in 1995 for terminations and
restructuring as specific actions are determined and communicated have not yet
been determined.
In December 1994, the Company approved a plan to enter into a joint marketing
agreement and expanded reinsurance arrangement with an unrelated insurance
entity covering existing products of each company as well as new products. In
conjunction therewith, the Company will provide the other insurance entity
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%.
(13) FOREIGN CURRENCY TRANSLATION
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $(2,708) (1,835) 1,058
-------- ------- -------
Ending amount of cumulative translation adjustments (3,787) (2,708) (1,835)
-------- ------- -------
Aggregate adjustment for the period resulting from translation adjustments (1,659) (1,746) (4,360)
Amount of income tax benefit for period related to aggregate adjustment 580 873 1,467
-------- ------- -------
Net aggregate translation included in equity $(1,079) (873) (2,893)
======== ======= =======
Canadian foreign exchange rate at end of year 0.7129 0.7554 0.7865
</TABLE>
(14) ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
<PAGE>
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118, an
amendment to SFAS No. 114, which are effective for fiscal years beginning
after December 15, 1994. These Statements require impaired loans within the
scope of the Statements to be measured based on the present value of expected
future cash flows discounted at the loan's original effective interest rate,
the loan's observable market price, or the fair value of the collateral if the
loan is collateral dependent. The impact of adoption of these Statements on
the financial position of the Company has not been determined.
(15) SUPPLEMENTARY INSURANCE INFORMATION
The following table summarizes certain financial information by line of
business for 1994, 1993 and 1992:
<TABLE>
<CAPTION>
As of December 31 For the years ended
------------ ------------ -------- ---------- -------------- ---------- ---------- -------------
Future Benefits,
policy Other Premium claims Amortization
Deferred benefits, policy revenue losses, of deferred
policy losses, claims and and other Net and policy
acquisition claims and Unearned benefits contract investment settlement acquisition
costs loss expense premiums payable considerations income expenses costs (a)
------------ ------------ -------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994:
Life $ 188,390 1,022,537 6,012 63,728 291,174 78,100 223,355 6,889
Accident and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797
Annuities 595,280 2,304,560 0 360 112,453 86,168 92,350 (140,776)
------------ ------------ -------- ---------- -------------- ---------- ---------- -------------
$ 798,442 3,327,097 40,376 355,411 749,311 181,291 552,319 (132,090)
============ ============ ======== ========== ============== ========== ========== =============
1993:
Life $ 195,279 989,309 7,389 57,763 263,465 80,422 216,911 (10,925)
Accident and health 16,569 0 34,181 264,583 354,837 15,735 241,466 804
Annuities 454,504 1,986,801 0 578 62,319 78,674 74,887 (243,113)
------------ ------------ -------- ---------- -------------- ---------- ---------- -------------
<PAGE>
$ 666,352 2,976,110 41,570 322,924 680,621 174,831 533,264 (253,234)
============ ============ ======== ========== ============== ========== ========== =============
1992:
Life $ 184,693 936,238 7,766 56,921 275,702 88,295 222,103 (9,481)
Accident and health 17,365 0 36,915 265,105 341,579 14,602 228,320 294
Annuities 211,060 1,539,911 0 264 28,954 66,872 63,080 (106,192)
------------ ------------ -------- ---------- -------------- ---------- ---------- -------------
$ 413,118 2,476,149 44,681 322,290 646,235 169,769 513,503 (115,379)
============ ============ ======== ========== ============== ========== ========== =============
December 31
--------- ---------
Other Premiums
operating written
expenses (b)
--------- ---------
<S> <C> <C>
1994:
Life 114,767
Accident and health 121,645
Annuities 210,933
---------
447,345
=========
1993:
Life 186,457
Accident and health 154,493
Annuities 191,783
---------
532,733
=========
1992:
Life 132,646
Accident and health 110,818
Annuities 139,321
---------
382,785
=========
</TABLE>
(a) Represents the net change in deferred policy acquisition cost reported in
the income statement.
(b) Premiums written are not applicable for life insurance companies.
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The following financial statements of the Company are included in
Part B hereof.
1. Independent Auditors' Report.
2. Consolidated Balance Sheets as of December 31, 1994 and 1993.
3. Consolidated Statements of Income for the years ended December
31, 1994, 1993 and 1992.
4. Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1994, 1993 and 1992.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992.
6. Notes to Consolidated Financial Statements - December 31, 1994,
1993 and 1992.
The following audited financial statements of the Variable Account
are included in Part B hereof.
1. Independent Auditors' Report.
2. Statements of Net Assets as of December 31, 1994.
3. Statements of Operations for the years ended December 31, 1994
and 1993.
4. Statements of Changes in Net Assets for the years ended December
31, 1994 and 1993.
5. Notes to Financial Statements - December 31, 1994.
The following unaudited financial statements of the Variable
Account are included in Part B hereof:
1. Statements of Assets and Liabilities as of June 30, 1995
(unaudited).
2. Statements of Operations for the period ended June 30, 1995
(unaudited).
3. Statements of Changes in Net Assets for the periods ended June
30, 1995 and 1994 (unaudited).
4. Notes to Financial Statements - June 30, 1995.
<PAGE>
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account
2. Not Applicable
3. Principal Underwriter Agreement*
4. Individual Variable Annuity Contract****
5. Application for Individual Variable Annuity Contract****
6. (i) Copy of Articles of Incorporation of the Company
(ii) Copy of the Bylaws of the Company
7. Not Applicable
8. Form of Fund Participation Agreement**
9. Opinion and Consent of Counsel
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information****
14. Company Organizational Chart***
27. Financial Data Schedules
*Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Form N-4 filed on September 20, 1988.
**Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Form N-4 filed on April 27, 1990.
***Incorporated by reference to Post-Effective Amendment No. 10 to
Registrant's Form N-4 filed on May 1, 1993.
****Incorporated by reference to Post-Effective Amendment No. 1 to
Registrants's Form N-4 filed on April 28, 1995.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
__________________ _____________________
<S> <C>
Lowell C. Anderson Chairman, President, Chief
1750 Hennepin Avenue Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive 777 San Marin Drive
Novato, CA 94998 Novato, CA 94998
<PAGE>
Michael P. Sullivan Director
7505 Metro Boulevard
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany
Rex B. Shannon Director
2172 Liane Lane
Santa Ana, CA 92705-3336
Edward J. Bonach Senior Vice President, Chief
1750 Hennepin Avenue Financial Officer and Treasurer
Minneapolis, MN 55403
Alan A. Grove Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President - Individual
1750 Hennepin Avenue Division
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Company organizational chart is incorporated by reference to
Post-Effective Amendment No. 10 (File No. 811-05618)
Item 27. Number of Contract Owners
As of August 31, 1995, there were 53,505 qualified Contract Owners and 106,497
non-qualified Contract Owners with Contracts in the separate account.
<PAGE>
Item 28. Indemnification
The Bylaws of the Company provide that:
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 corporation
(or by reason of serving any other organization at the request of the
corporation) shall be indemnified to the extent permitted by the laws of the
State of Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, 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 the Act and,
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 action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, 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 the Act and will be governed by the
final adjudication of such issue.
Item 29. Principal Underwriters
a. NALAC Financial Plans, Inc. is the principal underwriter for the
Contracts. It also is the principal underwriter for:
Allianz Life Variable Account A
Preferred Life Variable Account C
b. The following are the officers and directors of NALAC Financial
Plans, Inc.:
<PAGE>
<TABLE>
<CAPTION>
Name & Principal Positions and Offices
Business Address with Underwriter
________________ _____________________
<S> <C>
Lowell C. Anderson Director
1750 Hennepin Avenue
Minneapolis, MN 55403
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Mark L. Solverud Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas D. Barta Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Director
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis,
Minnesota, maintains physical possession of the accounts, books or documents
of the Variable Account required to be maintained by Section 31(a) of the
Investment Company Act of 1940, as amended, and the rules promulgated
thereunder.
<PAGE>
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance, dated November 28, 1988
(Commission ref. IP-6-88), and that the following provisions have been
complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement
and has caused this Registration Statement to be signed on its behalf in the
City of Minneapolis and State of Minnesota, on this 10th day of
October, 1995.
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/ ALAN A. GROVE
_________________
Alan A. Grove
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/ ALAN A. GROVE
_________________
Alan A. Grove
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.
<PAGE>
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board,
Lowell C. Anderson* President
Lowell C. Anderson and Chief Executive Officer 10/10/95
Herbert F. Hansmeyer* Director
Herbert F. Hansmeyer 10/10/95
Michael P. Sullivan* Director
Michael P. Sullivan 10/10/95
Dr. Jerry E. Robertson* Director
Dr. Jerry E. Robertson 10/10/95
Rex B. Shannon* Director
Rex B. Shannon 10/10/95
Director
Gerhard Rupprecht
Edward J. Bonach* Chief Financial Officer
Edward J. Bonach 10/10/95
</TABLE>
*By Power of Attorney
By: /s/ ALAN A. GROVE
_________________
Alan A. Grove
Attorney-in-Fact
<PAGE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
27 Financial Data Schedules
99.B1 Resolution of Board of Directors of the Company
99.B6 Copy of Articles of Incorporation of the Company
99.B6 Copy of the Bylaws of the Company
99.B9 Opinion and Consent of Counsel
99.B10 Independent Auditor's Consent
<PAGE>
The following resolution was adopted at a meeting of the Board
of Directors of North American Life and Casualty Company on
May 31, 1985:
RESOLVED: That this company is hereby authorized to establish one or
more separate accounts in accordance with state insurance laws and to
issue variable and fixed annuity contracts and variable and fixed life
insurance policies with the reserves for such contracts and policies
being segregated in such separate accounts or in the general accounts
of this company in the manner specified in the said accounts.
RESOLVED FURTHER: That the President of the Company or such other
executive officer of this company as shall be designated by the President
is hereby authorized to designate such separate accounts as may be deemed
necessary or convenient and to register such separate accounts and those
variable and fixed annuity contracts and life insurance policies authorized
hereby under such federal securities laws as are deemed appropriate.
RESOLVED FURTHER: That the President of this company or such other
executive officer of this company as shall be designated by the President
is hereby authorized to invest such sums in any separate account established
hereby as may be deemed necessary or appropriate to comply with requirements
of applicable law.
RESOLVED FURTHER: That the President of this company and such other
executive officers of this company as may be appropriate, are hereby
authorized to do any act necessary or appropriate to carry out the intention
of this resolution.
I, the undersigned, do hereby certify that I am the duly elected and
qualified Secretary and keeper of the records and corporate seal of North
American Life and Casualty Company, a corporation organized under the laws
of the State of Minnesota, and that the foregoing is a full, true and correct
copy of a resolution duly adopted at a meeting of the Board of Directors of
said Corporation, convened and held in accordance with the law and articles
and bylaws of said Corporation on the 31st day of May, 1985, and that said
resolution supersedes all resolutions previously adopted for the purpose
stated and is now in full force and effect.
Attest /s/ VICKI L. OSBAUGH /s/ ALAN A. GROVE
____________________ ____________________________
Alan A. Grove, Secretary
<PAGE>
AMENDED ARTICLES OF INCORPORATION
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
1750 HENNEPIN AVENUE
MINNEAPOLIS, MINNESOTA
(Amended as of March 31, 1993)
* * * * * * * *
ARTICLE I
The name of the corporation shall be Allianz Life Insurance Company of North
America. The principal office and place for the transaction of its business
shall be in the City of Minneapolis, Minnesota.
ARTICLE II
The corporation shall have the power to do any and all of the kinds of
insurance business specified in clauses (4) and (5)(a) of Section 60A.06,
Subdivision 1, of the Minnesota Statutes Annotated and any amendments to such
clauses or provisions in substitute therefore which may be hereafter adopted
together with any kind or kinds of business to the extent necessarily or
properly incidental to the kinds of insurance business which the corporation
is so authorized to do.
In furtherance of the foregoing, and not in limitation thereof, the
corporation shall have the power:
1. To make contracts of life and endowment insurance, to grant, purchase,
or dispose of annuities or endowments of any kinds; and in such contracts
or in contracts supplemental thereto to provide for additional benefits in
event of death of the insured by accidental means, total and permanent
disability of the insured, or specific dismemberment or disablement
suffered by the insured.
2. To insure against loss or damage by the sickness, bodily injury or
death by accident of the assured or his dependents.
3. To acquire and carry on all or any part of the business or property of
any corporation engaged in a business similar to that authorized to be
conducted by this corporation and to merge or consolidate with any
corporation with which this corporation shall be authorized to merge or
consolidate under the laws of the State of Minnesota.
<PAGE>
4. To acquire, own, hold, buy, sell, lease, mortgage, and in every other
manner deal in real and personal property of every kind and description,
wherever situated, including the shares of stock, bonds, debentures, notes,
evidences of indebtedness, and other securities, contracts, or obligations
of any corporation or corporations, association or associations, domestic
or foreign, and to pay therefore other assets of the corporation, stocks,
bonds, or other evidences of indebtedness or securities of this or any
other corporation.
5. To make such investments, borrow such money, own such property, as may now
or hereafter be permitted to insurance companies under the laws of the
State of Minnesota.
The corporation shall also have the general rights, powers and privileges of a
corporation, as the same now or hereafter are declared by the laws of the
State of Minnesota and any and all other rights, powers and privileges now or
hereafter granted by the laws relating to insurance adopted by the State of
Minnesota or any law or laws of the State of Minnesota applicable to stock
life insurance companies having power to do the kinds of business hereinabove
referred to.
The business of the corporation shall be transacted on the stock plan.
ARTICLE III
The management of the corporation shall be exercised by the Board of Directors
and by such committee, officers, employees, and agents as the Board may
authorize, elect, or appoint. The Board of Directors shall consist of not
less than three (3) nor more than twenty (20) directors in number, the exact
number of directors to be fixed by a resolution to be adopted at any annual
meeting of stockholders or at any special meeting called for that purpose.
The number of directors shall remain as so fixed until changed by the
stockholders at any annual meeting or at any special meeting called for that
purpose.
At each annual meeting of the stockholders, Directors shall be elected for a
term of one year. Directors need not be residents of the State of Minnesota.
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for breach of the
director's duty of loyalty to the Company or its shareholders; or (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law; or (iii) for acts prohibited under Section 300.60
of the Minnesota Statutes; or (iv) under Subdivision 2 and 3 of Section 300.64
of the Minnesota Statutes; or (v) for any transaction from which the director
derived an improper personal benefit; or (vi) for any act or omission
<PAGE>
occurring prior to the effective date of this amendment. This amendment to
the Articles of Incorporation shall be effective immediately but shall not
apply to or have any effect on the liability or alleged liability of any
director or the corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment.
ARTICLE IV
The total authorized capital of the corporation shall be $20,000,000 and shall
be evidenced by 20,000,000 common shares at a par value of one dollar each.
The holders of shares of this corporation shall not have any preemptive or
preferential right of subscription to any of the shares of the corporation,
and the sale of said shares and the terms and conditions of such sale shall be
as authorized and determined by the Board of Directors.
Voting by the holders of common shares in this corporation for the election of
directors shall not be cumulative.
ARTICLE V
In addition to the contingent and accrued contract liabilities of the
corporation, the maximum indebtedness to which it shall be subject at any one
time shall not exceed one-billion dollars ($1,000,000,000).
ARTICLE VI
The duration of the corporation shall be perpetual.
<PAGE>
BYLAWS
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
1750 HENNEPIN AVENUE
MINNEAPOLIS, MINNESOTA
(AMENDED AS OF MARCH 31, 1993)
*********************
ARTICLE I. OFFICES
The principal office of the corporation in the State of Minnesota shall be
located in the City of Minneapolis, County of Hennepin. The corporation may
have such other offices, either within or without the State of Minnesota, as
the Board of Directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall be
held on the first Tuesday after the first Monday of the month of May in each
year, at the hour of ten o'clock a.m., or at such other time on such other day
as shall be fixed by the Board of Directors, for the purpose of electing
Directors and for the transaction of such other business as may come before
the meeting. If the election of Directors shall not be held on the day
designated herein for any annual meeting of the stockholders, or at any
adjournment thereof, the Board of Directors shall cause the election of
Directors to be held at a special meeting of the stockholders as soon
thereafter as conveniently may be.
If a majority of the shares entitled to be voted shall not be represented at
any meeting of stockholders, the stockholders entitled to vote there, present
in person or represented by proxy, shall have the power to adjourn the
meeting, from time to time, without notice other than announcement at the
meeting until the requisite amount of voting stock shall be represented. Any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders, upon the vote of majority of the
shares of stock entitled to be voted, shall have the power to recess or
adjourn the meeting from time to time, without notice other than announcement
at the meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statue, may be called by
the Chief Executive Officer or by the Board of Directors, and shall be called
<PAGE>
by the Chief Executive Officer at the request of the holders of not less than
one-tenth of all outstanding shares of the corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Minnesota, as the place of meeting for
any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation
in the State of Minnesota.
Section 4. Notice of Meeting. Written notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose for which the
meeting is called, shall, unless otherwise prescribed by statue, be delivered
not less than ten (10) nor more than fifty (50) days before the date of the
meeting, either personally or by mail, by or at the direction of the Chief
Executive Officer, or the Secretary, or the office or other persons calling
the meeting, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the stockholder at his address as it appears
on the stock transfer books of the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. The Board of
Directors may fix a time not less than twenty (20) days preceding the date of
any meeting of stockholders, any dividend payment date or any date for the
allotment of rights, during which the books of the corporation will be closed
against transfer of stocks. In lieu of providing against transfer of stocks
aforesaid, the Board of Directors may fix a date not less than twenty (20)
days preceding the date of any meeting of stockholders, any dividend payment
date or any date for the allotment of rights, as a record date for the
determination of the stockholders entitled to notice of any to vote at such
meeting, or entitled to receive such dividend or rights, as the case may be.
Section 6. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders.
Section 7. Proxies. At all meetings of stockholders, a stockholder may vote
in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of
the corporation before or at the time of the meeting.
Section 8. Voting of Shares. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of stockholders.
<PAGE>
Section 9. Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by such officer, agent or proxy as the
Bylaws of such corporation may prescribe, or, in the above of such provision,
as the Board of Directors of such other corporation may determine.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall
be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The Board of Directors shall
consist of not less than three (3) nor more than twenty (20) directors in
number, the exact number of Directors to be fixed by a resolution to be
adopted at the annual meeting of stockholders or by a special meeting called
for that purpose.
At each annual meeting, Directors shall be elected for a term of one year and
until their successors shall have been elected and qualified. Directors need
not be residents of the State of Minnesota.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of stockholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Minnesota, for the holding of additional regular meetings without
other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chief Executive Officer or any two
Directors. The person or persons authorized to call special meetings of the
Board of Directors may fix and place, either within or without the State of
Minnesota, as the place for holding any special meeting of the Board of
Directors called by them.
Section 5. Notice. Notice of any special meeting shall be given personally
or by telephoning or telegraphing each Director a notice at least two days in
advance of the day when the meeting is to be held. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Waiver of notice of any meeting shall be
in writing and may be given before or after a meeting. A Director's
attendance at a meeting without protesting prior thereto or at its
commencement the lack of notice to him shall constitute waiver of such notice.
Section 6. Quorum. A majority of the members of the entire Board of
Directors shall constitute a quorum for the transaction of business, but if
less than such majority is present at a meeting, a majority of the Directors
present may adjourn the meeting from time to time without further notice.
<PAGE>
Section 7. Vacancies. Any vacancy occurring on the Board of Directors may be
filled by the affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be a Director until his successor is elected for the unexpired
term at the next annual meeting of stockholders.
Section 8. Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, in addition to the Executive Committee and the Finance Committee,
each committee to consist of two or more of the Directors of the corporation,
which to the extent provided in said resolutions, or in the Bylaws, shall have
and may have and may exercise, the powers of the Board of Directors in the
management of the business and affairs of the corporation, and may have the
power to authorize the seal of the corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be stated in these Bylaws, or as may be determined from time to
time, by resolutions adopted by the Board of Directors. All committees shall
keep regular minutes of their proceedings. Vacancies in any committee shall
be filled by the Board of Directors. All such reports shall be rendered not
later than at the second meeting of the Executive Committee or the Board of
Directors, as the case may be, next succeeding the action of any such
committee. The committee shall fix its own rules of procedure, and shall meet
where and as provided by such rules, or by resolution of the Board of
Directors.
Section 9. Retirement. No person shall serve as a Director of the Company
beyond the meeting of the Board of Directors next following his seventieth
(70) birthday. At such meeting next following his seventieth birthday, such
Director shall submit his resignation from the Board of Directors, which
resignation shall be accepted by the Board of Directors.
Section 10. General Powers. In addition to the powers and authorities by
these Bylaws expressly conferred upon it, the Board may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation, or by these Bylaws directed or
required to be exercised or done by the stockholders.
ARTICLE IV. OFFICERS
Section 1. Number. The executive officers of the corporation shall be the
Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Operating Officer, a President, one or more Divisional Presidents, Chief
Financial Officer, Executive Vice Presidents, Senior Vice Presidents, Vice
President and Second Vice Presidents (the number of such Vice Presidents to be
determined by the Board of Directors), a Secretary, and a Treasurer. The
Chairman of the Board of Directors, the Chief Executive Officer and the Chief
Operating Officer shall be selected from among the members of the Board of
Directors. At their discretion, the Board of Directors may decline to
<PAGE>
designate a Chairman of the Board of Directors. Such other executive officer
as may be deemed necessary may be elected by the Board of Directors. Any two
or more officers may be held by the same person.
Section 2. Election and Term of Office. The executive officers of the
corporation to be elected by the Board of Directors shall be elected annually
at the first meeting of the Board of Directors held after each annual meeting
of stockholders. If the election of executive officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently
may be. Each executive officer shall hold office until his successor shall
have been duly elected and qualified
Section 3. Appointive Officer. The Chief Executive Officer, subject to the
approval of the Board of Directors, may appoint one or more Assistant Vice
Presidents, and such additional appointive officers as may be designated by
the Chief Executive Officer and approved by the Board.
Section 4. Removal. An executive officer may be removed either for or
without cause by a majority vote of the Board of Directors present at any
meeting of the Board.
Section 5. Vacancies A vacancy in any executive office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 6. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Board of Directors, and shall perform
such other duties as may be assigned to him by the Board. In the event the
Board of Directors has not designated a Chairman of the Board of Directors, or
in the event the Chairman of the Board of Directors is not present, the Chief
Executive Officer shall preside at any such meeting of the Board of Directors.
Section 7. Chief Executive Officer. The Chief Executive Officer shall be
elected from among the members of the Board of Directors, and subject to the
control of the Board of Directors, shall have responsibility for the overall
operations of the corporation. He shall, when present, preside at all
meetings of the stockholders and, in general, carry out such duties as may be
prescribed by the Board of Directors from time to time.
Section 8. Chief Operating Officer. The Chief Operating Officer shall be
elected from among the members of the Board of Directors and shall report to
the Chief Executive Officer. He shall have responsibility for the day-to-day
operations of the corporation and such other duties as may be prescribed by
the Chief Executive Officer or by the Board of Directors from time to time.
<PAGE>
Section 9. President. The President shall be elected from among the members
of the Board of Directors. In general , the President shall perform such
duties as may be prescribed by the Chief Executive Officer or by the Board of
Directors from time to time.
Section 10. Divisional President. The Divisional President, or in the event
there may be more than one Divisional President, the Divisional Presidents,
shall perform such duties as may be prescribed by the President, Chief
Executive Officer, or Board of Directors, but shall generally be responsible
for the management of one of the corporation's divisions.
Section 11. Chief Financial Officer. The Chief Financial Officer shall have
supervision over the financial affairs of the corporation and shall perform
such other duties and have such other powers as may from time to time be
assigned by the President, Chief Executive Officer, or Board of Directors.
Section 12. Executive Vice President. The Executive Vice President or in the
event there be more than one Executive Vice President, the Executive Vice
Presidents, shall generally assist the President in the management of the
corporation.
Section 13. Senior Vice Presidents, Vice Presidents and Second Vice
Presidents. The Senior Presidents, Vice Presidents and Second Vice Presidents
shall perform such duties as may be assigned to them by the Chief Executive
Officer, the Chief Operating Officer, or the Board of Directors.
Section 14. Secretary. The Secretary shall keep the minute books and seal of
the corporation, record the minutes of the meetings of the stockholders and
the Board of Directors, and, in general, perform all duties and have all
powers incident to the office of Secretary, and perform such other duties and
have such other powers as from time to time may be assigned to him by these
Bylaws, or by the Board of Directors, or the Chief Executive Officer.
Section 15. Treasurer. The Treasurer shall have supervision over the funds,
securities, receipts and disbursements of the corporation, and, in general,
perform all duties and have all powers incident to the office of Treasurer,
and perform such other duties and have such other powers as from time to time
may be assigned to him by these Bylaws, or by the Board of Directors, or by
the Chief Executive Officer.
Section 16. Compensation. The executive officers and the appointive officers
shall receive such salary or compensation as may be determined by the Board of
Directors. The Board of Directors may delegate to any executive officer the
power to determine salaries or other compensation of any officer appointed in
accordance with Section 3 of ARTICLE IV.
<PAGE>
Section 17. Surety Bonds. In case the Board of Directors shall so require,
any officer or agent or the corporation shall execute to the corporation a
bond in such sum and with such surety or sureties as the Board of Directors
may direct, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting of
all property, funds or securities of the corporation which may come into his
hands.
ARTICLE V. EXECUTIVE COMMITTEE
The Board of Directors, by resolution adopted by a majority of the full Board,
may designate three or more of its members, of which Committee the Chief
Executive Officer shall be a member, to constitute an Executive Committee.
The Board of Directors shall designate a member of the Committee to serve as
Chairman of the Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or members thereof, of any responsibility imposed by law. Between
meetings of the Board of Directors, it shall have, and may exercise all of the
authority of the Board with the exception of such limitations as may be
imposed by the Board or by the laws of the State of Minnesota. All actions of
the Executive Committee shall be reported to the Board of Directors. All such
reports shall be rendered no later than at the second meeting of the Board of
Directors next succeeding such action of the Executive Committee.
ARTICLE VI. FINANCE COMMITTEE
The Board of Directors, by resolution adopted by a majority of the full Board,
may designate three or more of its members, of whom the Chief Executive
Officer shall be one, to constitute a Finance Committee. The Board of
Directors may also elect from their number one or more alternate members of
the Finance Committee to serve at the meetings of the Committee in the absence
of any regular member or members, and, in case more than one alternate is
elected, shall designate at the time of election the priorities as between
them. Vacancies in the Finance Committee shall be filled by the Board of
Directors.
The Finance Committee shall exercise general control and supervision of the
financial affairs and accounts of the corporation. It shall supervise all
investments and loans of the company, including investments in real estate,
policy loans, real estate mortgage loans and investments in housing company
securities. Directly or through such regulations as it may establish, it
shall authorize or approve the making of all investments or loans and all
sales or such investments or loans.
<PAGE>
ARTICLE VII. CERTIFICATES FOR SHARE AND THEIR TRANSFER
Section 1. Certificate for Shares. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such Certificates shall be signed by the Chief Executive Officer
and by the Secretary or an Assistant Secretary and sealed with the corporate
seal or facsimile thereof. The signatures of such officers upon a certificate
may be facsimiles if the certificate is manually signed on behalf of the
transfer agent and a registrar, other than the corporation itself or one of its
employees. Each certificate for share shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
<PAGE>
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled,
except that in case of a lost, destroyed or mutilated certificate a new one
may be issued therefore upon such terms and indemnity to the corporation as
the Board of Directors may prescribe.
In the event any officer's signature or facsimile signature shall appear on
any certificate and such officer shall have ceased to be such officer prior to
the issue of such certificate, such certificate shall be a valid certificate
and may, nevertheless, be issued and delivered.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VIII. EXECUTION OF INSTRUMENTS
All documents, instruments or writings of any nature shall be signed,
executed, verified, acknowledged and delivered by such officers, agents or
employees of the corporation, or any one of them, and in such manner, as from
time to time may be determined by the Board of Directors.
ARTICLE IX. DIVIDENDS
Dividends shall be declared and paid only out of funds available therefor at
such times and in such amounts as the Board of Directors may determine.
<PAGE>
ARTICLE X. CORPORATE SEAL
The seal of the corporation shall be in the form of a circle and shall bear
the name of the corporation and the words "Corporate Seal."
ARTICLE XI. INDEMNIFICATION
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 corporation
(or by reason of serving any other organization at the request of the
corporation) shall be indemnified to the extent permitted by the laws of the
State of Minnesota and in the manner prescribed therein.
BYLAWS CERTIFICATION
I, the undersigned, do hereby certify that I am the duly elected and qualified
Secretary and keeper of the records and corporate seal of Allianz Life
Insurance Company of North America, a corporation organized under the laws of
the State of Minnesota, and that the foregoing is a full, true and correct
copy of the amended Bylaws, duly adopted at the Special Meeting of the
Stockholders of said corporation, convened and held in accordance with the
laws and articles and bylaws of said corporation on the 12th day of February,
1993, and that said Bylaws supersede all Bylaws previously adopted for the
purpose stated and are in full force and effect.
/s/ ALAN A. GROVE
_________________
Alan A. Grove, Secretary
Allianz Life Insurance Company of North America
(Corporate Seal)
STATE OF MINNESOTA
County of Hennepin
Subscribed and sworn to before me, a Notary Public, in Minneapolis, Minnesota,
this 16th day of March, 1993.
/s/ TINA M. ERICKSON
______________________________________
Notary Public
County of Hennepin, State of Minnesota
<PAGE>
Blazzard, Grodd & Hasenauer, P.C.
Suite 213, Oceanwalk Mall
101 North Ocean Drive
Hollywood, FL 33019
(305)920-4864
October 24, 1995
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 B
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 N-4 for the Individual Deferred
Variable Annuity Contracts to be issued by Allianz Life Insurance Company of
North America and its separate account, Allianz Life Variable Account B.
We are of the following opinions:
1. Allianz Life Insurance Company of North America is a valid and existing
stock life insurance company of the state of Minnesota.
2. Allianz Life Variable Account B is a separate investment account of
Allianz Life Insurance Company of North America created and validly
existing pursuant to the Minnesota Insurance Laws and the Regulations
thereunder.
3. Upon the acceptance of purchase payments made by an Owner pursuant
to a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an
Owner will have a legally-issued, fully-paid, non-assessable contractual
interest under such Contract.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
<PAGE>
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD, & HASENAUER, P.C.
By:/S/ JUDITH A. HASENAUER
__________________________________
Judith A. Hasenauer
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center Telephone 612 305 5000 Telefax 612 305 5039
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors
Allianz Life Insurance Company of North America:
We consent to the use of our report, dated January 20, 1995, on the financial
statements of Allianz Life Variable Account B and our report dated February 7,
1995, 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
October 20, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000836346
<NAME> ALLIANZ LIFE VARIABLE ACCOUNT B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 6,849,961
<INVESTMENTS-AT-VALUE> 7,035,242
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,035,242
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,437
<TOTAL-LIABILITIES> 4,437
<SENIOR-EQUITY> 6,360,222
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 480,238
<SHARES-COMMON-PRIOR> 474,775
<ACCUMULATED-NII-CURRENT> 370,843
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 114,379
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 185,361
<NET-ASSETS> 7,030,805
<DIVIDEND-INCOME> 274,945
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 46,560
<NET-INVESTMENT-INCOME> 228,385
<REALIZED-GAINS-CURRENT> 47,418
<APPREC-INCREASE-CURRENT> 306,171
<NET-CHANGE-FROM-OPS> 581,974
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,040
<NUMBER-OF-SHARES-REDEEMED> 0
<PAGE>
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 648,801
<ACCUMULATED-NII-PRIOR> 142,458
<ACCUMULATED-GAINS-PRIOR> 66,961
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,560
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,560
<AVERAGE-NET-ASSETS> 6,706,405
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .007
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
