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. 4 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 25 (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)
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 8, 1996 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 28, 1996.
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>
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.
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 8, 1996
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. IN WASHINGTON, THE FIXED ACCOUNT IS
NOT AVAILABLE UNTIL APPROVED BY THE WASHINGTON INSURANCE DEPARTMENT.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). The Trust is a series fund with twenty-three Funds: the Money Market
Fund, the High Income Fund, the Templeton Global Income Securities Fund, The
U.S. Government Securities Fund, the Zero Coupon Funds-2000, 2005 and 2010, the
Growth and Income Fund, the Income Securities Fund, the Mutual Shares Securities
Fund, the Real Estate Securities Fund, the Rising Dividends Fund, the Templeton
Global Asset Allocation Fund, the Utility Equity Fund, the Capital Growth Fund,
the Mutual Discovery Securities Fund, the Precious Metals Fund, the Small Cap
Fund, the Templeton Developing Markets Equity Fund, the Templeton Global Growth
Fund, the Templeton International Equity Fund, the Templeton International
Smaller Companies Fund and the Templeton Pacific Growth Fund. Prior to May 1,
1996 the Templeton Global Income Securities Fund was known as the Global Income
Fund. See "Highlights" and "Tax Status" for a discussion of owner control of the
underlying investments in a variable annuity contract. IN CALIFORNIA, THE MUTUAL
SHARES SECURITIES FUND AND THE MUTUAL DISCOVERY SECURITIES FUND ARE NOT
AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH
YOUR AGENT REGARDING AVAILABILITY.)
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 PAYMENTS.
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
8, 1996, and 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.
Contents Page
DEFINITIONS...................................... 3
HIGHLIGHTS....................................... 4
FEE TABLE........................................ 6
CONDENSED FINANCIAL
INFORMATION..................................... 10
THE COMPANY...................................... 12
THE VARIABLE ACCOUNT............................. 12
FRANKLIN VALUEMARK FUNDS......................... 12
General......................................... 13
Substitution of Securities...................... 13
Voting Rights................................... 13
CHARGES AND DEDUCTIONS........................... 14
Deduction for Contingent Deferred
Sales Charge (Sales Load)...................... 14
Reduction or Elimination of Contingent
Deferred Sales Charge.......................... 14
Deduction for Mortality and
Expense Risk Charge............................ 15
Deduction for Administrative
Expense Charge................................. 15
Deduction for Contract
Maintenance Charge............................. 15
Deduction for Premium Taxes..................... 16
Deduction for Income Taxes...................... 16
Deduction for Trust Expenses.................... 16
Deduction for Transfer Fee...................... 16
THE CONTRACTS.................................... 16
Ownership....................................... 16
Assignment...................................... 17
Beneficiary..................................... 17
Change of Beneficiary........................... 17
Annuitant....................................... 17
Death of the Contract Owner
Before the Income Date......................... 17
Death of the Annuitant Prior
to the Income Date ............................ 18
Death of the Annuitant After
the Income Date................................ 18
ANNUITY PROVISIONS............................... 18
Income Date..................................... 18
Change in Income Date and
Annuity Option................................. 18
Annuity Options................................. 19
Annuity Units................................... 19
PURCHASE PAYMENTS AND
CONTRACT VALUE ................................. 20
Purchase Payments .............................. 20
Allocation of Purchase Payments................. 20
Transfer of Contract Values .................... 21
Dollar Cost Averaging .......................... 21
Automatic Investment Plan ...................... 22
Contract Value.................................. 22
Accumulation Unit............................... 22
DISTRIBUTOR...................................... 23
SURRENDERS....................................... 23
Systematic Withdrawal........................... 24
Delay of Payments............................... 24
ADMINISTRATION OF THE CONTRACTS................ 24
PERFORMANCE DATA ................................ 24
Money Market Sub-Account........................ 24
Other Sub-Accounts.............................. 25
Performance Ranking............................. 25
TAX STATUS....................................... 26
General......................................... 26
Diversification................................. 26
Multiple Contracts.............................. 27
Contracts Owned by Other than
Natural Persons................................ 27
Tax Treatment of Assignments.................... 27
Income Tax Withholding.......................... 27
Tax Treatment of Withdrawals -
Non-Qualified Contracts........................ 28
Qualified Plans................................. 28
Tax Treatment of Withdrawals -
Qualified Contracts............................ 29
Tax-Sheltered Annuities -
Withdrawal Limitations......................... 30
FINANCIAL STATEMENTS ............................ 30
LEGAL PROCEEDINGS................................ 30
APPENDIX - PERFORMANCE
INFORMATION OF SELECTED
PUBLIC FUNDS.................................... 30
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION ......................... 32
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.
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 of 1986, as amended (the "Code").
Qualified Contracts - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b) or 408 of the Code.
Sub-Account - A segment of the Variable Account. Each Sub-Account is invested in
shares of a Fund of an Eligible Investment.
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. IN WASHINGTON, THE FIXED ACCOUNT IS NOT
AVAILABLE UNTIL APPROVED BY THE WASHINGTON INSURANCE DEPARTMENT.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). (See "Franklin Valuemark Funds.") IN CALIFORNIA, THE MUTUAL SHARES
SECURITIES FUND AND THE MUTUAL DISCOVERY SECURITIES FUND ARE NOT AVAILABLE UNTIL
APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH YOUR AGENT
REGARDING AVAILABILITY.) CONTRACT OWNERS BEAR THE INVESTMENT RISK FOR ALL
AMOUNTS ALLOCATED 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 payment 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 payment to the Sub-Accounts 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
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 that may be applied to
the income portion of any distribution from the Contracts. However, the penalty
is not imposed under certain circumstances. (See "Tax Status - Tax Treatment of
Withdrawals - Non-Qualified Contracts" and "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 591/2; (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 became
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.")
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.
<PAGE>
<TABLE>
Allianz Life Variable Account B Fee Table*
Contract Owner Transaction Fees
Contingent Deferred Sales Charge**
(as a percentage of purchase payments)
<CAPTION>
Years Since
Payment Charge
------- -----
<S> <C> <C>
0-1 6%
1-2 5%
2-3 4%
3-4 3%
4-5 1.5%
5+ 0
</TABLE>
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). Pre-
scheduled automatic dollar cost averaging
transfers are not counted.
Contract Maintenance Charge......... $30 per Contract per year
(Prior to the 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%
*Applies to all 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.
<PAGE>
<TABLE>
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 "Management and Fund Administration Fees" below include investment advisory and other management and administrative
fees not included as "Other Expenses" that were paid to the Managers and Fund Administrators to the Trust for the 1995
calendar year except for Funds with fee waivers/expense reductions or newer Funds without a full year of operations
as of December 31, 1995 (see explanatory footnotes below). 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.
<CAPTION>
Management
and Fund Other Total Annual
Administration Fees1 Expenses Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund2.......................................................... .51% .02% .53%
Growth and Income Fund...................................................... .49% .03% .52%
Precious Metals Fund........................................................ .61% .05% .66%
Real Estate Securities Fund................................................. .56% .03% .59%
Utility Equity Fund......................................................... .47% .03% .50%
High Income Fund............................................................ .53% .03% .56%
Templeton Global Income Securities Fund3.................................... .55% .09% .64%
Income Securities Fund...................................................... .47% .04% .51%
The U.S. Government Securities Fund......................................... .49% .03% .52%
Zero Coupon Fund-20004...................................................... .37% .03% .40%
Zero Coupon Fund-20054...................................................... .37% .03% .40%
Zero Coupon Fund-20104...................................................... .37% .03% .40%
Rising Dividends Fund....................................................... .75% .03% .78%
Templeton International Equity Fund......................................... .83% .09% .92%
Templeton Pacific Growth Fund............................................... .90% .11% 1.01%
Templeton Global Growth Fund................................................ .93% .04% .97%
Templeton Developing Markets Equity Fund.................................... 1.25% .16% 1.41%
Templeton Global Asset Allocation Fund5..................................... .80% .10% .90%
Small Cap Fund6............................................................. .75% .15% .90%
Templeton International Smaller Companies Fund7............................. 1.00% .10% 1.10%
Capital Growth Fund7........................................................ .75% .04% .79%
Mutual Discovery Securities Fund8........................................... .95% .10% 1.05%
Mutual Shares Securities Fund8.............................................. .75% .10% .85%
<FN>
1 The Fund Administration Fee is a direct expense for the Templeton Global Asset Allocation Fund, the Templeton International
Smaller Companies Fund, the MutualDiscovery Securities Fund and the Mutual Shares Securities Fund; other Funds payfor similar
services indirectly through the Management Fee. See "Management" in the Trust Prospectus for further information regarding
Management and Fund Administration Fees.
2 Franklin Advisers, Inc. agreed in advance to waive a portion of its Management Fee and to make certain payments to reduce
expenses of the Money Market Fund during 1995 and is currently continuing this arrangement in 1996. This arrangement may be
terminated at any time. With this reduction, actual Management Fees and Total Annual Expenses of the Money Market Fund for
1995 were 0.38% and 0.40%, respectively of the average daily net assets of the Fund.
3 Prior to May 1, 1996, the Templeton Global Income Securities Fund was known as the Global Income 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 to make certain payments to reduce expenses of the three Zero Coupon
Funds through at least December 31, 1996 such that the aggregate expenses of 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, 1995, the Total Annual Expenses and Management and Fund
Administration Fees respectively would have been as follows: Zero Coupon Fund - 2000, .63% and .60%; Zero Coupon Fund - 2005,
.66% and .63%; and Zero Coupon Fund - 2010, .66% and .63%.
5 The Templeton Global Asset Allocation Fund commenced operations May 1, 1995. The expenses shown are estimated expenses for
the Fund for 1996.
6 The Small Cap Fund commenced operations November 1, 1995.The expenses shown are estimated expenses for the Fund for 1996.
7 The Templeton International Smaller Companies Fund and the Capital Growth Fund commenced operations May 1, 1996.
The expenses shown are estimated expenses for the Funds for 1996.
8 The Mutual Discovery Securities Fund and the Mutual Shares Securities Fund have not yet commenced operations. The
expenses shown are estimated expenses for the Funds for 1996.
</FN>
</TABLE>
<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 a prorated chargeof $1 based on a Contract account size of
$30,000. 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. Examples 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:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Money Market Fund.............................................................. $72 $ 89 $125 $292
Growth and Income Fund......................................................... $72 $ 89 $124 $291
Precious Metals Fund........................................................... $73 $ 93 $132 $310
Real Estate Securities Fund.................................................... $72 $ 91 $128 $300
Utility Equity Fund............................................................ $71 $ 88 $123 $288
High Income Fund............................................................... $72 $ 90 $126 $296
Templeton Global Income Securities Fund........................................ $73 $ 93 $131 $307
Income Securities Fund......................................................... $71 $ 88 $123 $290
The U.S. Government Securities Fund............................................ $72 $ 89 $124 $291
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 $ 97 $139 $325
Templeton International Equity Fund............................................ $76 $102 $147 $344
Templeton Pacific Growth Fund.................................................. $77 $104 $152 $355
Templeton Global Growth Fund................................................... $76 $103 $150 $350
Templeton Developing Markets Equity Fund....................................... $81 $117 $174 $405
Templeton Global Asset Allocation Fund*........................................ $75 $101 $146 $341
Small Cap Fund*................................................................ $75 $101 $146 $341
Templeton International Smaller Companies Fund*................................ $77 $107 $157 $367
Capital Growth Fund*........................................................... $74 $ 97 $139 $327
Mutual Discovery Securities Fund*.............................................. $77 $106 $154 $360
Mutual Shares Securities Fund*................................................. $75 $99 $143 $335
<FN>
*Estimated
+Calculated with waiver of fees and reimbursement of expenses
</FN>
</TABLE>
<PAGE>
<TABLE>
If the Contract is not surrendered at the end of the applicable time period and no prior surrenders have occurred or
is annuitized, the Contract Owner would have incurred the following expenses on a $1,000 investment, assuming a
5% annual return on assets compounded semi-annually:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Money Market Fund.............................................................. $21 $67 $121 $292
Growth and Income Fund......................................................... $21 $67 $120 $291
Precious Metals Fund........................................................... $22 $71 $128 $310
Real Estate Securities Fund.................................................... $21 $69 $124 $300
Utility Equity Fund............................................................ $20 $66 $119 $288
High Income Fund............................................................... $21 $68 $122 $296
Templeton Global Income Securities Fund........................................ $22 $71 $127 $307
Income Securities Fund......................................................... $20 $66 $119 $290
The U.S. Government Securities Fund............................................ $21 $67 $120 $291
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 $75 $135 $325
Templeton International Equity Fund............................................ $25 $80 $143 $344
Templeton Pacific Growth Fund.................................................. $26 $82 $148 $355
Templeton Global Growth Fund................................................... $25 $81 $146 $350
Templeton Developing Markets Equity Fund....................................... $30 $95 $170 $405
Templeton Global Asset Allocation Fund*........................................ $24 $79 $142 $341
Small Cap Fund*................................................................ $24 $79 $142 $341
Templeton International Smaller Companies Fund*................................ $26 $85 $153 $367
Capital Growth Fund*........................................................... $23 $75 $135 $327
Mutual Discovery Securities Fund*.............................................. $26 $84 $150 $360
Mutual Shares Securities Fund*................................................. $24 $77 $139 $335
<FN>
*Estimated
+Calculated with waiver of fees and reimbursement of other expenses
</FN>
</TABLE>
<PAGE>
<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
accumulation unit information about the financial history of each Sub-Account from the inception of each to
June 30, 1996.+ 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.
<CAPTION>
Period Year Year Year Year Year Year Period from
(Number of units in thousands) Ended Ended Ended Ended Ended Ended Ended Inception to
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Sub-Accounts: 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
Unit value at beginning of period.. $12.883 $12.354 $12.066 $11.932 $11.742 $11.288 $10.637 $10.000
Unit value at end of period........ $13.116 $12.883 $12.354 $12.066 $11.932 $11.742 $11.288 $10.637
Number of units outstanding
at end of period.................. 30,373 31,040 39,437 10,247 6,951 5,682 5,768 1,199
Growth and Income
Unit value at beginning of period.. $17.310 $13.215 $13.677 $12.574 $11.949 $9.803 $10.180 $10.000
Unit value at end of period........ $18.142 $17.310 $13.215 $13.677 $12.574 $11.949 $9.803 $10.180
Number of units outstanding
at end of period.................. 49,475 46,893 35,695 24,719 17,144 9,671 5,356 1,662
Precious Metals
Unit value at beginning of period.. $14.109 $13.979 $14.464 $9.424 $10.635 $10.387 $12.247 $10.000
Unit value at end of period........ $15.213 $14.109 $13.979 $14.464 $9.424 $10.635 $10.387 $12.247
Number of units outstanding
at end of period.................. 7,430 6,919 8,285 4,685 1,419 833 1,015 167
High Income
Unit value at beginning of period.. $17.252 $14.608 $15.155 $13.278 $11.583 $9.026 $10.021 $10.000
Unit value at end of period........ $17.777 $17.252 $14.608 $15.155 $13.278 $11.583 $9.026 $10.021
Number of units outstanding
at end of period.................. 18,578 18,756 15,679 11,787 4,780 1,923 1,056 612
Real Estate Securities
Unit value at beginning of period.. $18.073 $15.594 $15.369 $13.095 $11.848 $9.000 $10.368 $10.000
Unit value at end of period........ $19.235 $18.073 $15.594 $15.369 $13.095 $11.848 $9.000 $10.368
Number of units outstanding
at end of period.................. 11,340 10,998 11,645 5,589 1,052 394 200 57
The U.S. Government Securities
Unit value at beginning of period.. $16.298 $13.835 $14.698 $13.586 $12.798 $11.199 $10.427 $10.000
Unit value at end of period........ $15.948 $16.298 $13.835 $14.698 $13.586 $12.798 $11.199 $10.427
Number of units outstanding
at end of period.................. 31,853 34,313 36,490 40,402 25,054 14,426 5,450 1,102
Utility Equity
Unit value at beginning of period.. $19.565 $15.104 $17.319 $15.889 $14.821 $12.062 $12.010 $10.000
Unit value at end of period........ $20.287 $19.565 $15.104 $17.319 $15.88 $14.821 $12.062 $12.010
Number of units outstanding
at end of period.................. 59,785 66,669 70,082 84,217 39,387 16,188 6,300 1,173
Zero Coupon - 2000
Unit value at beginning of period.. $18.294 $15.373 $16.717 $14.595 $13.570 $11.446 $10.961 $10.000
Unit value at end of period........ $17.786 $18.294 $15.373 $16.717 $14.595 $13.570 $11.446 $10.961
Number of units outstanding
at end of period.................. 5,933 6,066 4,953 3,787 2,886 2,012 1,041 162
Zero Coupon - 2005
Unit value at beginning of period.. $20.914 $16.096 $18.050 $14.975 $13.705 $11.545 $11.406 $10.000
Unit value at end of period........ $19.387 $20.914 $16.096 $18.050 $14.975 $13.705 $11.545 $11.406
Number of units outstanding
at end of period.................. 3,624 3,504 2,780 2,020 1,090 795 406 86
Zero Coupon - 2010
Unit value at beginning of period.. $22.431 $15.930 $18.144 $14.670 $13.482 $11.390 $11.486 $10.000
Unit value at end of period........ $19.907 $22.431 $15.930 $18.144 $14.670 $13.482 $11.390 $11.486
Number of units outstanding
at end of period.................. 3,512 3,437 2,589 1,405 849 1,150 581 194
</TABLE>
<TABLE>
<CAPTION>
Period Year Year Year Year Year Year Period from
(Number of units in thousands) Ended Ended Ended Ended Ended Ended Ended Inception to
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Sub-Accounts: 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Templeton Global Income Securities *
Unit value at beginning of period.. $15.522 $13.726 $14.650 $12.733 $12.962 $11.706 $10.813 $10.000
Unit value at end of period........ $15.610 $15.522 $13.726 $14.650 $12.733 $12.962 $11.706 $10.813
Number of units outstanding
at end of period.................. 12,866 14,181 16,855 13,054 5,487 2,979 1,322 278
Income Securities
Unit value at beginning of period.. $19.785 $16.392 $17.734 $15.163 $13.580 $9.842 $10.783 $10.000
Unit value at end of period........ $20.441 $19.785 $16.392 $17.734 $15.163 $13.580 $9.842 $10.783
Number of units outstanding
at end of period.................. 59,368 59,309 56,569 38,967 11,397 4,472 3,011 1,508
Templeton Pacific Growth
Unit value at beginning of period.. $13.630 $12.802 $14.233 $9.761 $10.000** NA NA NA
Unit value at end of period........ $15.181 $13.630 $12.802 $14.233 $9.761 NA NA NA
Number of units outstanding
at end of period.................. 23,821 22,483 27,231 14,240 534 NA NA NA
Rising Dividends
Unit value at beginning of period.. $12.498 $9.769 $10.327 $10.848 $10.000** NA NA NA
Unit value at end of period........ $13.311 $12.498 $9.76 $10.327 $10.848 NA NA NA
Number of units outstanding
at end of period.......................34,564 33,789 28,778 26,256 8,388 NA NA NA
Templeton International Equity
Unit value at beginning of period.. $13.263 $12.161 $12.226 $9.642 $10.000** NA NA NA
Unit value at end of period........ $14.792 $13.263 $12.161 $12.226 $9.642 NA NA NA
Number of units outstanding
at end of period.................. 63,438 59,883 60,464 24,026 1,329 NA NA NA
Templeton Developing Markets Equity
Unit value at beginning of period.. $9.582 $9.454 $10.000** NA NA NA NA NA
Unit value at end of period........ $11.030 $9.582 $9.454 NA NA NA NA NA
Number of units outstanding
at end of period.................. 21,734 15,618 9,774 NA NA NA NA NA
Templeton Global Growth
Unit value at beginning of period.. $11.339 $10.201 $10.000** NA NA NA NA NA
Unit value at end of period........ $12.479 $11.339 $10.201 NA NA NA NA NA
Number of units outstanding
at end of period.................. 36,185 28,309 14,637 NA NA NA NA NA
Templeton Global Asset Allocation
Unit value at beginning of period.. $10.591 $10.000** NA NA NA NA NA NA
Unit value at end of period........ $11.382 $10.591 NA NA NA NA NA NA
Number of units outstanding
at end of period.................. 2,817 1,338 NA NA NA NA NA NA
Small Cap
Unit value at beginning of period.. $10.146 $10.000** NA NA NA NA NA NA
Unit value at end of period........ $11.971 $10.146 NA NA NA NA NA NA
Number of units outstanding
at end of period.................. 8,256 1,302 NA NA NA NA NA NA
Templeton International
Smaller Companies
Unit value at beginning of period.. $10.000** NA NA NA NA NA NA NA
Unit value at end of period........ $10.307 NA NA NA NA NA NA NA
Number of units outstanding
at end of period.................. 521 NA NA NA NA NA NA NA
Capital Growth
Unit value at beginning of period.. $10.000** NA NA NA NA NA NA NA
Unit value at end of period........ $10.157 NA NA NA NA NA NA NA
Number of units outstanding
at end of period.................. 478 NA NA NA NA NA NA NA
<FN>
+As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual Shares Securities Sub-Account had not yet
commenced operations.
*Prior to May 1, 1996, the Templeton Global Income Securities Sub-Account was known as the Global Income Sub-Account.
**Unit Value at inception was $10.00.
</FN>
</TABLE>
Accumulation Unit Value at the inception was $10.00 for each Sub-Account.
Inception was 1/24/89 for the Growth and Income, Templeton Global Income
Securities, High Income, Income Securities, Precious Metals, Real Estate
Securities, Utility Equity and Money Market Sub-Accounts; 3/13/89 for The U.S.
Government Securities and the three Zero Coupon Sub-Accounts; 1/24/92 for the
Rising Dividends, Templeton International Equity and Templeton Pacific Growth
Sub-Accounts; 3/15/94 for the Templeton Global Growth and Templeton Developing
Markets Equity Sub-Accounts; 5/1/95 for the Templeton Global Asset Allocation
Sub-Account; 11/1/95 for the Small Cap Sub-Account; and 5/1/96 for the the
Templeton International Smaller Companies and Capital Growth Sub-Accounts. The
Mutual Shares Securities and Mutual Discovery Securities Sub-Accounts had not
yet commenced operations as of 6/30/96.
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.
The Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets
throughout the world. The Company offers fixed and variable life insurance and
annuities, and group life, accident and health insurance.
NALAC Financial Plans, 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 Franklin Valuemark Funds. Currently,
there are twenty-three Funds available under Franklin Valuemark Funds.
Franklin Valuemark Funds
- --------------------------------------------------------------------------------
Each of the twenty-three Sub-Accounts of the Variable Account is invested solely
in the shares of one of the Funds of Franklin Valuemark Funds ("Trust"). The
Trust is an open-end management investment company registered under the 1940
Act. The investment objectives of each Fund and a discussion of potential risks
are found in the accompanying prospectus for the Trust, which is included with
this Prospectus and incorporated herein by reference.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS FOR THE
TRUST CAREFULLY BEFORE INVESTING.
Franklin Advisers, Inc. ("Advisers") serves as each Fund's (except the Rising
Dividends Fund, the Templeton Global Growth Fund, the Templeton Developing
Markets Equity Fund, the Templeton Global Asset Allocation Fund, the Templeton
International Smaller Companies Fund, the Mutual Shares Securities Fund and the
Mutual Discovery Securities Fund) investment manager. The investment manager for
the Templeton Global Growth Fund and the Templeton Global Asset Allocation Fund
is Templeton Global Advisors Limited. The investment manager for the Templeton
Developing Markets Equity Fund is Templeton Asset Management Ltd. The investment
manager for the Templeton International Smaller Companies Fund is Templeton
Investment Counsel, Inc. The investment manager for the Mutual Shares Securities
Fund and the Mutual Discovery Securities Fund is Franklin Mutual Advisers, Inc.
Franklin Advisory Services, Inc. replaced Advisers as the manager for the Rising
Dividends Fund on July 1, 1996. All investment managers or subadvisers are
referred to collectively as "Managers."
The Managers are direct or indirect wholly-owned subsidiaries of Franklin
Resources, Inc., a publicly-owned holding company. The Managers, subject to the
overall policies, control, direction, and review of the Board of Trustees of the
Trust, are responsible for recommending and providing advice with respect to
each Fund's investments, and for determining which securities will be purchased,
retained or sold as well as for execution of portfolio transactions. Certain
Managers have retained one or more subadvisers.
Franklin Templeton Services, Inc. ("Fund Administrator") provides certain
administrative facilities and services for the Funds.
Franklin Templeton Investor Services, Inc., also a wholly-owned subsidiary of
Franklin Resources, Inc., maintains the records of the Trust's shareholder
accounts, processes purchases and redemptions of shares, and serves as each
Fund's dividend paying agent.
The following Funds are available:
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
FUNDS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
The U.S. Government Securities Fund
Zero Coupon Funds - 2000, 2005, 2010
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
FUNDS SEEKING CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities Fund
Precious Metals Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
General
There is no assurance that the investment objectives of any of the Funds will be
met. 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, the
substitution of shares of any Fund for another would be in the best interests of
Contract Owners 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.
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 by the charge shown below:
Years Since
Payment Charge
----------- ------
0-1 6%
1-2 5%
2-3 4%
3-4 3%
4-5 1.5%
5+ 0
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 a 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.
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
and the commission is reduced. 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 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. The 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
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 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 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
Franklin Valuemark Funds, 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, twelve transfers may be made in a Contract Year
without a charge. Thereafter, the charge 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
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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 the 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 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 Joint Owner 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.
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 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 Contract 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.
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.
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. Any distribution of such death benefit
will be reduced by the sum of any applicable premium taxes, Contract Maintenance
Charges and Contingent Deferred Sales Charges. If the guaranteed death benefit
is the greater, it will be the death benefit. After the death benefit is
calculated, it will be subject to market risk. No additional purchase payments
will be accepted after the death of the Contract Owner.);
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 date of 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.); or
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 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 Contract
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
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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.
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-Accounts 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 the
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.
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
prorata 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 were 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.
Purchase Payments and Contract Value
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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. IN
WASHINGTON, THE FIXED ACCOUNT IS NOT AVAILABLE UNTIL APPROVED BY THE WASHINGTON
INSURANCE DEPARTMENT. IN CALIFORNIA, THE MUTUAL SHARES SECURITIES FUND AND THE
MUTUAL DISCOVERY SECURITIES FUND ARE NOT AVAILABLE UNTIL APPROVED BY THE
CALIFORNIA INSURANCE DEPARTMENT. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY.)
For each Sub-Account, the 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.
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.
Transfers 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 investment options (23
Franklin Funds and the Allianz Life Fixed Account) that a Contract Owner may
invest in at any one time. Currently, the Contract Owner may initially select up
to nine investment options and may only be invested in a maximum of ten
investment options at any one time throughout the life of the Contract. The
Company reserves the right to change the maximum number of investment options 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
the 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 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 is designed for professional market
timing organizations, other entities, or individuals using programmed, large or
frequent transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Fund and may be refused. Accounts under common
ownership or control may be aggregated for purposes of transfer limits. In
coordination with the Trust, the Company reserves the right to restrict the
transfer privilege or reject any specific 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.
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 U.S. Government Securities Sub-Account or the Fixed Account to
the Contract's other Sub-Accounts (maximum of eight) at regular intervals. By
allocating amounts 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 U.S. Government Securities 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 U.S. Government Securities
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 U.S. Government Securities 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 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. The Company does not intend to profit from any such charge. In the
event there are additional transfers, the transfer fee may be charged. Transfers
made pursuant to the Dollar Cost Averaging program are not counted in
determining the applicability of the transfer fee.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program by which a Contract Owner may
make monthly or quarterly investments by electronic funds transfer from their
checking or savings account if their bank is a member of an Automatic Clearing
House. Election of this program may occur at the time a Contract is issued, or
at any time thereafter by completing and signing the appropriate form and
returning it to the Company. The form must be received in good order by the
first of the month in order for AIP to begin that same month. Investments take
place on the 20th of the month, or the next business day. AIP may not be used
for the initial purchase payment. The minimum investment that may be made by AIP
is $250.
AIP is subject to any regulations that may govern the bank account, the
Automatic Clearing House, or the Contract. The Company may correct any error by
a debit or credit to the Contract Owner's bank account and/or Contract.
Participation in AIP may be stopped at any time at the request of the Contract
Owner. When the Company is advised to stop AIP, no automatic investments will be
processed until signed authorization is received to initiate the plan again. The
Company will need to be notified by the first of the month in order to stop or
change AIP within that month. If a transaction is rejected or returned to the
Company for any reason, including stop payment, insufficient funds, or account
closed, the respective number of units will be removed from the Contract Owner's
account, and AIP will be discounted.
If AIP is used for a Qualified Contract, the Contract Owner should contact his
or her tax adviser for maximum contributions.
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.
Distributor
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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, by agreement with the
broker-dealer, pays 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
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While the Contract is in force and before the Income Date, the Company will,
upon 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 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
the 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 591/2; (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
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.
The Surrender Value is 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:
a: any applicable premium taxes not previously
deducted;
b: any applicable Contract Maintenance Charge; and
c: any applicable Contingent Deferred Sales Charge.
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 591/2. 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 the reduction of 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:
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
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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
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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 compounding effect of this assumed reinvestment. The computation
of the yield calculation includes a deduction for the Mortality and Expense Risk
Charge, the 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 Sub-Account's average
annual total return over the most recent four calendar quarters, the period from
the Sub-Account's inception of operations, and, for Sub-Accounts in existence
for five years or more, for five years. The average annual total return is based
upon the value of the Accumulation Units acquired through a hypothetical $1,000
investment of 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, Administrative Expense Charge, Contingent Deferred
Sales Charge, and Contract Maintenance Charge. Each Sub-Account may also
advertise cumulative and total return information over different periods of time
without the Contingent Deferred Sales Charge and Contract Maintenance Charge.
The Company or NFP may, in addition, advertise or present yield or total return
performance information computed on a 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 prepared for sales literature or advertisements.
See "Calculation of Performance Data" in the Statement of Additional
Information.
The Appendix to this Prospectus contains performance information that you might
find informative. The Mutual Shares Securities Fund and the Mutual Discovery
Securities Fund ("New Valuemark funds") are newly created and therefore do not
yet have their own performance record. However, they have the same investment
objectives and portfolio managers and substantially the same investment policies
as two corresponding series of Franklin Mutual Series Fund Inc. (formerly,
Mutual Series Fund Inc.) which have been sold to the public ("Public Funds"). In
order to show how the performance of the Public Funds would have affected
Accumulation Unit values, hypothetical performance information was developed.
Part 1 in the Appendix shows the historical performance of the Public Funds
which reflects the deduction of the historical fees and expenses paid by the
Public Funds and not those paid by the New Valuemark funds. Part 2 shows
hypothetical performance figures for the Accumulation Units which assume the
deduction of the Mortality and Expense Risk Charge, the Administrative Expense
Charge and the fees and expenses that the Public Funds paid. Part 3 shows
hypothetical performance figures for the Accumulation Units which reflect the
deduction of the Mortality and Expense Risk Charge, the Administrative Expense
Charge, the Contract Maintenance Charge, the Contingent Deferred Sales Charge
and the fees and expenses that the Public Funds paid. The hypothetical
performance figures for the Accumulation Units have not been restated to reflect
the higher fees for the New Valuemark funds. If the higher fees were used, the
hypothetical performance shown would be lower. Future performance may vary and
the results shown are not necessarily representative of future results.
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 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
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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 includible 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 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."
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.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
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 treatment is not applied to Contracts held by a trust or
other entity as an agent for a natural person nor to Contracts held by Qualified
Plans. Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.
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 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 generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions). Participants should consult their own tax counsel
or other tax adviser regarding withholding requirements.
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 591/2; (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) paid 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.")
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: 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 includible 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" and
"Tax-Sheltered Annuities - Withdrawal Limitations.") 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
includible in the gross income of the employee 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: 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 includible 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 591/2; (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.
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
701/2. Required distributions must be over a period not exceeding the life or
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.
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 591/2;
(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.
Financial Statements
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Audited consolidated financial statements of the Company and audited financial
statements of the Variable Account as of and for the year ended December 31,
1995 are included in the Statement of Additional Information. Unaudited
financial statements of the Variable Account as of and for the six-month period
ended June 30, 1996 are also included in the Statement of Additional
Information.
Legal Proceedings
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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.
Appendix
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Performance Information of Selected Public Funds
The Mutual Shares Securities Fund and Mutual Discovery Securities Fund ("New
Valuemark funds") are newly created series of Franklin Valuemark Funds and have
no performance record. The New Valuemark funds do, however, have the same
investment objective and portfolio managers,1 and substantially the same
investment policies, as two corresponding series of Franklin Mutual Series Fund
Inc. (formerly "Mutual Series Fund Inc.") which have been sold directly to the
public ("Public Funds"). Thus, the performance of the Public Funds may be
considered relevant by investors.
1 In November 1996, Franklin Resources, Inc., parent company of the investment
managers of the Franklin Valuemark Funds, completed the acquisition of Heine
Securities Corporation, the investment manager of Mutual Series Fund Inc. This
transaction did not, however, change the individuals responsible for the
day-to-day operations of Franklin Mutual Series Fund Inc., who are also
responsible for the day-to-day operations of the New Valuemark funds.
Part 1 of the chart shows the past performance of the Public Funds, in terms of
average annual total return over the periods indicated. Average annual total
return represents the average annual change in value of an investment over the
stated periods, assuming reinvestment of dividends and capital gains at net
asset value. These figures reflect the deduction of the historical fees and
expenses paid by the Public Funds, which have been sold without sales charges.
Part 2 shows hypothetical performance of Accumulation Units of the New Valuemark
funds, based on the past average annual total return of the Public Funds and the
deduction of all current recurring expenses of the Separate Account, as
described above in this Prospectus. These figures do not reflect any Contingent
Deferred Sales Charge or Annual Contract Maintenance Charge, and have not been
restated to reflect the higher expenses of the New Valuemark funds, which are
also described in this Prospectus; all of which would lower the hypothetical
performance shown.
Part 3 shows hypothetical performance of Accumulation Units of the New Valuemark
funds, based on the past average annual total return of the Public Funds and the
deduction of all current recurring expenses of the Separate Account, as well as
deduction of the applicable Contingent Deferred Sales Charge and Annual Contract
Maintenance Charge, as described above in this Prospectus. These figures have
not been restated to reflect the higher expenses of the New Valuemark funds,
which are also described in this Prospectus and which would lower the
hypothetical performance shown.
Past performance cannot predict or guarantee future results of the New Valuemark
funds. In addition, the investment performance of the New Portfolios will differ
from the performance of the Public Funds because of product and portfolio
differences, including differences in portfolio size, the investments held, the
timing of purchases of similar investments, cash flows, minor differences in
certain investment policies, insurance product related tax diversification
requirements, state insurance regulations, and additional administrative and
insurance costs associated with insurance company separate accounts. These
figures are not adjusted for tax consequences.
<PAGE>
<TABLE>
<CAPTION>
1. Public Funds' Historical Performance
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mutual Discovery Fund................. 18.52% -- -- 21.90% 12/31/92
Mutual Shares Fund.................... 13.59% 17.47% 14.87% -- 7/1/49
2. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account)
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
- ----------------------------------------------------------------------------------------------------------------
Mutual Discovery Securities
Sub-Account ......................... 16.82% -- -- 20.14% 12/31/92
Mutual Shares Securities
Sub-Account ......................... 11.92% 15.74% 13.20% -- 7/1/49
3. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account and
deduction of the Contingent Deferred Sales Charge and Annual Contract Maintenance Charge)
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
- ----------------------------------------------------------------------------------------------------------------
Mutual Discovery Securities
Sub-Account.......................... 11.62% -- -- 19.92% 12/31/92
Mutual Shares Securities
Sub-Account.......................... 6.72% 15.57% 13.17% -- 7/1/49
</TABLE>
<TABLE>
<CAPTION>
Table of Contents of the
Statement of Additional Information
- -------------------------------------------------------
Item Page
<S> <C>
Company.......................................... 2
Experts.......................................... 2
Legal Opinions................................... 2
Distributor...................................... 2
Calculation of Performance Data.................. 2
Total Return ................................... 2
Yield........................................... 2
Performance Ranking............................. 3
Performance Information......................... 3
Annuity Provisions............................... 8
Variable Annuity Payout......................... 8
Annuity Unit Value ............................. 8
Fixed Annuity Payout............................ 8
Financial Statements............................. 8
</TABLE>
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
November 8, 1996
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
8, 1996, AND AS MAY BE AMENDED FROM TIME TO TIME.
<TABLE>
<CAPTION>
Table of Contents
- ------------------------------------------------------
Contents Page
<S> <C>
Company......................................... 2
Experts......................................... 2
Legal Opinions.................................. 2
Distributor..................................... 2
Calculation of Performance Data................. 2
Total Return................................... 2
Yield.......................................... 2
Performance Ranking............................ 3
Performance Information........................ 3
Annuity Provisions.............................. 8
Variable Annuity Payout........................ 8
Annuity Unit Value............................. 8
Fixed Annuity Payout........................... 8
Financial Statements............................ 8
</TABLE>
VMB SAI 11/96
<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 the Company as of and for the year ended December 31,
1995 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
- --------------------------------------------------------------------------------
Total Return
From time to time, the Company may advertise the performance data for the
Sub-Accounts in advertisements and Contract Owner communications. Such data will
show the percentage change in the value of an accumulation unit based on the
performance of a Sub-Account over a stated period of time, usually a calendar
year, which is determined by dividing the increase (or decrease) in value for
that unit by the accumulation unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Charge, a 0.15% Administrative
Expense Charge, the fees of the Funds being advertised and any applicable
Contingent Deferred Sales Charge and Contract Maintenance Charge ("Standardized
Total Return"). The Contingent Deferred Sales Charge and Contract Maintenance
Charge deductions are calculated assuming a Contract is surrendered at the end
of the reporting period.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual accumulation unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contingent Deferred Sales Charge and Contract Maintenance Charge to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
P (1 + T)n = ERV
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 made at
the beginning of the period at the end of the period.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of the
Contingent Deferred Sales Charge and the Contract Maintenance Charge
("Non-Standardized Total Return"). Cumulative total return is calculated in a
similar manner as described above except that the results are not annualized.
The Company may also advertise cumulative and total return information over
different periods of time.
The Company may also present performance information computed on a different
basis.
<PAGE>
Yield
The Money Market Sub-Account. The Company may advertise yield information for
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 yield at any particular time is not
indicative of what the yield may be at any other time.
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, Administrative Expense
Charge and Contract Maintenance Charge.
The 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.)
For the seven-day period ending on 6/30/96, the Money Market Sub-Account had a
current yield of 3.47% and an effective yield of 3.53%.
Other Sub-Accounts. The Company may also quote current yield in advertisements
and Contract Owner communications for the other Sub-Accounts. 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 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:
Yield = 2 [((a-b) + 1)6 - 1]
-----
cd
where:
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.
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 that no Contingent Deferred Sales Charges have been deducted
(see the Prospectus for information regarding the Contingent Deferred Sales
Charge). The Company does not currently advertise yield information for any
Sub-Account (other than the Money Market Sub-Account).
Performance Ranking
Total return information for the Sub-Accounts 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, evaluation of performance by independent sources may also be
used in advertisements and in information furnished to present or prospective
Contract Owners.
Performance Information
Total returns quoted in advertising reflect all aspects of a Sub-Account's
return, including the automatic reinvestment by Allianz Life Variable Account B
of all distributions and any change in a Sub-Account's value over the period.
The following chart shows the average annual total return on a hypothetical
investment in the Sub-Accounts for the last year, from the date that the
Sub-Account began operations, and, for Sub-Accounts in existence for five years
or more, for five years, through June 30, 1996. In addition, cumulative total
returns for the periods shown through June 30, 1996, are presented. The returns
reflect the deduction of the Mortality and Expense Risk Charge, Administrative
Expense Charge and the actual fees and expenses paid by each Fund and are shown
both with and without the deduction of the Contingent Deferred Sales Charge and
Contract Maintenance Charge.
<PAGE>
<TABLE>
<CAPTION>
Standardized Total Return
Franklin Valuemark II/III
Average Annual Total Return for the periods ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
Franklin Valuemark II Franklin Valuemark III
------------------------------ ------------------------------
Inception One Five Since One Five Since
Sub-Account Date Year Year Inception Year Year Inception
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Growth....................... 5/1/96 NA NA NA NA NA NA
Growth and Income.................... 1/24/89 15.70% 11.39% 8.25% 14.85% 11.39% 8.25%
High Income.......................... 1/24/89 3.76% 10.83% 7.95% 2.91% 10.83% 7.95%
Income Securities.................... 1/24/89 7.70% 11.00% 10.01% 6.85% 11.00% 10.01%
Money Market......................... 1/24/89 -0.44% 2.43% 3.62% -1.29% 2.43% 3.62%
Precious Metals...................... 1/24/89 4.19% 6.75% 5.71% 3.34% 6.75% 5.71%
Real Estate Securities............... 1/24/89 14.83% 12.20% 9.11% 13.98% 12.20% 9.11%
Rising Dividends..................... 1/27/92 16.27% NA 6.50% 15.42% NA 6.50%
Small Cap............................ 11/1/95 NA NA NA NA NA NA
Templeton Developing
Markets Equity...................... 3/15/94 9.62% NA 3.31% 8.77% NA 3.31%
Templeton Global
Asset Allocation.................... 5/1/95 8.39% NA 8.61% 7.54% NA 8.61%
Templeton Global Growth.............. 3/15/94 10.61% NA 9.15% 9.76% NA 9.15%
Templeton Global
Income Securities*.................. 1/24/89 1.66% 5.31% 6.09% 0.81% 5.31% 6.09%
Templeton International
Equity.............................. 1/27/92 9.39% NA 9.08% 8.54% NA 9.08%
Templeton International
Smaller Companies................... 5/1/96 NA NA NA NA NA NA
Templeton Pacific Growth............. 1/27/92 12.29% NA 9.73% 11.44% NA 9.73%
U.S. Government Securities........... 3/14/89 -1.13% 6.37% 6.51% -1.98% 6.37% 6.51%
Utility Equity....................... 1/24/89 15.65% 10.08% 9.90% 14.80% 10.08% 9.90%
Zero Coupon - 2000................... 3/14/89 -1.94% 8.76% 8.12% -2.79% 8.76% 8.12%
Zero Coupon - 2005................... 3/14/89 -2.64% 10.92% 9.41% -3.49% 10.92% 9.41%
Zero Coupon - 2010................... 3/14/89 -2.76% 12.37% 9.81% -3.61% 12.37% 9.81%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
*Prior to May 1, 1996, the Templeton Global Income Securities Sub-Account was
known as the Global Income Sub-Account.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return
Franklin Valuemark II/III
Total Return for the periods ended June 30, 1996:
Without Contingent Deferred Sales Charge or Contract Maintenance Charge
Total Return Cumulative Total Return
--------------------------------------- ------------------------------
Inception One Three Five Since Three Five Since
Sub-Account Date Year Year Year Inception Year Year Inception
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth............... 5/1/96 NA NA NA 1.57% NA NA 1.57%
Growth and Income............ 1/24/89 20.05% 12.10% 11.53% 8.34% 40.87% 72.54% 81.42%
High Income.................. 1/24/89 8.11% 7.44% 10.96% 8.04% 24.03% 68.23% 77.77%
Income Securities............ 1/24/89 12.05% 7.08% 11.13% 10.09% 22.76% 69.51% 104.41%
Money Market................. 1/24/89 3.91% 3.02% 2.60% 3.72% 9.33% 13.68% 31.16%
Precious Metals.............. 1/24/89 8.54% 5.56% 6.89% 5.81% 17.62% 39.56% 52.13%
Real Estate Securities....... 1/24/89 19.18% 9.34% 12.33% 9.20% 30.70% 78.85% 92.35%
Rising Dividends............. 1/27/92 20.62% 9.20% NA 6.67% 30.20% NA 33.11%
Small Cap.................... 11/1/95 NA NA NA 19.71% NA NA 19.71%
Templeton Developing
Markets Equity.............. 3/15/94 13.97% NA NA 4.36% NA NA 10.30%
Templeton Global Asset
Allocation.................. 5/1/95 12.74% NA NA 11.73% NA NA 13.82%
Templeton Global
Growth...................... 3/15/94 14.96% NA NA 10.13% NA NA 24.79%
Templeton Global Income
Securities*................. 1/24/89 6.01% 3.92% 5.46% 6.17% 12.21% 30.45% 56.10%
Templeton International
Equity...................... 1/27/92 13.74% 13.84% NA 9.25% 47.52% NA 47.92%
Templeton International
Smaller Companies........... 5/1/96 NA NA NA 3.07% NA NA 3.07%
Templeton Pacific
Growth...................... 1/27/92 16.64% 11.71% NA 9.89% 39.40% NA 51.81%
U.S. Government
Securities.................. 3/14/89 3.22% 3.29% 6.51% 6.60% 10.19% 37.09% 59.48%
Utility Equity............... 1/24/89 20.00% 5.25% 10.21% 9.98% 16.59% 62.61% 102.87%
Zero Coupon - 2000........... 3/14/89 2.41% 2.93% 8.89% 8.21% 9.04% 53.12% 77.86%
Zero Coupon - 2005........... 3/14/89 1.71% 3.59% 11.04% 9.49% 11.15% 68.83% 93.87%
Zero Coupon - 2010........... 3/14/89 1.59% 5.40% 12.49% 9.89% 17.08% 80.13% 99.07%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
*Prior to May 1, 1996, the Templeton Global Income Securities Sub-Account was
known as the Global Income Sub-Account.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return
Franklin Valuemark III
Total Return for the periods ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
Cumulative
Total Return Total Return
------------------------------ --------------------
Inception One Three Since Three Since
Sub-Account Date Year Year Inception Year Inception
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth.................................. 5/1/96 NA NA -3.63% NA -3.63%
Growth and Income............................... 1/24/89 14.85% 11.42% 8.25% 38.31% 80.29%
High Income..................................... 1/24/89 2.91% 6.71% 7.95% 21.50% 76.68%
Income Securities............................... 1/24/89 6.85% 6.33% 10.01% 20.23% 103.29%
Money Market.................................... 1/24/89 -1.29% 2.22% 3.62% 6.81% 30.28%
Precious Metals................................. 1/24/89 3.34% 4.80% 5.71% 15.10% 51.14%
Real Estate Securities.......................... 1/24/89 13.98% 8.62% 9.11% 28.16% 91.20%
Rising Dividends................................ 1/27/92 15.42% 8.48% 6.50% 27.64% 32.14%
Small Cap....................................... 11/1/95 NA NA 14.51% NA 14.51%
Templeton Developing Markets Equity............. 3/15/94 8.77% NA 3.31% NA 7.77%
Templeton Global Asset Allocation............... 5/1/95 7.54% NA 8.61% NA 10.12%
Templeton Global Growth......................... 3/15/94 9.76% NA 9.15% NA 22.26%
Templeton Global Income Securities*............. 1/24/89 0.81% 3.13% 6.09% 9.69% 55.16%
Templeton International Equity.................. 1/27/92 8.54% 13.18% 9.08% 44.98% 46.94%
Templeton International Smaller
Companies...................................... 5/1/96 NA NA -2.13% NA -2.13%
Templeton Pacific Growth........................ 1/27/92 11.44% 11.03% 9.73% 36.87% 50.84%
U.S. Government Securities...................... 3/14/89 -1.98% 2.49% 6.51% 7.67% 58.52%
Utility Equity.................................. 1/24/89 14.80% 4.47% 9.90% 14.03% 101.80%
Zero Coupon - 2000.............................. 3/14/89 -2.79% 2.13% 8.12% 6.52% 76.86%
Zero Coupon - 2005.............................. 3/14/89 -3.49% 2.80% 9.41% 8.62% 92.82%
Zero Coupon - 2010.............................. 3/14/89 -3.61% 4.63% 9.81% 14.55% 97.98%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
*Prior to May 1, 1996, the Templeton Global Income Securities Sub-Account was
known as the Global Income Sub-Account.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return
Franklin Valuemark II
Total Return for the periods ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
Cumulative
Total Return Total Return
------------------------------ --------------------
Inception One Three Since Three Since
Sub-Account Date Year Year Inception Year Inception
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth.................................. 5/1/96 NA NA -2.78% NA -2.78%
Growth and Income............................... 1/24/89 15.70% 11.42% 8.25% 38.31% 80.29%
High Income..................................... 1/24/89 3.76% 6.71% 7.95% 21.50% 76.68%
Income Securities............................... 1/24/89 7.70% 6.33% 10.01% 20.23% 103.29%
Money Market.................................... 1/24/89 -0.44% 2.22% 3.62% 6.81% 30.28%
Precious Metals................................. 1/24/89 4.19% 4.80% 5.71% 15.10% 51.14%
Real Estate Securities.......................... 1/24/89 14.83% 8.62% 9.11% 28.16% 91.20%
Rising Dividends................................ 1/27/92 16.27% 8.48% 6.50% 27.64% 32.14%
Small Cap....................................... 11/1/95 NA NA 15.36% NA 15.36%
Templeton Developing Markets Equity............. 3/15/94 9.62% NA 3.31% NA 7.77%
Templeton Global Asset Allocation............... 5/1/95 8.39% NA 8.61% NA 10.12%
Templeton Global Growth......................... 3/15/94 10.61% NA 9.15% NA 22.26%
Templeton Global Income Securities*............. 1/24/89 1.66% 3.13% 6.09% 9.69% 55.16%
Templeton International Equity.................. 1/27/92 9.39% 13.18% 9.08% 44.98% 46.94%
Templeton International Smaller
Companies...................................... 5/1/96 NA NA -1.28% NA -1.28%
Templeton Pacific Growth........................ 1/27/92 12.29% 11.03% 9.73% 36.87% 50.84%
U.S. Government Securities...................... 3/14/89 -1.13% 2.49% 6.51% 7.67% 58.52%
Utility Equity.................................. 1/24/89 15.65% 4.47% 9.90% 14.03% 101.80%
Zero Coupon - 2000.............................. 3/14/89 -1.94% 2.13% 8.12% 6.52% 76.86%
Zero Coupon - 2005.............................. 3/14/89 -2.64% 2.80% 9.41% 8.62% 92.82%
Zero Coupon - 2010.............................. 3/14/89 -2.76% 4.63% 9.81% 14.55% 97.98%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
*Prior to May 1, 1996, the Templeton Global Income Securities Sub-Account was
known as the Global Income Sub-Account.
</FN>
</TABLE>
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return 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 the Contract, the
larger amount will be paid. The dollar amount of annuity payments after the
first is determined as follows:
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.
<PAGE>
Annuity Unit Value
The value of an Annuity Unit for a Sub-Account is determined (see below) by
subtracting (2) from (1), dividing the result by (3) and multiplying the result
by .999866337248 (.999866337248 is the daily factor to neutralize the assumed
net investment rate of 5% per annum which is built into the annuity rate table)
where:
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.
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 any joint annuitant where
allowed.
Financial Statements
- --------------------------------------------------------------------------------
The audited consolidated financial statements of the Company as of and for the
year ended December 31, 1995, 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 and
for the year ended December 31, 1995 are also included herein. In addition,
unaudited financial statements of the Variable Account as of and for the
six-month period ended June 30, 1996 are included herein.
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements
Statements of Assets and Liabilities
June 30, 1996 (unaudited)
(In thousands except per unit data)
U.S.
Money Growth and Precious High Real Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
------- ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 398,601 shares,
cost $398,601.......................................... $398,601 - - - - -
Growth and Income Fund, 55,439 shares,
cost $783,080.......................................... - 899,223 - - - -
Precious Metals Fund, 7,577 shares,
cost $110,698.......................................... - - 113,044 - - -
High Income Fund, 25,605 shares,
cost $326,481.......................................... - - - 330,309 - -
Real Estate Securities Fund, 12,189 shares,
cost $187,133.......................................... - - - - 218,175 -
U.S. Government Securities Fund, 39,660 shares,
cost $512,991.......................................... - - - - - 508,039
-------- ------- ------- ------- ------- -------
Total assets......................................... 398,601 899,223 113,044 330,309 218,175 508,039
-------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges............... 49 25 9 16 12 23
Accrued administrative charges........................... 6 3 1 2 1 3
-------- ------- ------- ------- ------- -------
Total liabilities.................................... 55 28 10 18 13 26
-------- ------- ------- ------- ------- -------
Net assets........................................... $398,546 899,195 113,034 330,291 218,162 508,013
======== ======= ======= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)................ $398,366 897,554 113,034 330,267 218,132 507,982
Contracts in annuity payment period (note 2)............. 180 1,641 - 24 30 31
-------- ------- ------- ------- ------- -------
Total contract owners' equity........................ $398,546 899,195 113,034 330,291 218,162 508,013
======== ======= ======= ======= ======= =======
Accumulation units outstanding........................... 30,373 49,475 7,430 18,578 11,340 31,853
======== ======= ======= ======= ======= =======
Accumulation unit value per unit......................... $13.116 18.142 15.213 17.777 19.235 15.948
======== ======= ======= ======= ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
(In thousands except per unit data)
Templeton Investment
Utility Zero Zero Zero Global Income Grade
Equity Coupon Coupon Coupon Securities Intermediate
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Bond Fund
-------- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 68,479 shares,
cost $1,075,761............................... $1,214,138 - - - - -
Zero Coupon Fund - 2000, 7,268 shares,
cost $101,556................................. - 105,532 - - - -
Zero Coupon Fund - 2005, 4,581 shares,
cost $67,112.................................. - - 70,268 - - -
Zero Coupon Fund - 2010, 4,674 shares,
cost $70,608.................................. - - - 69,920 - -
Templeton Global Income Securities Fund,
15,967 shares, cost $202,997.................. - - - - 200,860 -
Investment Grade Intermediate Bond Fund,
10,890 shares, cost $144,237.................. - - - - - 145,928
---------- ------- ------ ------ ------- -------
Total assets............................... 1,214,138 105,532 70,268 69,920 200,860 145,928
---------- ------- ------ ------ ------- -------
Liabilities:
Accrued mortality and expense risk charges...... 40 8 8 8 13 9
Accrued administrative charges.................. 5 1 1 1 1 1
---------- ------- ------ ------ ------- -------
Total liabilities.......................... 45 9 9 9 14 10
---------- ------- ------ ------ ------- -------
Net assets.................................. $1,214,093 105,523 70,259 69,911 200,846 145,918
========== ======= ====== ====== ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)....... $1,212,889 105,523 70,259 69,911 200,846 145,908
Contracts in annuity payment period (note 2).... 1,204 - - - - 10
---------- ------- ------ ------ ------- -------
Total contract owners' equity.............. $1,214,093 105,523 70,259 69,911 200,846 145,918
========== ======= ====== ====== ======= =======
Accumulation units outstanding.................. 59,785 5,933 3,624 3,512 12,866 9,429
========== ======= ====== ====== ======= =======
Accumulation unit value per unit................ $20.287 17.786 19.387 19.907 15.610 15.475
========== ======= ====== ====== ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
(In thousands except per unit data)
Adjustable Templeton Templeton Templeton
Income U.S. Pacific Rising International Developing
Securities Government Growth Dividends Equity Markets Equity
Fund Fund Fund Fund Fund Fund
-------- -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Income Securities Fund, 75,582 shares,
cost $1,122,487................................. $1,216,115 - - - - -
Adjustable U.S. Government Fund, 15,685 shares,
cost $169,163................................... - 160,297 - - - -
Templeton Pacific Growth Fund, 24,302 shares,
cost $331,297................................... - - 362,098 - - -
Rising Dividends Fund, 34,634 shares,
cost $376,653................................... - - - 460,631 - -
Templeton International Equity Fund,
66,570 shares, cost $840,754.................... - - - - 939,298 -
Templeton Developing Markets Equity Fund,
21,811 shares, cost $224,677.................... - - - - - 241,015
---------- ------- ------- ------- ------- -------
Total assets................................. 1,216,115 160,297 362,098 460,631 939,298 241,015
---------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges........ 27 11 13 14 59 1
Accrued administrative charges.................... 3 1 1 2 7 -
---------- ------- ------- ------- ------- -------
Total liabilities............................ 30 12 14 16 66 1
---------- ------- ------- ------- ------- -------
Net assets................................... $1,216,085 160,285 362,084 460,615 939,232 241,014
========== ======= ======= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)......... $1,213,524 160,281 361,628 460,079 938,369 239,729
Contracts in annuity payment period (note 2)...... 2,561 4 456 536 863 1,285
---------- ------- ------- ------- ------- -------
Total contract owners' equity................ $1,216,085 160,285 362,084 460,615 939,232 241,014
========== ======= ======= ======= ======= =======
Accumulation units outstanding.................... 59,368 13,135 23,821 34,564 63,438 21,734
========== ======= ======= ======= ======= =======
Accumulation unit value per unit.................. $20.441 12.203 15.181 13.311 14.792 11.030
========== ======= ======= ======= ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
(In thousands except per unit data)
Templeton
Templeton Templeton International
Global Global Asset Small Capital Smaller Total
Growth Allocation Cap Growth Companies All
Fund Fund Fund Fund Fund Funds
------- -------- ----- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Global Growth Fund, 35,996 shares,
cost $403,424........................................... $453,914 - - - -
Templeton Global Asset Allocation Fund, 2,838 shares,
cost $30,473............................................ - 32,269 - - -
Small Cap Fund, 8,157 shares, cost $93,765............... - - 99,113 - -
Capital Growth Fund, 477 shares, cost $4,853............. - - - 4,859 -
Templeton International Smaller Companies Fund,
523 shares, cost $5,285................................. - - - - 5,406
-------- ------ ------ ------ ------
Total assets......................................... 453,914 32,269 99,113 4,859 5,406 8,249,052
-------- ------ ------ ------ ------ ---------
Liabilities:
Accrued mortality and expense risk charges................ 3 5 8 8 12 381
Accrued administrative charges............................ 1 1 1 1 2 46
------- ------ ------ ------ ------ ---------
Total liabilities.................................... 4 6 9 9 14 427
------- ------ ------ ------ ------ ---------
Net assets.. ........................................ $453,910 32,263 99,104 4,850 5,392 8,248,625
======== ====== ====== ====== ====== =========
Contract owners' equity:
Contracts in accumulation period (note 6)................. $451,555 32,064 98,832 4,850 5,369 8,236,951
Contracts in annuity payment period (note 2).............. 2,355 199 272 - 23 11,674
-------- ------ ------ ------ ------ ---------
Total contract owners' equity........................ $453,910 32,263 99,104 4,850 5,392 8,248,625
======== ====== ====== ====== ====== =========
Accumulation units outstanding............................ 36,185 2,817 8,256 478 521 508,515
======== ====== ====== ====== ====== =========
Accumulation unit value per unit.......................... $12.479 11.382 11.971 10.157 10.307
======== ====== ====== ====== ======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations
For the period ended June 30, 1996 (unaudited)
(In thousands)
U.S.
Money Growth and Precious High Real Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
-------- ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.................... $ 10,009 20,139 1,477 27,936 8,702 36,122
-------- ------ ------ ------ ------ ------
Expenses:
Mortality and expense risk charges..................... 2,522 5,299 774 2,030 1,272 3,313
Administrative charges................................. 303 636 93 244 153 398
-------- ------ ------ ------ ------ ------
Total expenses.................................... 2,825 5,935 867 2,274 1,425 3,711
-------- ------ ------ ------ ------ ------
Investment income (loss), net..................... 7,184 14,204 610 25,662 7,277 32,411
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds..... - 71,329 1,354 1,483 - -
-------- ------ ------ ------ ------ ------
Realized gains (losses) on sales of investments:
Proceeds from sales.................................... 198,654 40,662 38,092 53,955 9,534 45,593
Cost of investments sold............................... (198,654) (32,254) (33,792) (48,730) (8,067) (43,154)
-------- ------ ------ ------ ------ ------
Total realized gains (losses) on sales of
investments, net................................. - 8,408 4,300 5,225 1,467 2,439
-------- ------ ------ ------ ------ ------
Realized gains (losses) on investments, net....... - 79,737 5,654 6,708 1,467 2,439
Net change in unrealized appreciation (depreciation)
on investments......................................... - (54,539) (231) (22,452) 4,211 (46,785)
-------- ------ ------ ------ ------ ------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.. - 25,198 5,423 (15,744) 5,678 (44,346)
-------- ------ ------ ------ ------ ------
Net increase (decrease) in net assets from operations... $ 7,184 39,402 6,033 9,918 12,955 (11,935)
======== ====== ====== ====== ====== ======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the period ended June 30, 1996 (unaudited)
(In thousands)
Templeton Investment
Utility Zero Zero Zero Global Income Grade
Equity Coupon Coupon Coupon Securities Intermediate
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Bond Fund
-------- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares............. $ 59,963 5,915 3,734 3,687 15,325 7,793
-------- ----- ----- ------ ------ -----
Expenses:
Mortality and expense risk charges.............. 7,749 672 437 434 1,298 916
Administrative charges.......................... 930 81 52 52 156 110
-------- ----- ----- ------ ------ -----
Total expenses............................. 8,679 753 489 486 1,454 1,026
-------- ----- ----- ------ ------ -----
Investment income (loss), net.............. 51,284 5,162 3,245 3,201 13,871 6,767
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds................................. - 58 - 999 - -
-------- ----- ----- ------ ------ -----
Realized gains (losses) on sales of investments:
Proceeds from sales............................. 153,782 9,460 3,716 19,740 23,446 9,422
Cost of investments sold........................ (135,633) (8,543) (3,292) (17,884) (22,412) (8,896)
-------- ----- ----- ------ ------ -----
Total realized gains (losses) on sales
of investments, net....................... 18,149 917 424 1,856 1,034 526
-------- ----- ----- ------ ------ -----
Realized gains (losses) on investments, net 18,149 975 424 2,855 1,034 526
Net change in unrealized appreciation
(depreciation) on investments................... (27,740) (9,200) (9,018) (14,574) (13,993) (7,195)
-------- ----- ----- ------ ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net....................... (9,591) (8,225) (8,594) (11,719) (12,959) (6,669)
-------- ----- ----- ------ ------ -----
Net increase (decrease) in net assets
from operations................................. $ 41,693 (3,063) (5,349) (8,518) 912 98
======== ===== ===== ====== ====== =====
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the period ended June 30, 1996 (unaudited)
(In thousands)
Adjustable Templeton Templeton Templeton
Income U.S. Pacific Rising International Developing
Securities Government Growth Dividends Equity Markets Equity
Fund Fund Fund Fund Fund Fund
------- -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares............... $62,078 12,299 10,182 9,452 23,741 2,088
------- ------ ------ ------ ------ ------
Expenses:
Mortality and expense risk charges................ 7,447 1,043 2,182 2,714 5,413 1,254
Administrative charges............................ 894 125 262 326 650 151
------- ------ ------ ------ ------ ------
Total expenses............................... 8,341 1,168 2,444 3,040 6,063 1,405
------- ------ ------ ------ ------ ------
Investment income (loss), net................ 53,737 11,131 7,738 6,412 17,678 683
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on
mutual funds...................................... 10,324 - 5,901 - 29,052 3,862
------- ------ ------ ------ ------ ------
Realized gains (losses) on sales of investments:
Proceeds from sales............................... 47,641 30,134 47,463 24,354 19,922 11,058
Cost of investments sold.......................... (42,407) (30,146) (42,210) (20,133) (17,590) (10,534)
------- ------ ------ ------ ------ ------
Total realized gains (losses) on sales
of investments, net......................... 5,234 (12) 5,253 4,221 2,332 524
------- ------ ------ ------ ------ ------
Realized gains (losses) on investments, net.. 15,558 (12) 11,154 4,221 31,384 4,386
Net change in unrealized appreciation
(depreciation) on investments..................... (30,335) (7,661) 17,216 16,782 44,357 19,577
------- ------ ------ ------ ------ ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net......................... (14,777) (7,673) 28,370 21,003 75,741 23,963
------- ------ ------ ------ ------ ------
Net increase (decrease) in net assets from operations $38,960 3,458 36,108 27,415 93,419 24,646
======= ====== ====== ====== ====== ======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the period ended June 30, 1996 (unaudited)
(In thousands)
Templeton
Templeton Templeton International
Global Global Asset Small Capital Smaller Total
Growth Allocation Cap Growth Companies All
Fund Fund Fund Fund Fund Funds
------- -------- ------ ----- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares...................... $ 6,984 14 34 - - 327,674
------- ----- ------ --- --- -------
Expenses:
Mortality and expense risk charges....................... 2,397 145 395 9 13 49,728
Administrative charges................................... 288 17 47 1 2 5,971
------- ----- ------ --- --- -------
Total expenses...................................... 2,685 162 442 10 15 55,699
------- ----- ------ --- --- -------
Investment income (loss), net....................... 4,299 (148) (408) (10) (15) 271,975
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds....... 6,984 27 3 - - 131,376
------- ----- ------ --- --- -------
Realized gains (losses) on sales of investments:
Proceeds from sales...................................... 3,062 2,238 16,384 831 17 809,160
Cost of investments sold................................. (2,767) (2,130) (15,671) (846) (16) (745,761)
------- ----- ------ --- --- -------
Total realized gains (losses) on sales
of investments, net................................ 295 108 713 (15) 1 63,399
------- ----- ------ --- --- -------
Realized gains (losses) on investments, net......... 7,279 135 716 (15) 1 194,775
Net change in unrealized appreciation (depreciation)
on investments........................................... 23,705 1,473 5,165 6 122 (111,109)
------- ----- ------ --- --- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.... 30,984 1,608 5,881 (9) 123 83,666
------- ----- ------ --- --- -------
Net increase (decrease) in net assets from operations..... $35,283 1,460 5,473 (19) 108 355,641
======= ===== ====== === === =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Growth and
Money Market Fund Income Fund Precious Metals Fund High Income Fund
---------------- --------------- ---------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------- ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 7,184 17,718 14,204 (1,279) 610 52 25,662 15,167
Realized gains (losses) on
investments, net................... - - 79,737 21,076 5,654 2,150 6,708 3,298
Net change in unrealized appreciation
(depreciation) on investments...... - - (54,539) 147,406 (231) (2,147) (22,452) 27,669
-------- ------- ------- ------- ------- ------ ------- -------
Net increase (decrease) in
net assets from operations..... 7,184 17,718 39,402 167,203 6,033 55 9,918 46,134
-------- ------- ------- ------- ------- ------ ------- -------
Contract transactions (note 6):
Purchase payments................... 88,633 190,018 78,445 98,725 16,558 11,049 27,084 47,086
Transfers between funds............. (35,816) (169,358) 22,023 150,088 (1,501) (17,212) (12,156) 46,491
Surrenders and terminations......... (60,142) (120,722) (51,981) (73,514) (5,588) (11,728) (17,716) (43,591)
Rescissions......................... (1,021) (5,198) (1,811) (1,783) (156) (326) (478) (1,643)
Other transactions (note 2)......... (227) 238 385 240 58 (36) 59 77
-------- ------- ------- ------- ------- ------ ------- -------
Net increase (decrease)
in net assets resulting from
contract transactions.......... (8,573) (105,022) 47,061 173,756 9,371 (18,253) (3,207) 48,420
-------- ------- ------- ------- ------- ------ ------- -------
Increase (decrease) in net assets..... (1,389) (87,304) 86,463 340,959 15,404 (18,198) 6,711 94,554
-------- ------- ------- ------- ------- ------ ------- -------
Net assets at beginning of period..... 399,935 487,239 812,732 471,773 97,630 115,828 323,580 229,026
-------- ------- ------- ------- ------- ------ ------- -------
Net assets at end of period........... $398,546 399,935 899,195 812,732 113,034 97,630 330,291 323,580
======== ======= ======= ======= ======= ====== ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Real Estate U.S. Government Zero Coupon
Securities Fund Securities Fund Utility Equity Fund Fund - 1995
--------------- --------------- ----------------- ------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 7,277 3,361 32,411 30,379 51,284 48,876 - 2,395
Realized gains (losses) on
investments, net................... 1,467 1,477 2,439 2,695 18,149 1,589 - 600
Net change in unrealized appreciation
(depreciation) on investments...... 4,211 22,517 (46,785) 54,968 (27,740) 255,500 - (597)
-------- ------- ------- ------- --------- --------- --- -------
Net increase (decrease) in
net assets from operations..... 12,955 27,355 (11,935) 88,042 41,693 305,965 - 2,398
-------- ------- ------- ------- --------- --------- --- -------
Contract transactions (note 6):
Purchase payments................... 12,992 19,829 23,782 47,766 36,512 73,558 - 1,557
Transfers between funds............. 3,725 (12,435) (28,123) (5,307) (87,436) 10,721 - (36,522)
Surrenders and terminations......... (10,151) (17,397) (34,711) (74,423) (81,772) (141,926) - (13,413)
Rescissions......................... (107) (277) (531) (1,813) (529) (1,891) - (49)
Other transactions (note 2)......... (25) 99 297 132 130 537 - 88
-------- ------- ------- ------- --------- --------- --- -------
Net increase (decrease)
in net assets resulting from
contract transactions......... 6,434 (10,181) (39,286) (33,645) (133,095) (59,001) - (48,339)
-------- ------- ------- ------- --------- --------- --- -------
Increase (decrease) in net assets..... 19,389 17,174 (51,221) 54,397 (91,402) 246,964 - (45,941)
-------- ------- ------- ------- --------- --------- --- -------
Net assets at beginning of period..... 198,773 181,599 559,234 504,837 1,305,495 1,058,531 - 45,941
-------- ------- ------- ------- --------- --------- --- -------
Net assets at end of period........... $218,162 198,773 508,013 559,234 1,214,093 1,305,495 - -
======== ======= ======= ======= ========= ========= === =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Zero Coupon Zero Coupon Zero Coupon Templeton Global
Fund - 2000 Fund - 2005 Fund - 2010 Income Securities Fund
--------------- ------------- ------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net........... $ 5,162 2,895 3,245 1,752 3,201 1,068 13,871 5,291
Realized gains (losses) on
investments, net....................... 975 1,081 424 753 2,855 2,987 1,034 (206)
Net change in unrealized appreciation
(depreciation) on investments.......... (9,200) 12,514 (9,018) 13,063 (14,574) 15,696 (13,993) 22,286
-------- ------- ------ ------ ------ ------ ------- -------
Net increase (decrease) in
net assets from operations......... (3,063) 16,490 (5,349) 15,568 (8,518) 19,751 912 27,371
-------- ------- ------ ------ ------ ------ ------- -------
Contract transactions (note 6):
Purchase payments....................... 8,311 16,203 6,696 13,119 7,074 12,239 6,812 13,098
Transfers between funds................. (3,404) 13,339 (1,482) 4,711 (2,704) 9,807 (13,086) (21,421)
Surrenders and terminations............. (7,162) (10,927) (2,765) (4,654) (2,982) (5,624) (13,856) (29,898)
Rescissions............................. (142) (263) (134) (185) (110) (469) (156) (400)
Other transactions (note 2)............. 18 (17) 1 (23) 15 177 77 25
-------- ------- ------ ------ ------ ------ ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions.............. (2,379) 18,335 2,316 12,968 1,293 16,130 (20,209) (38,596)
-------- ------- ------ ------ ------ ------ ------- -------
Increase (decrease) in net assets......... (5,442) 34,825 (3,033) 28,536 (7,225) 35,881 (19,297) (11,225)
-------- ------- ------ ------ ------ ------ ------- -------
Net assets at beginning of period......... 110,965 76,140 73,292 44,756 77,136 41,255 220,143 231,368
-------- ------- ------ ------ ------ ------ ------- -------
Net assets at end of period............... $105,523 110,965 70,259 73,292 69,911 77,136 200,846 220,143
======== ======= ====== ====== ====== ====== ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Investment Grade Adjustable U.S. Templeton
Intermediate Bond Fund Income Securities Fund Government Fund Pacific Growth Fund
---------------- ----------------- -------------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.... $ 6,767 3,922 53,737 44,301 11,131 9,723 7,738 1,633
Realized gains (losses) on
investments, net................ 526 624 15,558 7,100 (12) (1,327) 11,154 3,150
Net change in unrealized
appreciation (depreciation)
on investments.................. (7,195) 7,237 (30,335) 145,457 (7,661) 6,258 17,216 14,929
-------- ------- --------- --------- ------- ------- ------- -------
Net increase (decrease) in
net assets from operations.. 98 11,783 38,960 196,858 3,458 14,654 36,108 19,712
-------- ------- --------- --------- ------- ------- ------- -------
Contract transactions (note 6):
Purchase payments................ 8,204 15,136 92,086 145,910 21,783 43,555 20,493 27,022
Transfers between funds.......... (4,453) 364 (17,930) 33,034 (28,098) (75,287) 16,757 (52,319)
Surrenders and terminations...... (7,582) (16,323) (70,315) (125,202) (10,863) (27,666) (18,066) (35,125)
Rescissions...................... (226) (379) (2,308) (3,470) (525) (1,087) (177) (1,057)
Other transactions (note 2)...... (5) (24) 449 670 23 296 126 (45)
-------- ------- --------- --------- ------- ------- ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions....... (4,062) (1,226) 1,982 50,942 (17,680) (60,189) 19,133 (61,524)
-------- ------- --------- --------- ------- ------- ------- -------
Increase (decrease) in net assets.. (3,964) 10,557 40,942 247,800 (14,222) (45,535) 55,241 (41,812)
-------- ------- --------- --------- ------- ------- ------- -------
Net assets at beginning of period.. 149,882 139,325 1,175,143 927,343 174,507 220,042 306,843 348,655
-------- ------- --------- --------- ------- ------- ------- -------
Net assets at end of period........ $145,918 149,882 1,216,085 1,175,143 160,285 174,507 362,084 306,843
======== ======= ========= ========= ======= ======= ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Templeton
Rising Templeton International Developing Markets Templeton
Dividends Fund Equity Fund Equity Fund Global Growth Fund
---------------- --------------- --------------- --------------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------ ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 6,412 2,452 17,678 1,998 683 (1,241) 4,299 (2,008)
Realized gains (losses) on
investments, net................... 4,221 1,323 31,384 20,155 4,386 (277) 7,279 303
Net change in unrealized appreciation
(depreciation) on investments...... 16,782 81,539 44,357 42,587 19,577 3,149 23,705 26,429
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net assets from operations..... 27,415 85,314 93,419 64,740 24,646 1,631 35,283 24,724
-------- ------- ------- ------- ------- ------- ------- -------
Contract transactions (note 6):
Purchase payments................... 29,824 42,756 58,128 99,403 32,123 42,027 78,353 119,490
Transfers between funds............. 2,245 50,303 34,652 (30,418) 41,320 22,865 33,116 46,237
Surrenders and terminations......... (21,337) (35,907) (41,253) (72,338) (7,370) (7,387) (14,362) (15,658)
Rescissions......................... (634) (750) (737) (2,115) (257) (1,069) (832) (1,966)
Other transactions (note 2)......... 110 131 353 59 71 (55) 68 64
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions.......... 10,208 56,533 51,143 (5,409) 65,887 56,381 96,343 148,167
-------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in net assets..... 37,623 141,847 144,562 59,331 90,533 58,012 131,626 172,891
-------- ------- ------- ------- ------- ------- ------- -------
Net assets at beginning of period..... 422,992 281,145 794,670 735,339 150,481 92,469 322,284 149,393
-------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of period........... $460,615 422,992 939,232 794,670 241,014 150,481 453,910 322,284
======== ======= ======= ======= ======= ======= ======= =======
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Templeton Templeton
Global Asset International Smaller
Allocation Fund Small Cap Fund Capital Growth Fund Companies Fund
-------------- ------------- ------------- --------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net................ $ (148) 127 (408) (25) (10) - (15) -
Realized gains (losses) on investments, net.. 135 71 716 - (15) - 1 -
Net change in unrealized appreciation
(depreciation) on investments............... 1,473 323 5,165 183 6 - 122 -
------- ------ ------ ----- ----- ----- ----- ----
Net increase (decrease) in net assets
from operations......................... 1,460 521 5,473 158 (19) - 108 -
------- ------ ------ ----- ----- ----- ----- ----
Contract transactions (note 6):
Purchase payments............................ 9,444 5,580 23,676 2,140 1,223 - 942 -
Transfers between funds...................... 8,050 9,316 59,891 11,013 3,650 - 4,385 -
Surrenders and terminations.................. (884) (1,163) (3,183) (36) (4) - (22) -
Rescissions.................................. (36) (27) (165) (19) - - (21) -
Other transactions (note 2).................. (5) 7 152 4 - - - -
------- ------ ------ ------ ----- ----- ----- ----
Net increase (decrease) in net assets
resulting from contract transactions.... 16,569 13,713 80,371 13,102 4,869 - 5,284 -
------- ------ ------ ------ ----- ----- ----- ----
Increase (decrease) in net assets.............. 18,029 14,234 85,844 13,260 4,850 - 5,392 -
------- ------ ------ ------ ----- ----- ----- ----
Net assets at beginning of period.............. 14,234 - 13,260 - - - - -
------- ------ ------ ------ ----- ----- ----- ----
Net assets at end of period.................... $32,263 14,234 99,104 13,260 4,850 - 5,392 -
======= ====== ====== ====== ===== ===== ===== ====
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the period ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(In thousands)
Total All Funds
-------------------
1996 1995
------ ------
<S> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net...................................................................... $ 271,975 188,557
Realized gains (losses) on investments, net........................................................ 194,775 68,622
Net change in unrealized appreciation (depreciation) on investments................................ (111,109) 896,966
---------- ---------
Net increase (decrease) in net assets from operations.......................................... 355,641 1,154,145
---------- ---------
Contract transactions (note 6):
Purchase payments.................................................................................. 689,178 1,087,266
Transfers between funds............................................................................ (6,375) (11,990)
Surrenders and terminations........................................................................ (484,067) (884,622)
Rescissions........................................................................................ (11,093) (26,236)
Other transactions (note 2)........................................................................ 2,130 2,644
---------- ---------
Net increase (decrease) in net assets resulting from contract transactions..................... 189,773 167,062
---------- ---------
Increase (decrease) in net assets.................................................................... 545,414 1,321,207
---------- ---------
Net assets at beginning of period.................................................................... 7,703,211 6,382,004
---------- ---------
Net assets at end of period.......................................................................... $8,248,625 7,703,211
========== =========
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements
June 30, 1996 (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
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include realized gain distributions received from the
respective funds and gains on the sale of fund shares as determined by the
average cost method. Realized gain distributions are reinvested in the
respective funds. Dividend distributions received from the FVF are reinvested in
additional shares of the FVF and are recorded as income to the Variable Account
on the ex-dividend date.
A Fixed Account investment option is available to deferred annuity contract
owners. This account is comprised of equity and fixed income investments which
are part of the general assets of Allianz Life. The liabilities of the Fixed
Account are part of the general obligations of Allianz Life and are not included
in the Variable Account. The guaranteed minimum rate of return on the Fixed
Account is 3%.
The Templeton Global Asset Allocation Fund, Fixed Account and Small Cap Fund
were added as available investment options on May 1, 1995, October 1, 1995 and
November 1, 1995, respectively. The Zero Coupon - 1995 Fund matured and was
closed on December 15, 1995. The Capital Growth Fund and Templeton International
Smaller Companies Fund were added as available investment options on May 1,
1996.
On May 1, 1995, the Equity Growth Fund name was changed to Growth and Income
Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996.
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 0.15% of the daily net assets of the Variable
Account.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
June 30, 1996 (unaudited)
2. Significant Accounting Policies (cont.)
Expenses (cont.)
Contract Based Expenses
A contract maintenance charge is paid by the contract owner annually from each
deferred annuity 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
period ended June 30, 1996 (unaudited) and the year ended December 31, 1995 were
$2,250,020 and $4,294,361, respectively. These contract charges are reflected in
the Statements of Changes in Net Assets 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 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>
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 deferred annuity 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 period
ended June 30, 1996 (unaudited) and the year ended December 31, 1995 were
$5,444,241 and $12,373,225, 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 period ended June 30,
1996 (unaudited) and the year ended December 31, 1995 were $44,417 and $119,180,
respectively. Transfer charges are reflected in the Statements of Changes in Net
Assets as other transactions. Transfers to the Fixed Account for the period
ended June 30, 1996 (unaudited) and the year ended December 31, 1995 were
$6,375,180 and $11,989,631, respectively.
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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
June 30, 1996 (unaudited)
3. Capitalization
Allianz Life provides capital for the establishment of new funds as investment
options of the Variable Account. The capitalization transactions were as follows
during the period ended June 30, 1996 (unaudited) and the year ended December
31, 1995:
<TABLE>
<CAPTION>
Capitalization Date of Market Value Date of Current
Fund Amount Capitalization at Withdrawal Withdrawal Market Value
- ------------------------------------------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Templeton Global Asset Allocation Fund........... $500,000 4/18/95 $525,500 12/21/95 -
Small Cap Fund................................... 250,000 9/18/95 313,250 5/29/96 -
Capital Growth Fund.............................. 250,000 4/30/96 - - $254,500
Templeton International Smaller Companies Fund... 250,000 4/30/96 - - 258,250
</TABLE>
4. Investment Transactions
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the period ended June 30, 1996 (unaudited)
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund................................. $197,013
Growth and Income Fund............................ 172,871
Precious Metals Fund.............................. 49,380
High Income Fund.................................. 77,724
Real Estate Securities Fund....................... 23,116
U.S. Government Securities Fund................... 38,439
Utility Equity Fund............................... 71,297
Zero Coupon Fund - 2000........................... 12,244
Zero Coupon Fund - 2005........................... 9,240
Zero Coupon Fund - 2010........................... 25,197
Templeton Global Income Securities Fund........... 16,998
Investment Grade Intermediate Bond Fund........... 12,041
Income Securities Fund............................ 113,097
Adjustable U.S. Government Fund................... 23,493
Templeton Pacific Growth Fund..................... 80,084
Rising Dividends Fund............................. 40,727
Templeton International Equity Fund............... 117,341
Templeton Developing Markets Equity Fund.......... 81,419
Templeton Global Growth Fund...................... 110,534
Templeton Global Asset Allocation Fund............ 18,579
Small Cap Fund.................................... 96,332
Capital Growth Fund............................... 5,699
Templeton International Smaller Companies Fund.... 5,301
</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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
June 30, 1996 (unaudited)
6. Contract Transactions - Accumulation Unit Activity (In thousands)
Transactions in units for each fund for the period ended June 30, 1996
(unaudited) and the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
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, 1994.......................... 39,437 35,695 8,285 15,679 11,645 36,490 70,082 3,195
Contract transactions:
Purchase payments.......................... 15,069 6,403 796 2,877 1,233 3,115 4,303 106
Transfers between funds.................... (13,495) 9,757 (1,290) 2,959 (792) (266) 736 (2,398)
Surrenders and terminations................ (9,580) (4,859) (846) (2,661) (1,077) (4,916) (8,372) (905)
Rescissions................................ (410) (118) (24) (102) (17) (118) (113) (3)
Other transactions......................... 19 15 (2) 4 6 8 33 5
------ ------ ------ ------ ------ ------ ------ -----
Net increase (decrease) in
accumulation units resulting
from contract transactions........... (8,397) 11,198 (1,366) 3,077 (647) (2,177) (3,413) (3,195)
------ ------ ------ ------ ------ ------- ------ -----
Accumulation units outstanding at
December 31, 1995.......................... 31,040 46,893 6,919 18,756 10,998 34,313 66,669 -
====== ====== ====== ====== ====== ====== ====== =====
Contract transactions (unaudited):
Purchase payments.......................... 6,764 4,407 1,008 1,537 696 1,484 1,865 -
Transfers between funds.................... (2,733) 1,193 (152) (685) 198 (1,759) (4,535) -
Surrenders and terminations................ (4,603) (2,939) (341) (1,006) (545) (2,171) (4,194) -
Rescissions................................ (78) (102) (9) (27) (6) (33) (27) -
Other transactions......................... (17) 23 5 3 (1) 19 7 -
------ ------ ----- ------ ------ ------ ------ -----
Net increase (decrease) in
accumulation units resulting
from contract transactions........... (667) 2,582 511 (178) 342 (2,460) (6,884) -
------ ------ ----- ------ ------ ------ ------ -----
Accumulation units outstanding at
June 30, 1996 (unaudited).................. 30,373 49,475 7,430 18,578 11,340 31,853 59,785 -
====== ====== ===== ====== ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Zero Zero Zero Templeton Investment Adjustable Templeton
Coupon Coupon Coupon Global Income Grade Income U.S. Pacific
Fund - Fund - Fund - Securities Intermediate Securities Government Growth
2000 2005 2010 Fund Bond Fund Fund Fund Fund
----- ----- ----- --------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at
December 31, 1994................... 4,953 2,780 2,589 16,855 9,772 56,569 19,865 27,231
Contract transactions:
Purchase payments................... 966 715 652 904 1,016 7,979 3,753 2,065
Transfers between funds............. 800 269 511 (1,494) 30 1,879 (6,551) (4,013)
Surrenders and terminations......... (636) (249) (297) (2,058) (1,099) (6,965) (2,397) (2,714)
Rescissions......................... (16) (10) (27) (28) (25) (192) (95) (82)
Other transactions.................. (1) (1) 9 2 (2) 39 25 (4)
----- ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions.... 1,113 724 848 (2,674) (80) 2,740 (5,265) (4,748)
----- ----- ----- ------ ----- ------ ------ ------
Accumulation units outstanding at
December 31, 1995................... 6,066 3,504 3,437 14,181 9,692 59,309 14,600 22,483
===== ===== ===== ====== ===== ====== ====== ======
Contract transactions (unaudited):
Purchase payments................... 463 340 348 443 533 4,563 1,807 1,383
Transfers between funds............. (192) (73) (124) (852) (289) (903) (2,331) 1,175
Surrenders and terminations......... (398) (140) (146) (902) (492) (3,509) (900) (1,217)
Rescissions......................... (8) (7) (5) (10) (15) (115) (44) (12)
Other transactions.................. 2 - 2 6 - 23 3 9
----- ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions.... (133) 120 75 (1,315) (263) 59 (1,465) 1,338
----- ----- ----- ------ ----- ------ ------ ------
Accumulation units outstanding at
June 30, 1996 (unaudited)........... 5,933 3,624 3,512 12,866 9,429 59,368 13,135 23,821
===== ===== ===== ====== ===== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
June 30, 1996 (unaudited)
6. Contract Transactions - Accumulation Unit Activity (In thousands) (cont.)
<TABLE>
<CAPTION>
Templeton Templeton Templeton
Templeton Developing Templeton Global International
Rising International Markets Global Asset Small Capital Smaller Total
Dividends Equity Equity Growth Allocation Cap Growth Companies All
Fund Fund Fund Fund Fund Fund Fund Fund Funds
------ -------- ------- ------- ------- ----- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding
at December 31, 1994......... 28,778 60,464 9,774 14,637 - - - - 474,775
Contract transactions:
Purchase payments............ 3,782 7,774 4,364 10,991 538 212 - - 79,613
Transfers between funds...... 4,493 (2,530) 2,372 4,306 916 1,096 - - (2,705)
Surrenders and
terminations................ (3,208) (5,662) (773) (1,448) (114) (4) - - (60,840)
Rescissions.................. (68) (168) (112) (183) (3) (2) - - (1,916)
Other transactions........... 12 5 (7) 6 1 - - - 172
------ ------ ------ ------ ----- ----- --- --- ------
Net increase (decrease)
in accumulation units
resulting from
contract transactions.. 5,011 (581) 5,844 13,672 1,338 1,302 - - 14,324
------ ------ ------ ------ ----- ----- --- --- ------
Accumulation units outstanding
at December 31, 1995......... 33,789 59,883 15,618 28,309 1,338 1,302 - - 489,099
====== ====== ====== ====== ===== ===== === === =======
Contract transactions
(unaudited):
Purchase payments............ 2,304 4,071 2,980 6,415 837 2,034 121 92 46,495
Transfers between funds...... 160 2,413 3,839 2,710 725 5,205 357 433 3,780
Surrenders and
terminations................ (1,649) (2,903) (686) (1,185) (80) (284) - (2) (30,292)
Rescissions.................. (49) (52) (24) (69) (3) (14) - (2) (711)
Other transactions........... 9 26 7 5 - 13 - - 144
------ ------ ------ ------ ----- ----- --- --- -------
Net increase (decrease)
in accumulation units
resulting from
contract transactions.. 775 3,555 6,116 7,876 1,479 6,954 478 521 19,416
------ ------ ------ ------ ----- ----- --- --- -------
Accumulation units outstanding
at June 30, 1996 (unaudited). 34,564 63,438 21,734 36,185 2,817 8,256 478 521 508,515
====== ====== ====== ====== ===== ===== === === =======
</TABLE>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1995
<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, 1995, the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the years in the two-years then ended.
These financial statements are the responsibility of the Variable Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Investment securities held in custody for the benefit of the Variable Account
were confirmed to us by the Franklin Valuemark Funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of the sub-accounts of
Allianz Life Variable Account B at December 31, 1995, the results of their
operations for the year then ended and the changes in their net assets for
each of the years in the two-years then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 22, 1996
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities
December 31, 1995
(In thousands)
Growth Real U.S.
Money and Precious High Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
-------- ------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 400,242
shares, cost $400,242 $400,242 - - - - -
Growth and Income Fund, 47,441
shares, cost $642,464 - 813,146 - - - -
Precious Metals Fund,
6,938 shares, cost $95,110 - - 97,687 - - -
High Income Fund, 23,702
shares, cost $297,487 - - - 323,767 - -
Real Estate Securities Fund,
11,432 shares, cost $172,084 - - - - 198,914 -
U.S. Government Securities Fund,
39,967 shares, cost $517,705 - - - - - 559,540
-------- ------- -------- ------- ---------- ----------
Total assets 400,242 813,146 97,687 323,767 198,914 559,540
-------- ------- -------- ------- ---------- ----------
Liabilities:
Accrued mortality and expense risk charges 274 370 51 167 126 273
Accrued administrative charges 33 44 6 20 15 33
-------- ------- -------- ------- ---------- ----------
Total liabilities 307 414 57 187 141 306
-------- ------- -------- ------- ---------- ----------
Net assets $399,935 812,732 97,630 323,580 198,773 559,234
======== ======= ======== ======= ========== ==========
Contract owners' equity:
Contracts in accumulation period (note 6) $399,901 811,706 97,630 323,580 198,773 559,234
Contracts in annuity payment
period (note 2) 34 1,026 - - - -
-------- ------- -------- ------- ---------- ----------
Total contract owners' equity $399,935 812,732 97,630 323,580 198,773 559,234
======== ======= ======== ======= ========== ==========
</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, 1995
(In thousands)
Zero Zero Zero
Utility Coupon Coupon Coupon Global
Equity Fund - Fund - Fund - Income
Fund 2000 2005 2010 Fund
---------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 72,973
shares, cost $1,140,098 $1,306,215 - - - -
Zero Coupon Fund - 2000,
7,059 shares, cost $97,854 - 111,030 - - -
Zero Coupon Fund - 2005,
4,220 shares, cost $61,163 - - 73,337 - -
Zero Coupon Fund - 2010,
4,278 shares, cost $63,295 - - - 77,181 -
Global Income Fund, 16,365
shares, cost $208,411 - - - - 220,267
---------- ------- ------ ------ -------
Total assets 1,306,215 111,030 73,337 77,181 220,267
---------- ------- ------ ------ -------
Liabilities:
Accrued mortality and expense risk charges 643 58 40 40 111
Accrued administrative charges 77 7 5 5 13
---------- ------- ------ ------ -------
Total liabilities 720 65 45 45 124
---------- ------- ------ ------ -------
Net assets $1,305,495 110,965 73,292 77,136 220,143
========== ======= ====== ====== =======
Contract owners' equity:
Contracts in accumulation period (note 6) $1,304,348 110,965 73,292 77,136 220,143
Contracts in annuity payment
period (note 2) 1,147 - - - -
---------- ------- ------ ------ -------
Total contract owners' equity $1,305,495 110,965 73,292 77,136 220,143
========== ======= ====== ====== =======
</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, 1995
(In thousands)
Investment Adjustable Templeton Templeton
Grade Income U.S. Pacific Rising International
Intermediate Securities Government Growth Dividends Equity
Bond Fund Fund Fund Fund Fund Fund
------------- ---------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Investment Grade Intermediate Bond
Fund, 10,675 shares, cost $141,092 $ 149,978 - - - - -
Income Securities Fund, 71,388
shares, cost $1,051,796 - 1,175,760 - - - -
Adjustable U.S. Government Fund,
16,228 shares, cost $175,816 - - 174,610 - - -
Templeton Pacific Growth Fund,
22,071 shares, cost $293,424 - - - 307,008 - -
Rising Dividends Fund, 33,432
shares, cost $356,060 - - - - 423,255 -
Templeton International Equity Fund,
59,699 shares, cost $741,003 - - - - - 795,190
------------- ---------- ---------- --------- --------- -------------
Total assets 149,978 1,175,760 174,610 307,008 423,255 795,190
------------- ---------- ---------- --------- --------- -------------
Liabilities:
Accrued mortality and expense risk charges 86 551 92 147 235 464
Accrued administrative charges 10 66 11 18 28 56
------------- ---------- ---------- --------- --------- -------------
Total liabilities 96 617 103 165 263 520
------------- ---------- ---------- --------- --------- -------------
Net assets $ 149,882 1,175,143 174,507 306,843 422,992 794,670
============= ========== ========== ========= ========= =============
Contract owners' equity:
Contracts in accumulation period (note 6) $ 149,882 1,173,447 174,507 306,448 422,318 794,226
Contracts in annuity payment
period (note 2) - 1,696 - 395 674 444
------------- ---------- ---------- --------- --------- -------------
Total contract owners' equity $ 149,882 1,175,143 174,507 306,843 422,992 794,670
============= ========== ========== ========= ========= =============
</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, 1995
(In thousands)
Templeton Templeton
Developing Templeton Global
Markets Global Asset Small Total
Equity Growth Allocation Cap All
Fund Fund Fund Fund Funds
----------- --------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Developing Markets Equity
Fund, 15,394 shares, cost $153,792 $ 150,553 - - -
Templeton Global Growth Fund,
27,442 shares, cost $295,657 - 322,442 - -
Templeton Global Asset Allocation
Fund, 1,364 shares, cost $14,024 - - 14,347 -
Small Cap Fund, 1,299 shares,
cost $13,104 - - - 13,287
----------- --------- ---------- ------
Total assets 150,553 322,442 14,347 13,287 7,707,756
----------- --------- ---------- ------ ---------
Liabilities:
Accrued mortality and expense risk charges 64 141 101 24 4,058
Accrued administrative charges 8 17 12 3 487
----------- --------- ---------- ------ ---------
Total liabilities 72 158 113 27 4,545
----------- --------- ---------- ------ ---------
Net assets $ 150,481 322,284 14,234 13,260 7,703,211
=========== ========= ========== ====== =========
Contract owners' equity:
Contracts in accumulation period (note 6) $ 149,649 320,997 14,167 13,211 7,695,560
Contracts in annuity payment
period (note 2) 832 1,287 67 49 7,651
----------- --------- ---------- ------ ---------
Total contract owners' equity $ 150,481 322,284 14,234 13,260 7,703,211
=========== ========= ========== ====== =========
</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, 1995
(In thousands)
Growth Real U.S.
Money and Precious High Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
---------- -------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 23,692 7,314 1,546 19,247 5,958 37,956
---------- -------- --------- -------- ----------- -----------
Expenses:
Mortality and expense risk charges 5,334 7,672 1,334 3,643 2,319 6,765
Administrative charges 640 921 160 437 278 812
---------- -------- --------- -------- ----------- -----------
Total expenses 5,974 8,593 1,494 4,080 2,597 7,577
---------- -------- --------- -------- ----------- -----------
Investment income (loss), net 17,718 (1,279) 52 15,167 3,361 30,379
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - 15,921 1,145 - - -
---------- -------- --------- -------- ----------- -----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 421,429 39,408 64,829 49,344 34,264 84,760
Cost of investments sold (421,429) (34,253) (63,824) (46,046) (32,787) (82,065)
---------- -------- --------- -------- ----------- -----------
Total realized gains (losses) on
sales of investments, net - 5,155 1,005 3,298 1,477 2,695
---------- -------- --------- -------- ----------- -----------
Realized gains (losses)
on investments, net - 21,076 2,150 3,298 1,477 2,695
Net change in unrealized appreciation
(depreciation) on investments - 147,406 (2,147) 27,669 22,517 54,968
---------- -------- --------- -------- ----------- -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net - 168,482 3 30,967 23,994 57,663
---------- -------- --------- -------- ----------- -----------
Net increase (decrease) in
net assets from operations $ 17,718 167,203 55 46,134 27,355 88,042
========== ======== ========= ======== =========== ===========
</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, 1995
(In thousands)
Zero Zero Zero Zero
Utility Coupon Coupon Coupon Coupon Global
Equity Fund - Fund - Fund - Fund - Income
Fund 1995 2000 2005 2010 Fund
---------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 65,100 2,930 4,248 2,593 1,881 8,424
---------- -------- -------- ------- -------- --------
Expenses:
Mortality and expense risk charges 14,486 478 1,208 751 726 2,797
Administrative charges 1,738 57 145 90 87 336
---------- -------- -------- ------- -------- --------
Total expenses 16,224 535 1,353 841 813 3,133
---------- -------- -------- ------- -------- --------
Investment income (loss), net 48,876 2,395 2,895 1,752 1,068 5,291
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - 14 - - - -
---------- -------- -------- ------- -------- --------
Realized gains (losses)
on sales of investments:
Proceeds from sales 134,789 53,632 11,775 8,345 34,323 54,834
Cost of investments sold (133,200) (53,046) (10,694) (7,592) (31,336) (55,040)
---------- -------- -------- ------- -------- --------
Total realized gains (losses) on
sales of investments, net 1,589 586 1,081 753 2,987 (206)
---------- -------- -------- ------- -------- --------
Realized gains (losses)
on investments, net 1,589 600 1,081 753 2,987 (206)
Net change in unrealized appreciation
(depreciation) on investments 255,500 (597) 12,514 13,063 15,696 22,286
---------- -------- -------- ------- -------- --------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 257,089 3 13,595 13,816 18,683 22,080
---------- -------- -------- ------- -------- --------
Net increase (decrease) in
net assets from operations $ 305,965 2,398 16,490 15,568 19,751 27,371
========== ======== ======== ======= ======== ========
</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, 1995
(In thousands)
Investment Adjustable Templeton Templeton
Grade Income U.S. Pacific Rising International
Intermediate Securities Government Growth Dividends Equity
Bond Fund Fund Fund Fund Fund Fund
-------------- ----------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 5,974 58,967 12,390 6,144 7,357 12,759
-------------- ----------- ----------- ---------- ---------- --------------
Expenses:
Mortality and expense risk charges 1,832 13,095 2,381 4,028 4,379 9,608
Administrative charges 220 1,571 286 483 526 1,153
-------------- ----------- ----------- ---------- ---------- --------------
Total expenses 2,052 14,666 2,667 4,511 4,905 10,761
-------------- ----------- ----------- ---------- ---------- --------------
Investment income (loss), net 3,922 44,301 9,723 1,633 2,452 1,998
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - 4,746 - 2,555 - 15,808
-------------- ----------- ----------- ---------- ---------- --------------
Realized gains (losses)
on sales of investments:
Proceeds from sales 16,878 62,553 87,316 142,977 21,235 99,450
Cost of investments sold (16,254) (60,199) (88,643) (142,382) (19,912) (95,103)
-------------- ----------- ----------- ---------- ---------- --------------
Total realized gains (losses) on
sales of investments, net 624 2,354 (1,327) 595 1,323 4,347
-------------- ----------- ----------- ---------- ---------- --------------
Realized gains (losses)
on investments, net 624 7,100 (1,327) 3,150 1,323 20,155
Net change in unrealized appreciation
(depreciation) on investments 7,237 145,457 6,258 14,929 81,539 42,587
-------------- ----------- ----------- ---------- ---------- --------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 7,861 152,557 4,931 18,079 82,862 62,742
-------------- ----------- ----------- ---------- ---------- --------------
Net increase (decrease) in
net assets from operations $ 11,783 196,858 14,654 19,712 85,314 64,740
============== =========== =========== ========== ========== ==============
</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 Operations (Continued)
For the year ended December 31, 1995
(In thousands)
Templeton Templeton Templeton
Developing Global Global Asset Small Total
Markets Growth Allocation Cap All
Equity Fund Fund Fund Fund Funds
------------- ---------- ------------- ------ -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 465 1,261 240 - 286,446
------------- ---------- ------------- ------ -----------
Expenses:
Mortality and expense risk charges 1,523 2,919 101 22 87,401
Administrative charges 183 350 12 3 10,488
------------- ---------- ------------- ------ -----------
Total expenses 1,706 3,269 113 25 97,889
------------- ---------- ------------- ------ -----------
Investment income (loss), net (1,241) (2,008) 127 (25) 188,557
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds 109 - - - 40,298
------------- ---------- ------------- ------ -----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 19,245 6,235 4,619 1 1,452,241
Cost of investments sold (19,631) (5,932) (4,548) (1) (1,423,917)
------------- ---------- ------------- ------ -----------
Total realized gains (losses) on
sales of investments, net (386) 303 71 - 28,324
------------- ---------- ------------- ------ -----------
Realized gains (losses)
on investments, net (277) 303 71 - 68,622
Net change in unrealized appreciation
(depreciation) on investments 3,149 26,429 323 183 896,966
------------- ---------- ------------- ------ -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 2,872 26,732 394 183 965,588
------------- ---------- ------------- ------ -----------
Net increase (decrease) in
net assets from operations $ 1,631 24,724 521 158 1,154,145
============= ========== ============= ====== ===========
</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, 1995 and 1994
(In thousands)
Growth Growth
Money Money and and Precious Precious
Market Market Income Income Metals Metals
Fund Fund Fund Fund Fund Fund
---------- -------- -------- -------- --------- ---------
1995 1994 1995 1994 1995 1994
---------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 17,718 9,560 (1,279) (2,959) 52 (793)
Realized gains (losses) on investments, net - - 21,076 8,145 2,150 3,017
Net change in unrealized appreciation
(depreciation) on investments - - 147,406 (21,586) (2,147) (5,762)
---------- -------- -------- -------- --------- ---------
Net increase (decrease) in net assets
from operations 17,718 9,560 167,203 (16,400) 55 (3,538)
---------- -------- -------- -------- --------- ---------
Contract transactions (note 6):
Purchase payments 190,018 402,816 98,725 124,695 11,049 38,433
Transfers between funds (169,358) 34,121 150,088 59,547 (17,212) 19,303
Surrenders and terminations (120,722) (73,487) (73,514) (32,245) (11,728) (5,784)
Rescissions (5,198) (9,660) (1,783) (1,852) (326) (354)
Other transactions (note 2) 238 250 240 (54) (36) (2)
---------- -------- -------- -------- --------- ---------
Net increase (decrease) in net assets
resulting from contract transactions (105,022) 354,040 173,756 150,091 (18,253) 51,596
---------- -------- -------- -------- --------- ---------
Increase (decrease) in net assets (87,304) 363,600 340,959 133,691 (18,198) 48,058
---------- -------- -------- -------- --------- ---------
Net assets at beginning of year 487,239 123,639 471,773 338,082 115,828 67,770
---------- -------- -------- -------- --------- ---------
Net assets at end of year $ 399,935 487,239 812,732 471,773 97,630 115,828
========== ======== ======== ======== ========= =========
</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, 1995 and 1994
(In thousands)
Real Real U.S. U.S.
High High Estate Estate Government Government
Income Income Securities Securities Securities Securities
Fund Fund Fund Fund Fund Fund
--------- -------- ----------- ----------- ----------- -----------
1995 1994 1995 1994 1995 1994
--------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 15,167 6,592 3,361 (357) 30,379 20,347
Realized gains (losses) on investments, net 3,298 2,133 1,477 79 2,695 1,513
Net change in unrealized appreciation
(depreciation) on investments 27,669 (15,346) 22,517 (466) 54,968 (57,407)
--------- -------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations 46,134 (6,621) 27,355 (744) 88,042 (35,547)
--------- -------- ----------- ----------- ----------- -----------
Contract transactions (note 6):
Purchase payments 47,086 73,592 19,829 69,260 47,766 105,968
Transfers between funds 46,491 5,342 (12,435) 35,863 (5,307) (93,935)
Surrenders and terminations (43,591) (20,894) (17,397) (8,032) (74,423) (62,167)
Rescissions (1,643) (1,104) (277) (635) (1,813) (3,388)
Other transactions (note 2) 77 84 99 (9) 132 64
--------- -------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from contract transactions 48,420 57,020 (10,181) 96,447 (33,645) (53,458)
--------- -------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 94,554 50,399 17,174 95,703 54,397 (89,005)
--------- -------- ----------- ----------- ----------- -----------
Net assets at beginning of year 229,026 178,627 181,599 85,896 504,837 593,842
--------- -------- ----------- ----------- ----------- -----------
Net assets at end of year $323,580 229,026 198,773 181,599 559,234 504,837
========= ======== =========== =========== =========== ===========
</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, 1995 and 1994
(In thousands)
Zero Zero Zero Zero
Utility Utility Coupon Coupon Coupon Coupon
Equity Equity Fund - Fund - Fund - Fund -
Fund Fund 1995 1995 2000 2000
----------- ---------- -------- ------- -------- -------
1995 1994 1995 1994 1995 1994
----------- ---------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 48,876 31,566 2,395 2,048 2,895 2,226
Realized gains (losses) on investments, net 1,589 (4,505) 600 613 1,081 795
Net change in unrealized appreciation
(depreciation) on investments 255,500 (209,171) (597) (2,957) 12,514 (8,436)
----------- ---------- -------- ------- -------- -------
Net increase (decrease) in net assets
from operations 305,965 (182,110) 2,398 (296) 16,490 (5,415)
----------- ---------- -------- ------- -------- -------
Contract transactions (note 6):
Purchase payments 73,558 196,908 1,557 4,941 16,203 22,614
Transfers between funds 10,721 (313,095) (36,522) 3,202 13,339 1,608
Surrenders and terminations (141,926) (97,394) (13,413) (6,634) (10,927) (5,586)
Rescissions (1,891) (4,132) (49) (35) (263) (371)
Other transactions (note 2) 537 (179) 88 (8) (17) (11)
----------- ---------- -------- ------- -------- -------
Net increase (decrease) in net assets
resulting from contract transactions (59,001) (217,892) (48,339) 1,466 18,335 18,254
----------- ---------- -------- ------- -------- -------
Increase (decrease) in net assets 246,964 (400,002) (45,941) 1,170 34,825 12,839
----------- ---------- -------- ------- -------- -------
Net assets at beginning of year 1,058,531 1,458,533 45,941 44,771 76,140 63,301
----------- ---------- -------- ------- -------- -------
Net assets at end of year $1,305,495 1,058,531 - 45,941 110,965 76,140
=========== ========== ======== ======= ======== =======
</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, 1995 and 1994
(In thousands)
Zero Zero Zero Zero
Coupon Coupon Coupon Coupon Global Global
Fund - Fund - Fund - Fund - Income Income
2005 2005 2010 2010 Fund Fund
-------- ------- ------- ------- -------- --------
1995 1994 1995 1994 1995 1994
-------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 1,752 1,027 1,068 736 5,291 3,045
Realized gains (losses) on investments, net 753 626 2,987 135 (206) 1,653
Net change in unrealized appreciation
(depreciation) on investments 13,063 (5,757) 15,696 (3,733) 22,286 (20,889)
-------- ------- ------- ------- -------- --------
Net increase (decrease) in net assets
from operations 15,568 (4,104) 19,751 (2,862) 27,371 (16,191)
-------- ------- ------- ------- -------- --------
Contract transactions (note 6):
Purchase payments 13,119 15,613 12,239 8,813 13,098 78,997
Transfers between funds 4,711 (294) 9,807 13,300 (21,421) (5,062)
Surrenders and terminations (4,654) (2,526) (5,624) (3,226) (29,898) (16,449)
Rescissions (185) (306) (469) (265) (400) (1,310)
Other transactions (note 2) (23) (96) 177 6 25 137
-------- ------- ------- ------- -------- --------
Net increase (decrease) in net assets
resulting from contract transactions 12,968 12,391 16,130 18,628 (38,596) 56,313
-------- ------- ------- ------- -------- --------
Increase (decrease) in net assets 28,536 8,287 35,881 15,766 (11,225) 40,122
-------- ------- ------- ------- -------- --------
Net assets at beginning of year 44,756 36,469 41,255 25,489 231,368 191,246
-------- ------- ------- ------- -------- --------
Net assets at end of year $73,292 44,756 77,136 41,255 220,143 231,368
======== ======= ======= ======= ======== ========
</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, 1995 and 1994
(In thousands)
Investment Investment Adjustable Adjustable
Grade Grade Income Income U.S. U.S.
Intermediate Intermediate Securities Securities Government Government
Bond Fund Bond Fund Fund Fund Fund Fund
-------------- ------------- ----------- ----------- ----------- -----------
1995 1994 1995 1994 1995 1994
-------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 3,922 1,833 44,301 14,009 9,723 8,204
Realized gains (losses) on investments, net 624 677 7,100 4,517 (1,327) (2,310)
Net change in unrealized appreciation
(depreciation) on investments 7,237 (3,562) 145,457 (86,577) 6,258 (10,031)
-------------- ------------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations 11,783 (1,052) 196,858 (68,051) 14,654 (4,137)
-------------- ------------- ----------- ----------- ----------- -----------
Contract transactions (note 6):
Purchase payments 15,136 39,681 145,910 334,009 43,555 119,427
Transfers between funds 364 (430) 33,034 44,929 (75,287) (144,039)
Surrenders and terminations (16,323) (8,811) (125,202) (68,497) (27,666) (30,329)
Rescissions (379) (527) (3,470) (6,184) (1,087) (2,051)
Other transactions (note 2) (24) (2) 670 81 296 110
-------------- ------------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from contract transactions (1,226) 29,911 50,942 304,338 (60,189) (56,882)
-------------- ------------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 10,557 28,859 247,800 236,287 (45,535) (61,019)
-------------- ------------- ----------- ----------- ----------- -----------
Net assets at beginning of year 139,325 110,466 927,343 691,056 220,042 281,061
-------------- ------------- ----------- ----------- ----------- -----------
Net assets at end of year $ 149,882 139,325 1,175,143 927,343 174,507 220,042
============== ============= =========== =========== =========== ===========
</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, 1995 and 1994
(In thousands)
Templeton Templeton Templeton Templeton
Pacific Pacific Rising Rising International International
Growth Growth Dividends Dividends Equity Equity
Fund Fund Fund Fund Fund Fund
----------- ---------- ---------- ---------- -------------- --------------
1995 1994 1995 1994 1995 1994
----------- ---------- ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 1,633 (3,669) 2,452 746 1,998 (6,764)
Realized gains (losses) on investments, net 3,150 2,541 1,323 (1,037) 20,155 6,161
Net change in unrealized appreciation
(depreciation) on investments 14,929 (32,730) 81,539 (14,714) 42,587 (22,558)
----------- ---------- ---------- ---------- -------------- --------------
Net increase (decrease) in net assets
from operations 19,712 (33,858) 85,314 (15,005) 64,740 (23,161)
----------- ---------- ---------- ---------- -------------- --------------
Contract transactions (note 6):
Purchase payments 27,022 145,620 42,756 62,677 99,403 301,166
Transfers between funds (52,319) 54,656 50,303 (19,751) (30,418) 196,400
Surrenders and terminations (35,125) (18,242) (35,907) (17,224) (72,338) (29,507)
Rescissions (1,057) (2,213) (750) (821) (2,115) (3,386)
Other transactions (note 2) (45) 16 131 122 59 87
----------- ---------- ---------- ---------- -------------- --------------
Net increase (decrease) in net assets
resulting from contract transactions (61,524) 179,837 56,533 25,003 (5,409) 464,760
----------- ---------- ---------- ---------- -------------- --------------
Increase (decrease) in net assets (41,812) 145,979 141,847 9,998 59,331 441,599
----------- ---------- ---------- ---------- -------------- --------------
Net assets at beginning of year 348,655 202,676 281,145 271,147 735,339 293,740
----------- ---------- ---------- ---------- -------------- --------------
Net assets at end of year $ 306,843 348,655 422,992 281,145 794,670 735,339
=========== ========== ========== ========== ============== ==============
</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, 1995 and 1994
(In thousands)
Templeton Templeton Templeton Templeton
Developing Developing Templeton Templeton Global Global
Markets Markets Global Global Asset Asset
Equity Equity Growth Growth Allocation Allocation
Fund Fund Fund Fund Fund Fund
------------ ----------- ---------- ---------- ----------- ----------
1995 1994 1995 1994 1995 1994
------------ ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ (1,241) (542) (2,008) (812) 127 -
Realized gains (losses) on investments, net (277) (77) 303 15 71 -
Net change in unrealized appreciation
(depreciation) on investments 3,149 (6,388) 26,429 356 323 -
------------ ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets
from operations 1,631 (7,007) 24,724 (441) 521 -
------------ ----------- ---------- ---------- ----------- ----------
Contract transactions (note 6):
Purchase payments 42,027 57,484 119,490 89,328 5,580 -
Transfers between funds 22,865 43,967 46,237 64,368 9,316 -
Surrenders and terminations (7,387) (1,472) (15,658) (2,702) (1,163) -
Rescissions (1,069) (501) (1,966) (1,166) (27) -
Other transactions (note 2) (55) (2) 64 6 7 -
------------ ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from contract transactions 56,381 99,476 148,167 149,834 13,713 -
------------ ----------- ---------- ---------- ----------- ----------
Increase (decrease) in net assets 58,012 92,469 172,891 149,393 14,234 -
------------ ----------- ---------- ---------- ----------- ----------
Net assets at beginning of year 92,469 - 149,393 - - -
------------ ----------- ---------- ---------- ----------- ----------
Net assets at end of year $ 150,481 92,469 322,284 149,393 14,234 -
============ =========== ========== ========== =========== ==========
</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, 1995 and 1994
(In thousands)
Small Small Total Total
Cap Cap All All
Fund Fund Funds Funds
-------- ----- ---------- ----------
1995 1994 1995 1994
-------- ----- ---------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ (25) - 188,557 86,043
Realized gains (losses) on investments, net - - 68,622 24,691
Net change in unrealized appreciation
(depreciation) on investments 183 - 896,966 (527,714)
-------- ----- ---------- ----------
Net increase (decrease) in net assets
from operations 158 - 1,154,145 (416,980)
-------- ----- ---------- ----------
Contract transactions (note 6):
Purchase payments 2,140 - 1,087,266 2,292,042
Transfers between funds 11,013 - (11,990) -
Surrenders and terminations (36) - (884,622) (511,208)
Rescissions (19) - (26,236) (40,261)
Other transactions (note 2) 4 - 2,644 600
-------- ----- ---------- ----------
Net increase (decrease) in net assets
resulting from contract transactions 13,102 - 167,062 1,741,173
-------- ----- ---------- ----------
Increase (decrease) in net assets 13,260 - 1,321,207 1,324,193
-------- ----- ---------- ----------
Net assets at beginning of year - - 6,382,004 5,057,811
-------- ----- ---------- ----------
Net assets at end of year $13,260 - 7,703,211 6,382,004
======== ===== ========== ==========
</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, 1995
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
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include realized gain distributions received from
the respective funds and gains on the sale of fund shares as determined by the
average cost method. Realized gain distributions are reinvested in the
respective funds. Dividend distributions received from the FVF are reinvested
in additional shares of the FVF and are recorded as income to the Variable
Account on the ex-dividend date.
A Fixed Account investment option is available to deferred annuity contract
owners. This account is comprised of equity and fixed income investments
which are part of the general assets of Allianz Life. The liabilities of the
Fixed Account are part of the general obligations of Allianz Life and are not
included in the Variable Account. The guaranteed minimum rate of return on
the Fixed Account is 3%.
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, Fixed Account and Small Cap Fund were added as
available investment options on May 1, 1995, October 1, 1995 and November 1,
1995, respectively. The Zero Coupon - 1995 Fund matured and was closed on
December 15, 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 0.15% 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
deferred annuity 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, 1995 and 1994 were $4,294,361 and
$3,070,519, respectively. These contract charges are reflected in the
Statements of Changes in Net Assets 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
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 deferred annuity 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, 1995 and 1994 were $12,373,225 and $8,600,401,
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, 1995 and 1994 were $119,180 and $88,989, respectively. Transfer
charges are reflected in the financial statements as other transactions.
Transfers to the Fixed Account were $11,989,631 during the year ended December
31, 1995.
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. All investments were withdrawn
by Allianz Life on December 21, 1995 at the then-current market value of
$525,500.
On September 18, 1995, $250,000 was provided by Allianz Life for the
establishment of the Small Cap Fund. On December 31, 1995, the market value
of this investment was $255,750.
4. INVESTMENT TRANSACTIONS
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund $334,323
Growth and Income Fund 228,178
Precious Metals Fund 47,816
High Income Fund 113,096
Real Estate Securities Fund 27,566
U.S. Government Securities Fund 81,756
Utility Equity Fund 125,296
Zero Coupon Fund - 1995 7,693
Zero Coupon Fund - 2000 33,059
Zero Coupon Fund - 2005 23,101
Zero Coupon Fund - 2010 51,558
Global Income Fund 21,630
Investment Grade Intermediate Bond Fund 19,654
Income Securities Fund 163,073
Adjustable U.S. Government Fund 36,931
Templeton Pacific Growth Fund 85,778
Rising Dividends Fund 80,456
Templeton International Equity Fund 112,294
Templeton Developing Markets Equity Fund 74,549
Templeton Global Growth Fund 152,536
Templeton Global Asset Allocation Fund 18,572
Small Cap Fund 13,104
</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.
<PAGE>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA)
Transactions in units for each fund for the years ended December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
Growth Real U.S.
Money and Precious High Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
--------- -------- --------- -------- ----------- -----------
<S> <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
Contract transactions:
Purchase payments 33,071 9,135 2,732 4,967 4,417 7,429
Transfers between funds 2,902 4,379 1,303 422 2,206 (6,649)
Surrenders and terminations (6,011) (2,397) (409) (1,428) (525) (4,458)
Rescissions (792) (137) (26) (75) (41) (239)
Other transactions 20 (4) - 6 (1) 5
--------- -------- --------- -------- ----------- -----------
Net increase (decrease) in accumulation
units resulting from contract transactions 29,190 10,976 3,600 3,892 6,056 (3,912)
--------- -------- --------- -------- ----------- -----------
Accumulation units outstanding at December 31, 1994 39,437 35,695 8,285 15,679 11,645 36,490
========= ======== ========= ======== =========== ===========
Accumulation unit value per unit at December 31, 1994 $ 12.354 13.215 13.979 14.608 15.594 13.835
========= ======== ========= ======== =========== ===========
Contract transactions:
Purchase payments 15,069 6,403 796 2,877 1,233 3,115
Transfers between funds (13,495) 9,757 (1,290) 2,959 (792) (266)
Surrenders and terminations (9,580) (4,859) (846) (2,661) (1,077) (4,916)
Rescissions (410) (118) (24) (102) (17) (118)
Other transactions 19 15 (2) 4 6 8
--------- -------- --------- -------- ----------- -----------
Net increase (decrease) in accumulation
units resulting from contract transactions (8,397) 11,198 (1,366) 3,077 (647) (2,177)
--------- -------- --------- -------- ----------- -----------
Accumulation units outstanding at December 31, 1995 31,040 46,893 6,919 18,756 10,998 34,313
========= ======== ========= ======== =========== ===========
Accumulation unit value per unit at December 31, 1995 $ 12.883 17.310 14.109 17.252 18.073 16.298
========= ======== ========= ======== =========== ===========
Accumulation net assets at December 31, 1995 $399,901 811,706 97,630 323,580 198,773 559,234
========= ======== ========= ======== =========== ===========
</TABLE>
<PAGE>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA) (CONTINUED)
<TABLE>
<CAPTION>
Zero Zero Zero Zero
Utility Coupon Coupon Coupon Coupon Global
Equity Fund - Fund - Fund - Fund - Income
Fund 1995 2000 2005 2010 Fund
----------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1993 84,217 3,092 3,787 2,020 1,405 13,054
Contract transactions:
Purchase payments 12,472 344 1,434 942 541 5,526
Transfers between funds (19,941) 224 114 (4) 864 (465)
Surrenders and terminations (6,391) (462) (357) (154) (204) (1,178)
Rescissions (264) (2) (24) (18) (17) (92)
Other transactions (11) (1) (1) (6) - 10
----------- ------- -------- ------- ------- --------
Net increase (decrease) in accumulation
units resulting from contract transactions (14,135) 103 1,166 760 1,184 3,801
----------- ------- -------- ------- ------- --------
Accumulation units outstanding at December 31, 1994 70,082 3,195 4,953 2,780 2,589 16,855
=========== ======= ======== ======= ======= ========
Accumulation unit value per unit at December 31, 1994 $ 15.104 14.380 15.373 16.096 15.930 13.726
=========== ======= ======== ======= ======= ========
Contract transactions:
Purchase payments 4,303 106 966 715 652 904
Transfers between funds 736 (2,398) 800 269 511 (1,494)
Surrenders and terminations (8,372) (905) (636) (249) (297) (2,058)
Rescissions (113) (3) (16) (10) (27) (28)
Other transactions 33 5 (1) (1) 9 2
----------- ------- -------- ------- ------- --------
Net increase (decrease) in accumulation
units resulting from contract transactions (3,413) (3,195) 1,113 724 848 (2,674)
----------- ------- -------- ------- ------- --------
Accumulation units outstanding at December 31, 1995 66,669 - 6,066 3,504 3,437 14,181
=========== ======= ======== ======= ======= ========
Accumulation unit value per unit at December 31, 1995 $ 19.565 - 18.294 20.914 22.431 15.522
=========== ======= ======== ======= ======= ========
Accumulation net assets at December 31, 1995 $1,304,348 - 110,965 73,292 77,136 220,143
=========== ======= ======== ======= ======= ========
</TABLE>
<PAGE>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA) (CONTINUED)
<TABLE>
<CAPTION>
Investment Adjustable Templeton
Grade Income U.S. Pacific Rising
Intermediate Securities Government Growth Dividends
Bond Fund Fund Fund Fund Fund
-------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1993 7,677 38,967 24,975 14,240 26,256
Contract transactions:
Purchase payments 2,779 19,487 10,678 10,676 6,295
Transfers between funds (28) 2,539 (12,898) 3,849 (1,955)
Surrenders and terminations (619) (4,065) (2,716) (1,371) (1,748)
Rescissions (37) (364) (184) (164) (83)
Other transactions - 5 10 1 13
-------------- ----------- ----------- ---------- ----------
Net increase (decrease) in accumulation
units resulting from contract transactions 2,095 17,602 (5,110) 12,991 2,522
-------------- ----------- ----------- ---------- ----------
Accumulation units outstanding at December 31, 1994 9,772 56,569 19,865 27,231 28,778
============== =========== =========== ========== ==========
Accumulation unit value per unit at December 31, 1994 $ 14.257 16.392 11.077 12.802 9.769
============== =========== =========== ========== ==========
Contract transactions:
Purchase payments 1,016 7,979 3,753 2,065 3,782
Transfers between funds 30 1,879 (6,551) (4,013) 4,493
Surrenders and terminations (1,099) (6,965) (2,397) (2,714) (3,208)
Rescissions (25) (192) (95) (82) (68)
Other transactions (2) 39 25 (4) 12
-------------- ----------- ----------- ---------- ----------
Net increase (decrease) in accumulation
units resulting from contract transactions (80) 2,740 (5,265) (4,748) 5,011
-------------- ----------- ----------- ---------- ----------
Accumulation units outstanding at December 31, 1995 9,692 59,309 14,600 22,483 33,789
============== =========== =========== ========== ==========
Accumulation unit value per unit at December 31, 1995 $ 15.463 19.785 11.951 13.630 12.498
============== =========== =========== ========== ==========
Accumulation net assets at December 31, 1995 $ 149,882 1,173,447 174,507 306,448 422,318
============== =========== =========== ========== ==========
</TABLE>
<PAGE>
6. CONTRACT TRANSACTIONS - ACCUMULATION UNIT ACTIVITY (IN THOUSANDS EXCEPT
PER UNIT DATA) (CONTINUED)
<TABLE>
<CAPTION>
Templeton Templeton
Templeton Developing Templeton Global
International Markets Global Asset Small Total
Equity Equity Growth Allocation Cap All
Fund Fund Fund Fund Fund Funds
--------------- ----------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding
at December 31, 1993 24,026 - - - - 341,145
Contract transactions:
Purchase payments 23,800 5,673 8,715 - - 171,113
Transfers between funds 15,240 4,296 6,300 - - 2,698
Surrenders and terminations (2,341) (146) (265) - - (37,245)
Rescissions (268) (49) (114) - - (2,990)
Other transactions 7 - 1 - - 54
--------------- ----------- ---------- ----------- ------- ----------
Net increase (decrease) in accumulation
units resulting from contract transactions 36,438 9,774 14,637 - - 133,630
--------------- ----------- ---------- ----------- ------- ----------
Accumulation units outstanding
at December 31, 1994 60,464 9,774 14,637 - - 474,775
=============== =========== ========== =========== ======= ==========
Accumulation unit value per
unit at December 31, 1994 $ 12.161 9.454 10.201 - -
=============== =========== ========== =========== =======
Contract transactions:
Purchase payments 7,774 4,364 10,991 538 212 79,613
Transfers between funds (2,530) 2,372 4,306 916 1,096 (2,705)
Surrenders and terminations (5,662) (773) (1,448) (114) (4) (60,840)
Rescissions (168) (112) (183) (3) (2) (1,916)
Other transactions 5 (7) 6 1 - 172
--------------- ----------- ---------- ----------- ------- ----------
Net increase (decrease) in accumulation
units resulting from contract transactions (581) 5,844 13,672 1,338 1,302 14,324
--------------- ----------- ---------- ----------- ------- ----------
Accumulation units outstanding
at December 31, 1995 59,883 15,618 28,309 1,338 1,302 489,099
=============== =========== ========== =========== ======= ==========
Accumulation unit value per
unit at December 31, 1995 $ 13.263 9.582 11.339 10.591 10.146
=============== =========== ========== =========== =======
Accumulation net assets at December 31, 1995 $ 794,226 149,649 320,997 14,167 13,211 7,695,560
=============== =========== ========== =========== ======= ==========
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1995 and 1994
<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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, 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, 1995, in conformity with generally accepted
accounting principles.
In 1994, as discussed in note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. In 1993, as discussed in notes 1,
8 and 10 to the consolidated financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 106, Accounting for Postretirement Benefits
Other Than Pensions and No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
February 6, 1996
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(in thousands except share data)
Assets 1995 1994
- ---------------------------------------------------------- ----------- ----------
<S> <C> <C>
Investments:
Fixed maturities, at amortized cost $ 0 90,615
Fixed maturities, at market 2,549,598 1,906,208
Equity securities, at market 254,458 131,712
Mortgage loans on real estate 203,128 163,099
Real estate, at cost 8,806 4,685
Investment in real estate partnerships, at equity 11,975 12,551
Certificates of deposit and short-term securities 31,501 155,307
Policy loans 104,184 101,899
Other long-term investments 650 1,117
----------- ----------
Total investments 3,164,300 2,567,193
Cash 10,936 63,883
Accrued investment income 36,858 34,786
Receivables (net of allowance for uncollectible
accounts of $7,697 in 1995 and $9,607 in 1994) 124,700 111,400
Reinsurance receivable:
Funds held on deposit 1,060,566 927,353
Recoverable on future policy benefit reserves 43,248 35,387
Recoverable on unpaid claims 109,075 105,603
Receivable on paid claims 22,172 26,736
Prepaid insurance premiums 4,078 4,317
Home office property and equipment (net of accumulated
depreciation of $21,256 in 1995 and $28,547 in 1994) 8,790 11,612
Deferred acquisition costs 826,994 798,442
Federal income tax recoverable 3,947 3,794
Other assets 11,048 9,818
----------- ----------
Assets, exclusive of separate account assets 5,426,712 4,700,324
Separate account assets 8,402,003 6,965,755
----------- ----------
Total assets $13,828,715 11,666,079
=========== ==========
</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, 1995 and 1994
(in thousands except share data)
Liabilities and Stockholder's Equity 1995 1994
- --------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Liabilities:
Future policy benefit reserves:
Life $ 1,088,964 1,022,537
Annuity 2,601,943 2,304,560
Policy and contract claims 371,898 355,411
Unearned premiums 34,181 40,376
Reinsurance payable 72,838 81,507
Deferred income taxes 140,174 5,807
Accrued expenses 41,266 29,006
Commissions due and accrued 22,979 24,190
Other policyholder funds 82,138 73,509
Other liabilities 19,137 76,314
------------ -----------
Liabilities, exclusive of separate account liabilities 4,475,518 4,013,217
Separate account liabilities 8,402,003 6,965,755
------------ -----------
Total liabilities 12,877,521 10,978,972
------------ -----------
Minority interest in subsidiary 0 7,662
------------ -----------
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, 25 million shares issued and outstanding
in 1995 and 40 million shares issued and outstanding in 1994 25,000 40,000
Additional paid-in capital 407,088 406,494
Net unrealized holding gain (loss) on securities
available-for-sale, net of deferred federal income taxes 139,204 (62,073)
Net unrealized Canadian currency loss (3,455) (3,787)
Retained earnings 363,357 278,811
------------ -----------
Total stockholder's equity 951,194 679,445
------------ -----------
Commitments and contingencies (notes 7 and 12)
Total liabilities and stockholder's equity $13,828,715 11,666,079
============ ===========
</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, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 257,647 234,295 217,717
Other life policy considerations 93,158 92,254 88,003
Annuity considerations 147,112 120,240 69,583
Accident and health premiums 527,059 547,508 508,785
----------- --------- ---------
Total premiums and considerations 1,024,976 994,297 884,088
Premiums ceded 223,226 244,208 202,904
----------- --------- ---------
Net premiums and considerations 801,750 750,089 681,184
Investment income, net 201,158 181,291 174,831
Realized investment gains, net 29,202 829 28,318
Other 10,140 12,703 9,347
----------- --------- ---------
Total revenue 1,042,250 944,912 893,680
----------- --------- ---------
Benefits and expenses:
Life insurance benefits 268,163 254,326 233,694
Annuity benefits 145,636 131,793 113,500
Accident and health insurance benefits 374,743 379,122 341,676
----------- --------- ---------
Total benefits 788,542 765,241 688,870
Benefit recoveries 210,702 212,144 155,043
----------- --------- ---------
Net benefits 577,840 553,097 533,827
Commissions and other agent compensation 233,939 313,715 398,161
General and administrative expenses 115,419 111,116 109,333
Taxes, licenses and fees 17,672 22,514 25,239
Increase in deferred acquisition costs, net (28,552) (132,090) (253,234)
Minority interest in income of consolidated subsidiary (30) (66) 0
----------- --------- ---------
Total benefits and expenses 916,288 868,286 813,326
----------- --------- ---------
Income from operations before income taxes 125,962 76,626 80,354
----------- --------- ---------
Income tax expense (benefit):
Current 12,993 5,098 30,215
Deferred 25,772 16,053 (6,496)
----------- --------- ---------
Total income tax expense 38,765 21,151 23,719
----------- --------- ---------
Income before cumulative effect of
changes in accounting 87,197 55,475 56,635
Cumulative effect of changes in accounting 0 0 26,875
----------- --------- ---------
Net income $ 87,197 55,475 83,510
=========== ========= =========
</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, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
--------- --------- --------
<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 40,000 0 0
Issuance of stock during the year 0 40,000 0
Redemption of stock during the year (15,000) 0 0
--------- --------- --------
Balance at end of year 25,000 40,000 0
--------- --------- --------
Additional paid-in capital:
Balance at beginning of year 406,494 401,304 401,304
Additional contribution from parent 594 5,190 0
--------- --------- --------
Balance at end of year 407,088 406,494 401,304
--------- --------- --------
Net unrealized gain (loss) on investments:
Balance at beginning of year (62,073) 9,071 12,071
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 0 74,866 0
Net unrealized gain on securities transferred
from held-to-maturity to available-for-sale
classification, net of deferred federal income taxes 1,789 0 0
Net unrealized gain (loss) during the year,
net of deferred federal income taxes 199,488 (146,010) (3,000)
--------- --------- --------
Balance at end of year 139,204 (62,073) 9,071
--------- --------- --------
Net unrealized Canadian currency gain (loss):
Balance at beginning of year (3,787) (2,708) (1,835)
Net unrealized gain (loss) during the year,
net of deferred federal income taxes 332 (1,079) (873)
--------- --------- --------
Balance at end of year (3,455) (3,787) (2,708)
--------- --------- --------
Retained earnings:
Balance at beginning of year 278,811 223,749 140,239
Net income 87,197 55,475 83,510
Cash dividend to stockholder (2,651) (413) 0
--------- --------- --------
Balance at end of year 363,357 278,811 223,749
--------- --------- --------
Total stockholder's equity $951,194 679,445 651,416
========= ========= ========
</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, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 87,197 55,475 83,510
---------- --------- ---------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized gains on investments (29,202) (829) (28,318)
Deferred federal income tax (benefit) expense 25,772 16,053 (6,496)
Cumulative effect of changes in accounting 0 0 (26,875)
Charges to policy account balances (120,254) (125,488) (105,912)
Interest credited to policy account balances 169,151 150,490 147,983
Change in:
Accrued investment income (2,072) (764) (2,725)
Receivables (13,300) 12,040 (20,206)
Reinsurance receivables (190,953) (93,453) (107,809)
Deferred acquisition costs (28,552) (132,090) (253,234)
Future policy benefit reserves 66,932 20,791 (9,557)
Policy and contract claims 25,116 25,072 40,211
Unearned premiums (6,195) (1,194) (2,111)
Reinsurance payable (8,669) 19,779 31,653
Current tax recoverable (153) (6,255) 1,085
Deferred tax liability 0 0 15,936
Accrued expenses and other liabilities (43,867) 54,626 14,657
Commissions due and accrued (1,211) 3,316 1,461
Depreciation and amortization (23,391) (11,498) (7,681)
Other, net 916 (86) 2,303
---------- --------- ---------
Total adjustments (179,932) (69,490) (315,635)
---------- --------- ---------
Net cash used in operating activities (92,735) (14,015) (232,125)
---------- --------- ---------
</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, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
------------ --------- -----------
<S> <C> <C> <C>
Cash flows used in investing activities:
Purchase of fixed maturities, at amortized cost $ 0 0 (1,191,749)
Purchase of fixed maturities, at market (1,533,290) (928,532) 0
Purchase of equity securities (166,701) (145,267) (205,345)
Purchase of other long-term investments 0 (467) (650)
Funding of mortgage loans (66,301) (64,808) (20,097)
Sale of fixed maturities, at amortized cost 0 0 666,893
Sale of fixed maturities, at market 1,242,988 791,659 0
Matured or redeemed fixed maturities, at amortized cost 7,022 4,342 314,223
Matured fixed maturities, at market 38,991 32,508 0
Sale of equity securities 97,619 150,347 217,524
Repayment of mortgage loans 25,563 28,206 15,989
Sale of minority interest in subsidiary 0 0 8,189
Purchase of minority interest's shares in subsidiary (7,903) 0 0
Net change in certificates of deposit and
short-term securities 123,806 (96,344) 33,330
Other (2,851) (6,232) 782
------------ --------- -----------
Net cash used in investing activities (241,057) (234,588) (160,911)
------------ --------- -----------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 553,699 526,918 639,633
Policyholders' withdrawals from account balances (291,102) (235,309) (164,911)
Change in assets held under reinsurance agreements 36,354 (59,349) (75,658)
Net change in mortgage notes payable (1,049) (39) (36)
Additional paid-in capital from parent 594 5,190 0
Preferred stock transactions (15,000) 40,000 0
Cash dividends paid (2,651) (413) 0
------------ --------- -----------
Net cash used in financing activities 280,845 276,998 399,028
------------ --------- -----------
Net change in cash (52,947) 28,395 5,992
Cash at beginning of year 63,883 35,488 29,496
------------ --------- -----------
Cash at end of year $ 10,936 63,883 35,488
============ ========= ===========
</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, 1995, 1994 and 1993
(in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allianz Life Insurance Company of North America (the Company) is a wholly
owned subsidiary of Allianz of America, Inc. (AZOA), a majority-owned
subsidiary of Allianz A.G. Holding, a Federal Republic of Germany company.
The Company is a life insurance company which is licensed to sell both group
and individual life, annuity and accident and health policies in the United
States, Canada and several U.S. territories. Based on 1995 gross premium
volume, 13%, 71% and 16% of the Company's business is life, annuity and
accident and health, respectively. The Company's primary distribution
channels are through strategic alliances with other insurance companies and
third party marketing organizations. The Company has a significant
relationship as of December 31, 1995 with a mutual fund company and its
broker/dealer network related to sales of its variable life and variable
annuity products and another significant administration, marketing and
reinsurance relationship with an unrelated insurance company.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major 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.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported
assets and liabilities including reporting or disclosure of contingent assets
and liabilities as of the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Actual results could vary
significantly from management's estimates.
RECOGNITION OF TRADITIONAL LIFE, GROUP LIFE AND GROUP ACCIDENT AND HEALTH
REVENUE
Traditional life products include products with guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited payment contracts and certain annuity products with life
contingencies.
Premiums on traditional life and group life products are recognized as income
when due. Group accident and health premiums are recognized as earned on a pro
rata basis over the risk coverage periods. Benefits and expenses for
traditional and group products are matched with earned premiums so that
profits are recognized over the premium paying periods of the contracts. This
matching is accomplished by establishing provisions for future policy benefits
and policy and contract claims, and deferring and amortizing related policy
acquisition costs.
<PAGE>
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 1995, 1994 and 1993 were $117,782, $108,676 and $72,431, 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, 1995 and 1994.
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
Insurance liabilities are reported before the effects of reinsurance. Amounts
paid or deemed to have been paid for claims covered by reinsurance contracts
are recorded as reinsurance receivable. Reinsurance receivables are recognized
in a manner consistent with the liabilities related to the underlying
reinsured contracts.
<PAGE>
INVESTMENTS
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities which addresses the accounting and reporting for investments
in equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are classified in one of
three categories. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as "held-to-maturity
securities" and reported at amortized cost. Debt and equity securities bought
and held principally for the purpose of selling them in the near term are
classified as "trading securities" and reported at fair value, with unrealized
gains and losses included in earnings. Debt and equity securities not
classified as either "held-to-maturity securities" or "trading securities" are
classified as "available-for-sale securities" and reported at fair value, with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of deferred taxes. SFAS No. 115 did 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.
At December 31, 1995, the Company transferred all of its securities with an
amortized cost of $83,357 classified as "held-to-maturity' to the
"available-for-sale" classifications as provided in the Financial Accounting
Standards Board (FASB) Special Report on the implementation of SFAS No. 115.
The effect of this transfer was an increase in stockholder's equity of $1,789.
All of the Company's investment portfolio is classified as
"available-for-sale" at December 31, 1995.
Short-term investments are carried at amortized cost which approximates
market. Policy loans are reflected at their unpaid principal balances.
Mortgage loans are reflected at unpaid principal balances adjusted for premium
and discount amortization and an allowance for uncollectible balances. During
1995, the Company adopted SFAS No. 114, Accounting by Creditors for Impairment
of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. SFAS No. 114 addresses accounting by
creditors for impairment of certain loans. It requires that impaired loans
within the scope of the Statement be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate
or, alternatively, at the loan's observable market price of the fair value of
supporting collateral. The Company analyzes loan impairment at least once a
year when assessing the adequacy of the allowance for possible credit losses.
SFAS No. 118 permits existing income recognition practices to continue. The
Company does not accrue interest on impaired loans and accounts for interest
income on a cash basis. The adoption of these Statements did not have a
material impact on the Company's net income or financial position.
Investments in real estate are reflected at the lower of cost or market value.
Real estate occupied by the Company is reflected at cost, less accumulated
depreciation. Investments in real estate, exclusive of land, are being
depreciated on a straight-line basis over estimated useful lives ranging from
3 to 30 years.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1995 and 1994, investments with a carrying value of $37,879
and $44,337, 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
<PAGE>
may cause estimates of fair values to differ from the amounts presented
herein.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and investment
gains and losses accrue directly to the policyholders and contractholders.
Each account has specific investment objectives and the assets are carried at
market value. The assets of each account are legally segregated and are not
subject to claims which arise out of any other business of the Company.
Fair values of separate 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
policyholder's and contractholder's account.
RECEIVABLES
Receivable balances approximate estimated fair values. This is based on
pertinent information available to management as of year end including the
financial condition and credit worthiness of the parties underlying the
receivables. Changes in market conditions subsequent to year end may cause
estimates of fair values to differ from the amounts presented herein.
ACCOUNTING CHANGES
The impact of implementation of SFAS No. 115 in 1994 was an increase in equity
of $74,866 at January 1, 1994.
<TABLE>
<CAPTION>
The table below presents the cumulative effect of changes, net of tax, in
accounting principles implemented in 1993 on after tax net income:
<S> <C>
SFAS No. 106, Accounting for Postretirement Benefits Other Than Pensions $(4,006)
SFAS No. 109, Accounting for Income Taxes 30,881
--------
Total cumulative effect on after tax net income
of changes in accounting principles $26,875
========
</TABLE>
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of by a company. The Company will adopt SFAS No. 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
<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.
<TABLE>
<CAPTION>
Total revenues and net income, before adoption of any changes in accounting,
of the separate companies for the five-months ended May 31, 1993 were:
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
</TABLE>
(3) INVESTMENTS
<TABLE>
<CAPTION>
Investments at December 31, 1995 consist of:
Amount
Amortized Estimated shown on
cost fair balance
or cost value sheet
---------- --------- ---------
<S> <C> <C> <C>
Fixed maturities - Available-for-sale:
U.S. government $ 793,311 867,793 867,793
States and political subdivisions 469 481 481
Foreign government 254,457 265,797 265,797
Public utilities 32,100 36,728 36,728
Corporate securities 709,906 747,609 747,609
Mortgage backed securities 516,538 548,182 548,182
Collateralized mortgage obligations 80,949 83,008 83,008
---------- --------- ---------
Total fixed maturities $2,387,730 2,549,598 2,549,598
---------- --------- ---------
Equity securities - Available-for-sale:
Common stocks:
Public utilities 9,305 10,377 10,377
Banks, trusts and insurance companies 6,305 7,108 7,108
Industrial and miscellaneous 171,163 221,002 221,002
Nonredeemable preferred stocks 14,835 15,971 15,971
---------- --------- ---------
Total equity securities $ 201,608 254,458 254,458
---------- --------- ---------
<PAGE>
Other investments:
Mortgage loans on real estate 203,128 XXXXXXXXX 203,128
Real estate:
Investment properties 8,806 XXXXXXXXX 8,806
Partnerships 11,975 XXXXXXXXX 11,975
Certificates of deposit and short term securities 31,501 XXXXXXXXX 31,501
Policy loans 104,184 XXXXXXXXX 104,184
Other long term investments 650 XXXXXXXXX 650
---------- --------- ---------
Total other investments $ 360,244 XXXXXXXXX 360,244
---------- --------- ---------
Total investments $2,949,582 XXXXXXXXX 3,164,300
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995 and 1994, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of marketable securities are as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
1995:
Available-for-sale:
U.S. government $ 793,311 74,482 0 867,793
States and political subdivisions 469 12 0 481
Foreign government 254,457 11,613 273 265,797
Public utilities 32,100 4,628 0 36,728
Corporate securities 709,906 41,746 4,043 747,609
Mortgage backed securities 516,538 31,644 0 548,182
Collateralized mortgage obligations 80,949 2,751 692 83,008
---------- ---------- ---------- ---------
Total fixed maturities 2,387,730 166,876 5,008 2,549,598
Equity securities 201,608 61,753 8,903 254,458
---------- ---------- ---------- ---------
Total $2,589,338 228,629 13,911 2,804,056
========== ========== ========== =========
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
========== ========== ========== =========
</TABLE>
<PAGE>
The changes in unrealized gains (losses) on fixed maturities
available-for-sale securities were $261,471 and $(214,245) and the changes in
unrealized losses on held-to-maturity securities were $0 and $(8,783) for the
years ended December 31, 1995 and 1994, respectively. The change in
unrealized gains from fixed maturities was $33,645 for the year ended December
31, 1993.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$48,186, $(9,587) and $(2,468) for the years ended December 31, 1995, 1994 and
1993, respectively.
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of fixed maturities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated
cost fair value
---------- ----------
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 3,494 3,552
Due after one year through five years 282,290 295,698
Due after five years through ten years 1,252,516 1,337,963
Due after ten years 251,943 281,195
Mortgage backed securities 597,487 631,190
---------- ----------
Totals $2,387,730 2,549,598
========== ==========
</TABLE>
Gross gains of $41,962 and $26,848 and gross losses of $14,607 and $26,805
were realized on sales of available-for-sale securities in 1995 and 1994,
respectively; related taxes were $9,574 and $715 in 1995 and 1994,
respectively. Proceeds from redemptions of held-to-maturity securities
during 1995 and 1994 were $7,022 and $4,342, respectively, with no gain
or loss realized on the transactions. Proceeds from sales of fixed
maturity securities in 1993 were $666,893. Gross gains of $25,229 and
gross losses of $2,102 were realized on sales of fixed maturities in 1993;
related taxes were $8,094.
<TABLE>
<CAPTION>
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Fixed maturities, at amortized cost $ 0 0 23,127
Fixed maturities, at market 21,877 (2,712) 0
Equity securities 5,478 2,745 5,876
Mortgage loans (687) (1,667) (189)
Real estate 2,530 2,067 (513)
Other 4 396 17
-------- ------- -------
Net gains before taxes 29,202 829 28,318
<PAGE>
Tax expense on net realized gains 10,218 352 10,329
-------- ------- -------
Net gains after taxes $18,984 477 17,989
======== ======= =======
</TABLE>
In 1995, in conjunction with an expanded marketing agreement, the Company
provided an unrelated insurance company with $30 million in exchange for a
fifteen year convertible debenture paying 5% interest for the first five years
with the interest rate reset annually thereafter at the one-year LIBOR plus
1%. If converted, the Company would obtain approximately 10% equity ownership
in the unrelated company. The Company has no intention of converting the
debenture in the near term.
During 1995 and 1994, the Company entered into mortgage backed security
reverse repurchase transactions ("dollar rolls") with certain securities
dealers. Under this program, the Company sells certain securities for
delivery in the current month and simultaneously contracts with the same
dealer to repurchase similar, but not identical, securities on a specified
future date. The Company gives up the right to receive principal and interest
on the securities sold. As of December 31, 1995 there were no outstanding
amounts under the Company's dollar roll program. As of December 31, 1994,
mortgage backed securities underlying the agreements were carried at a market
value of $58,174 and other liabilities included $58,150 for funds received
under these agreements. Average balances outstanding were $67,735 and $66,110
and weighted average interest rates were 7.4% and 6.5% during 1995 and 1994,
respectively.
During 1995 and 1994 the Company participated in a securities lending program
that is administered by Allianz Investment Corporation (AIC), an affiliated
company. Under this program, the Company loans U.S. Treasury Notes to
qualified third parties. The Company obtains collateral for the loan equal to
102 percent of the estimated market value and accrued interest on the loaned
securities and receives a portion of the interest earned on the collateral.
In addition, the Company maintains full ownership rights to the securities
loaned, including investment income and has the ability to sell the securities
while they are on loan with the consent of the borrower. There were no
securities on loan at December 31, 1995. As of December 31, 1994, the
estimated market value of the loaned securities was $110,063, collateralized
by investments in FNMA securities.
<TABLE>
<CAPTION>
Impaired mortgage loans are defined as those where it is probable that amounts
due according to contractual terms, including principal and interest, will not
be collected. Impaired mortgage loans are measured by the Company at the fair
value of collateral. Interest income on impaired mortgage loans is recorded
on a cash basis. Below is a summary of impaired mortgage loans as of December
31, 1995.
Impaired Impaired Total
mortgage loans mortgage loans impaired
with a related without a related mortgage
allowance allowance loans
--------------- ----------------- --------
<S> <C> <C> <C>
Balance $ 9,210 8,541 17,751
Related allowance 3,580 - 3,580
--------------- ----------------- --------
Balance, net of allowance $ 5,630 8,541 14,171
=============== ================= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Below is a summary of interest income on impaired mortgage loans.
1995
-------
<S> <C>
Average impaired mortgage loans $19,671
Total interest income on impaired mortgage loans 1,100
Interest income on impaired mortgage loans recorded on a cash basis 1,100
</TABLE>
<TABLE>
<CAPTION>
The valuation allowances at December 31, 1995, 1994 and 1993 and the changes in the
allowance for the years then ended are summarized as follows:
Writedowns
Beginning Charged to Charged to End
of year Operations Allowance Recoveries of year
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Mortgage loans $ 11,552 914 0 1,979 10,487
Investment in real estate 1,550 0 0 1,550 0
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 13,102 914 0 3,529 10,487
========== ========== ========== ========== =======
December 31, 1994:
Mortgage loans $ 11,552 1,598 0 1,598 11,552
Investment in real estate 1,550 0 0 0 1,550
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 13,102 1,598 0 1,598 13,102
========== ========== ========== ========== =======
December 31, 1993:
Mortgage loans $ 13,602 0 0 2,050 11,552
Investment in real estate 1,854 973 0 1,277 1,550
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 15,456 973 0 3,327 13,102
========== ========== ========== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Major categories of net investment income for the respective years ended
December 31 are:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 6,284 6,966 142,814
Fixed maturities, at market 158,421 141,611 0
Mortgage loans 16,125 13,706 12,764
Policy loans 6,688 6,329 6,404
Short-term investments 7,182 3,012 4,159
<PAGE>
Dividends:
Preferred stock 581 495 231
Common stock 3,204 2,673 2,496
Rental income on real estate 2,781 3,135 2,540
Interest on assets held by reinsurers 10,445 10,470 10,074
Other 833 577 1,131
-------- ------- -------
Total investment income 212,544 188,974 182,613
Investment expenses 11,386 7,683 7,782
-------- ------- -------
Net investment income $201,158 181,291 174,831
======== ======= =======
</TABLE>
(4) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1995 1995 1994 1994
---------- ---------- ---------- ----------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets
- -------------------------------------------
Fixed maturities, at amortized cost:
Corporate securities $ 0 $ 0 $ 90,615 $ 85,559
Fixed maturities, at market:
U.S. Government 867,793 867,793 463,694 463,694
States and political subdivisions 481 481 498 498
Foreign governments 265,797 265,797 43,494 43,494
Public utilities 36,728 36,728 80,002 80,002
Corporate securities 747,609 747,609 1,042,867 1,042,867
Mortgage backed securities 548,182 548,182 221,079 221,079
Collateralized mortgage obligations 83,008 83,008 54,574 54,574
Equity securities 254,458 254,458 131,712 131,712
Mortgage loans 203,128 212,766 163,099 162,903
Short term investments 31,501 31,501 155,307 155,307
Policy loans 104,184 104,184 101,899 101,899
Other long term investments 650 650 1,117 1,117
Receivables 124,700 124,700 111,874 111,874
Separate accounts assets 8,402,003 8,402,003 6,965,755 6,965,755
Financial liabilities
- -------------------------------------------
Investment contracts 3,063,100 2,542,260 2,753,304 2,319,872
Separate account liabilities 8,402,003 8,181,725 6,965,755 6,715,730
</TABLE>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
(5) RECEIVABLES
<TABLE>
<CAPTION>
<PAGE>
Receivables at December 31 consist of the following:
1995 1994
-------- -------
<S> <C> <C>
Premiums due $ 83,695 76,840
Agents balances 7,236 7,299
Related party receivables 922 1,042
Reinsurance commission receivable 16,693 13,723
Scholarship enrollment fees 6,822 6,753
Due from administrators 6,149 2,735
Other 3,183 3,008
-------- -------
Total receivables $124,700 111,400
======== =======
</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,
thereby allowing more reliable re-evaluations of such reserves. While
management believes that reserves as of December 31, 1995 are adequate,
uncertainties in the reserving process could cause such reserves to develop
favorably or unfavorably in the near term as new or additional information
emerges. Any adjustments to reserves are reflected in the operating results
of the periods in which they are made. Movements in reserves which are small
relative to the amount of such reserves could significantly impact future
reported earnings of the Company.
<TABLE>
<CAPTION>
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $18,858, $11,149 and $8,742 in
1995, 1994 and 1993, respectively, is summarized as follows:
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $96,090, $86,551 and $91,303 $185,028 170,123 168,872
Incurred related to:
Current year 242,024 230,995 226,815
Prior years (9,163) (7,290) (8,432)
--------- -------- --------
Total incurred 232,861 223,705 218,383
--------- -------- --------
Paid related to:
Current year 100,165 82,338 84,172
Prior years 125,920 126,462 132,960
--------- -------- --------
Total paid 226,085 208,800 217,132
--------- -------- --------
Balance at December 31, net of reinsurance
recoverables of $99,292, $96,090 and $86,551 $191,804 185,028 170,123
========= ======== ========
</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, 1995 are $873,724, $67,819
and $148,319 recoverable from insurers who, as of December 31, 1995, were
rated A+, A+ and B++, respectively by Best's Insurance Reports. A contingent
liability exists to the extent that the Company's reinsurers are unable to
meet their contractual obligations. Management is of the opinion that no
liability will accrue to the Company with respect to this contingency.
<TABLE>
<CAPTION>
Life insurance, annuities and accident and health business assumed from and ceded to other
companies is as follows:
Percentage
Assumed Ceded of amount
Gross from other to other Net assumed
Year ended amount companies companies amount to net
- -------------------------------- ----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Life insurance In force $39,601,531 28,790,199 6,884,645 61,507,085 46.8%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 242,704 108,102 40,291 310,515 34.8%
Annuities 145,994 1,117 10,376 136,735 0.8%
Accident and health insurance 361,290 165,769 172,559 354,500 46.8%
----------- ---------- --------- ---------- -----------
Total premiums 749,988 274,988 223,226 801,750 34.3%
=========== ========== ========= ========== ===========
December 31, 1994:
Life insurance In force $39,789,859 24,411,513 6,893,030 57,308,342 42.6%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 230,241 96,308 35,578 290,971 33.1%
Annuities 119,045 1,195 6,806 113,434 1.1%
Accident and health insurance 388,759 158,749 201,824 345,684 45.9%
----------- ---------- --------- ---------- -----------
Total premiums 738,045 256,252 244,208 750,089 34.2%
=========== ========== ========= ========== ===========
December 31, 1993:
Life insurance In force $39,784,564 21,861,833 6,297,943 55,348,454 39.5%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 220,287 85,433 42,323 263,397 32.4%
Annuities 68,713 870 6,633 62,950 1.4%
Accident and health insurance 365,894 142,891 153,948 354,837 40.3%
----------- ---------- --------- ---------- -----------
Total premiums 654,894 229,194 202,904 681,184 33.6%
=========== ========== ========= ========== ===========
</TABLE>
<PAGE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$182,638, $86,055 and $30,841 in 1995, 1994 and 1993, respectively, and life
insurance premiums earned of $641, $203 and $98 in 1995, 1994 and 1993,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company
also ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$(7,520), $12,256 and $8,966 in 1995, 1994 and 1993.
In addition to the above transactions, the Company ceded a portion of its
mortality risk associated with the variable annuity product to Allianz
Aktiengesellshaft. The Company recorded a recoverable on future policy
benefit reserves of $930 as of December 31, 1995.
(8) INCOME TAXES
INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Total income tax expense (benefit) for the years ended December 31 are as follows:
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 12,993 5,098 30,215
-------- -------- --------
Deferred tax (benefit) expense 25,772 16,053 (10,847)
Benefit of operating loss carryforwards 0 0 3,406
Adjustment of deferred tax assets and
liabilities for enacted change in tax rates 0 0 945
-------- -------- --------
Total deferred tax (benefit) expense 25,772 16,053 (6,496)
-------- -------- --------
Total income tax expense attributable to operations 38,765 21,151 23,719
Income tax effect on equity:
Income tax allocated to cumulative effect of
adoption of SFAS No. 106 0 0 (2,064)
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 0 40,312 0
Attributable to unrealized gains and losses for the year 108,559 (79,201) 62
-------- -------- --------
Total income tax effect on equity $147,324 (17,738) 21,717
======== ======== ========
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Income tax expense computed at the statutory rate of 35% in 1995, 1994 and 1993,
varies from tax expense reported in the Consolidated Statements of Income for the
respective years ended December 31 as follows:
<PAGE>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $44,087 26,819 28,125
Dividends received deductions and tax-exempt interest (5,430) (3,967) (2,189)
Foreign tax (464) (79) (1,324)
Interest on tax deficiency 408 (716) 528
Impact of statutory rate change on deferred tax liability 0 0 945
Utilization of net operating loss and alternative
minimum tax credits 0 0 (2,549)
Other 164 (906) 183
-------- ------- -------
Income tax expense as reported $38,765 21,151 23,719
======== ======= =======
</TABLE>
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
<TABLE>
<CAPTION>
Tax effects of temporary differences giving rise to the significant components of the
net deferred tax liability at December 31 are as follows:
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 1,936 1,885
Allowance for uncollectible accounts 2,283 2,961
Policy reserves 175,963 188,602
Unrealized losses on investments in available for sale securities 0 35,584
-------- -------
Total deferred tax assets 180,182 229,032
-------- -------
Deferred tax liabilities:
Deferred acquisition costs 234,393 229,577
Net unrealized gain 72,975 0
Other 12,988 5,262
-------- -------
Total deferred tax liabilities 320,356 234,839
-------- -------
Net deferred tax liability $140,174 5,807
======== =======
</TABLE>
Although realization is not assured, the Company believes it is not necessary
to establish a valuation allowance for the deferred tax asset as it is more
likely than not the deferred tax asset will be realized principally through
future reversals of existing taxable temporary differences and future taxable
income. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future reversals of existing
taxable temporary differences and future taxable income are reduced.
As of December 31, 1995, the Company had no tax loss carryforwards or
alternative minimum tax credits.
The Company files a consolidated federal income tax return with AZOA and all
of its wholly owned subsidiaries. The consolidated tax allocation agreement
stipulates that each company participating in the return will bear its share
of the tax liability pursuant to United States Treasury Department
regulations. The Company and each of its insurance subsidiaries generally
will be paid for the tax benefit on their losses, and any other tax
attributes, to the extent they could have obtained a benefit against their
<PAGE>
post-1990 separate return taxable income or tax. Income taxes paid by the
Company were $14,865, $15,162 and $28,465 in 1995, 1994 and 1993,
respectively. At December 31, 1995 and 1994 the Company has a tax recoverable
from AZOA of $3,257 and $5,095 and a recoverable from Revenue Canada Taxation
of $690 and a payable to Revenue Canada Taxation of $1,301, respectively.
(9) RELATED PARTY TRANSACTIONS
In November 1995, the Company purchased the 400 non-voting common shares in
its subsidiary, Canadian American Financial Corporation from AZOA for $7,903.
The acquisition of the shares increased the Company's equity ownership in both
voting and non-voting common stock to 100%.
As of December 31, 1995 and 1994, Allianz Real Estate (AzRE), a wholly owned
subsidiary of AZOA, owned 100% of the stock or was a limited partner of
certain entities whose assets include mortgage loans issued by the Company
amounting to $6,245 and $12,100, respectively. Included in the mortgage loans
are properties originally foreclosed upon by the Company of which the balances
at December 31, 1995 and 1994 are $1,650 and $4,575, respectively.
Allianz Investment Corporation (AIC) manages the Company's investment
portfolio. The Company paid AIC $1,024, $1,285 and $1,207 in 1995, 1994 and
1993, respectively, for investment advisory fees. The Company's liability to
AIC was $377 and $0 at December 31, 1995 and 1994, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $3,752, $4,228 and $4,715
in 1995, 1994 and 1993, respectively. The Company's liability for data center
charges was $337 and $457 at December 31, 1995 and 1994, respectively.
The Company reimbursed AZOA $738, $817 and $339 in 1995, 1994 and 1993,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $528 and $264 at December 31, 1995 and 1994,
respectively.
In June 1994, the Company authorized 200 million shares of preferred stock
with a par value of $1 per share. This preferred stock is issuable in series
with the number of shares, redemption rights and dividend rate designated by
the Board of Directors for each series. Dividends are cumulative at a rate
reflective of prevailing market conditions at time of issue and are payable
semiannually. Dividend payments are restricted by provisions in State of
Minnesota statutes. In 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 1995,
the Company redeemed and canceled the 15 million shares of Series B preferred
stock issued to AZOA. There are currently 25 million shares of Series A
preferred stock issued and outstanding.
In 1995 and 1994, AZOA contributed additional capital to the Company of $594
and $5,190, 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 $860, $918 and $1,363 in
1995, 1994 and 1993, respectively.
<PAGE>
The Company participates in the Allianz Asset Accumulation Plan (Allianz
Plan), a defined contribution plan sponsored by AZOA. Under the Allianz Plan
provisions, the Company will match from 50% to 100% of eligible employees'
contributions up to a maximum of 6% of a participant's compensation. The
total Company match for 1995, 1994 and 1993 Plan participants was 100%. All
employees, excluding agents, are eligible to participate after one year of
service and are fully vested in the Company's matching contribution after
three years of service. The Allianz Plan will accept participants' pretax or
after-tax contributions up to 15% of the participant's compensation. It is the
Company's policy to fund the Allianz Plan costs as accrued. The Company has
accrued $1,188, $1,266 and $1,270 in 1995, 1994 and 1993, respectively, toward
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. The Plan accepts
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.
In 1995, the Company discontinued support of its individual agency field force
and suspended contributions to the Plan as of January 1, 1996. Also during
1995, participation in the Plan decreased significantly resulting in a partial
plan termination whereby participants as of January 1, 1995 became fully
vested in the Plan. The Company has no intention to fully terminate the Plan
in the near term. Total Company contributions to the Plan were $118, $386 and
$319 in 1995, 1994 and 1993, respectively.
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 a $2,064 tax benefit. The Company's current plan obligation is $5,532 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
calculated for statutory accounting do not include provisions for withdrawals.
<TABLE>
<CAPTION>
The differences between stockholder's equity and net income reported in accordance with statutory
accounting practices and the accompanying consolidated financial statements as of and for the year ended
December 31 are as follows:
Stockholder's Stockholder's Net Net Net
equity equity Income Income Income
--------------- -------------- -------- --------- ---------
1995 1994 1995 1994 1993
--------------- -------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 299,186 294,334 11,565 6,895 657
Adjustments:
Change in reserve basis (211,678) (339,283) (43,642) (109,473) (138,864)
Deferred acquisition costs 826,994 798,442 28,552 132,090 253,240
Net deferred taxes (140,174) (5,807) (25,772) (16,053) 6,496
Statutory asset valuation reserve 100,462 59,169 0 0 0
Statutory interest maintenance reserve 25,061 16,305 8,756 (4,768) 11,178
Modified coinsurance reinsurance (119,178) (51,947) 104,222 44,920 (75,611)
<PAGE>
Unrealized gains (losses) on investments 163,237 (99,408) 0 0 0
Nonadmitted assets 1,471 2,302 0 0 0
Cumulative effect of accounting changes 0 0 0 0 26,875
Other 5,813 5,338 3,516 1,864 (461)
--------------- -------------- -------- --------- ---------
As reported in the accompanying
consolidated financial statements $ 951,194 679,445 87,197 55,475 83,510
=============== ============== ======== ========= =========
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1995 and 1994 was in compliance with these requirements. The maximum amount
of dividends which can be paid by Minnesota insurance companies to
stockholders without prior approval of the Commissioner of Commerce is subject
to restrictions relating to statutory earned surplus, also known as unassigned
funds. Unassigned funds are determined in accordance with the accounting
procedures and practices governing preparation of the statutory annual
statement, minus 25% of earned surplus attributable to unrealized capital
gains. In accordance with Minnesota Statutes, the Company may declare and pay
from its surplus, cash dividends of not more than the greater of 10% of its
beginning of the year statutory surplus in any year, or the net gain from
operations of the insurer, not including realized gains, for the 12-month
period ending the 31st day of the next preceding year. In 1995 and 1994,
respectively, the Company paid dividends on preferred stock in the amount of
$2,651 and $413, respectively to AZOA. Dividends of $23,433 could be paid in
1996 without prior approval of the Commissioner of Commerce.
REGULATORY RISK BASED CAPITAL
<TABLE>
<CAPTION>
An insurance enterprise's state of domicile imposes minimum risk-based capital
requirements that were developed by the National Association of Insurance
Commissioners (NAIC). The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial
balances or various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of an enterprise's regulatory
total adjusted capital to its authorized control level risk-based capital, as
defined by the NAIC. Enterprises below specific triggerpoints or ratios are
classified within certain levels, each of which requires specified corrective
action. The levels and ratios are as follows:
Ratio of total adjusted capital to
authorized control level risk-based
Regulatory Event Capital (less than or equal to)
- ------------------------ ------------------------------------
<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, 1995 and 1994.
<PAGE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company is required to file annual statements with insurance regulatory
authorities which are prepared on an accounting basis prescribed or permitted
by such authorities. Currently, prescribed statutory accounting practices
include state laws, regulations, and general administrative rules, as well as
a variety of publications of the NAIC. Permitted statutory accounting
practices encompass all accounting practices that are not prescribed; such
practices differ from state to state, may differ from company to company
within a state, and may change in the future. The NAIC currently has a
project underway to codify statutory accounting practices, the result of which
is expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project will likely change the definition of
what comprises prescribed versus permitted statutory accounting practices, and
may result in changes to existing accounting policies insurance enterprises
use to prepare their statutory financial statements. The Company does not
currently use permitted statutory accounting practices which have a
significant impact on its statutory financial statements.
(12) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion
of management, the ultimate resolution of such litigation will not have a
material adverse effect on the consolidated financial position of the Company.
The Company is contingently liable for possible future assessments under
regulatory requirements pertaining to insolvencies and impairments of
unaffiliated insurance companies. Provision has been made for assessments
currently received and assessments anticipated for known insolvencies.
(13) FOREIGN CURRENCY TRANSLATION
<TABLE>
<CAPTION>
The net assets of the Company's foreign operations are translated into U.S.
dollars using exchange rates in effect at each year end. Translation adjustments
arising from differences in exchange rates from period to period are included in
the accumulated foreign currency translation adjustment reported as a separate
component of stockholder's equity. An analysis of this account for the respective
years ended December 31 follows:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $(3,787) (2,708) (1,835)
-------- ------- -------
Aggregate adjustment for the period resulting from
translation adjustments 511 (1,659) (1,746)
Amount of income tax benefit for period related to
aggregate adjustment (179) 580 873
-------- ------- -------
Net aggregate translation included in equity 332 (1,079) (873)
-------- ------- -------
Ending amount of cumulative translation adjustments $(3,455) (3,787) (2,708)
======== ======= =======
Canadian foreign exchange rate at end of year 0.7329 0.7129 0.7554
</TABLE>
<PAGE>
(14) SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
The following table summarizes certain financial information by line of business for 1995, 1994 and 1993:
As of December 31 For the year ended December 31
--------- --------- -------- -------- --------- ------- --------- --------- --------- ---------
Amortiz-
Future Premium Benefits, ation
policy Other revenue claims of
Deferred benefits, policy and losses, deferred
policy losses, claims other Net and policy
acquis- claims and contract invest- settle- acquis- Other Premiums
ition and loss Unearned benefits consider- ment ment ition operating written
costs expense premiums payable ations income expenses costs (a) expenses (b)
--------- --------- -------- -------- --------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
Life $ 179,915 1,088,964 5,493 62,660 310,514 83,741 239,287 8,475 124,415
Annuities 629,515 2,601,943 0 580 136,736 98,214 89,321 (34,235) 137,000
Accident
and health 17,564 0 28,688 308,658 354,500 19,203 249,232 (2,792) 105,615
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 826,994 3,690,907 34,181 371,898 801,750 201,158 577,840 (28,552) 367,030
========= ========= ======== ======== ========= ======= ========= ========= =========
1994:
Life $ 188,390 1,022,537 6,012 63,728 290,971 78,100 228,383 6,889 114,767
Annuities 595,280 2,304,560 0 360 113,434 86,168 88,100 (140,776) 210,933
Accident
and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797 121,645
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 798,442 3,327,097 40,376 355,411 750,089 181,291 553,097 (132,090) 447,345
========= ========= ======== ======== ========= ======= ========= ========= =========
1993:
Life $ 195,279 989,309 7,389 57,763 263,397 80,422 206,157 (10,925) 186,457
Annuities 454,504 1,986,801 0 578 62,950 78,674 86,227 (243,113) 191,783
Accident
and health 16,569 0 34,181 264,583 354,837 15,735 241,443 804 154,493
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 666,352 2,976,110 41,570 322,924 681,184 174,831 533,827 (253,234) 532,733
========= ========= ======== ======== ========= ======= ========= ========= =========
</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>
<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, 1995 and 1994.
3. Consolidated Statements of Income for the years ended December
31, 1995, 1994 and 1993.
4. Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1995, 1994 and 1993.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
6. Notes to Consolidated Financial Statements - December 31, 1995,
1994 and 1993.
The following financial statements of the Variable Account are
included in Part B hereof.
1. Statements of Assets and Liabilities as of June 30, 1996
(unaudited).
2. Statements of Operations for the period ended June 30, 1996
(unaudited).
3. Statements of Changes in Net Assets for the period ended June 30,
1996 (unaudited) and the year ended December 31, 1995.
4. Notes to Financial Statements - June 30, 1996 (unaudited).
5. Independent Auditors' Report.
6. Statements of Assets and Liabilities as of December 31, 1995.
7. Statements of Operations for the year ended December 31, 1995.
8. Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994.
9. Notes to Financial Statements - December 31, 1995.
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. 10 to
Registrant's Form N-4 filed on May 1, 1993.
#Incorporated by reference to Post-Effective Amendment No. 2 to
Registrant's Form N-4 electronically filed on October 24, 1995.
##Incorporated by reference to Post-Effective Amendment No.3 to Registrant's
Form N-4 electronically filed on April 18, 1996
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
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
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
Rev. Dennis J. Dease Director
c/o Univer of St.Thomas
Box AQU100
2115 Summit Avenue
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Corp.
Norwest Center
Sixth + Marquette
Minneapolis, MN 55479-0116
</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 September 12, 1996, there were 14,891 qualified Contract Owners and 32,595
non-qualified Contract Owners with Contracts in the separate account
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.:
<TABLE>
<CAPTION>
Name & Principal Positions and Offices
Business Address with Underwriter
- ---------------- ---------------------
<S> <C>
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
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.
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.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
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.
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 5th day of November, 1996.
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/Alan A. Grove
-----------------
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/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.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board,
Lowell C. Anderson* President
Lowell C. Anderson and Chief Executive Officer 11-5-96
Herbert F. Hansmeyer* Director 11-5-96
Herbert F. Hansmeyer
Michael P. Sullivan* Director 11-5-96
Michael P. Sullivan
Dr. Jerry E. Robertson* Director 11-5-96
Dr. Jerry E. Robertson
Dr. Gerhard Rupprecht* Director 11-5-96
Dr. Gerhard Rupprecht
Edward J. Bonach* Chief Financial Officer 11-5-96
Edward J. Bonach
Rev. Dennis J. Dease* Director 11-5-96
Rev. Dennis J. Dease
James R. Campbell* Director 11-5-96
James R. Campbell
</TABLE>
*By Power of Attorney
By:/s/Alan A. Grove
-----------------
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO.4
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
INDEX TO EXHIBITS
Exhibit Page
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Independent Auditor's Consent
EX-99.B13 Calculation of Performance Information
EX-27 Financial Data Schedule
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
October 23, 1996
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.
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/ LYNN KORMAN STONE
- ----------------------------------
Lynn Korman Stone
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America
and Contract Owners of Allianz Life Variable Account B:
We consent to the use of our report, dated January 22, 1996, on the financial
statements of Allianz Life Variable Account B and our report dated February 6,
1996, 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
November 4, 1996
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK III
Allianz Life Variable Account B
Cumulative and Average Annual Total Return Calculations
Original Purchase as of June 30, 1995
Valuation Date as of June 30, 1996
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Growth and Income
6-30-95 Purchase $1,000.00 $15.11222373 66.172 66.172 $1,000.00
6-30-96 Contract Fee (1.00) 18.14157976 (0.055) 66.116 1,199.46
6-30-96 Value before Surr Chg 18.14157976 0.000 66.116 1,199.46
6-30-96 Surrender Charge (51.00) 18.14157976 (2.811) 63.305 1,148.46
Cumulative and Average Annual Total Returns
without/with charges 20.05% A 14.85% B
High Income
6-30-95 Purchase $1,000.00 $16.44426282 60.811 60.811 $1,000.00
6-30-96 Contract Fee (1.00) 17.77714583 (0.056) 60.755 1,080.05
6-30-96 Value before Surr Chg 17.77714583 0.000 60.755 1,080.05
6-30-96 Surrender Charge (51.00) 17.77714583 (2.869) 57.886 1,029.05
Cumulative and Average Annual Total Returns
without/with charges 8.11% A 2.91% B
Income Securities
6-30-95 Purchase $1,000.00 $18.24244923 54.817 54.817 $1,000.00
6-30-96 Contract Fee (1.00) 20.44085417 (0.049) 54.768 1,119.51
6-30-96 Value before Surr Chg 20.44085417 0.000 54.768 1,119.51
6-30-96 Surrender Charge (51.00) 20.44085417 (2.495) 52.273 1,068.51
Cumulative and Average Annual Total Returns
without/with charges 12.05% A 6.85% B
Money Market
6-30-95 Purchase $1,000.00 $12.62219925 79.225 79.225 $1,000.00
6-30-96 Contract Fee (1.00) 13.11596925 (0.076) 79.149 1,038.12
6-30-96 Value before Surr Chg 13.11596925 0.000 79.149 1,038.12
6-30-96 Surrender Charge (51.00) 13.11596925 (3.888) 75.261 987.12
Cumulative and Average Annual Total Returns
without/with charges 3.91% A -1.29% B
Precious Metals
6-30-95 Purchase $1,000.00 $14.01578927 71.348 71.348 $1,000.00
6-30-96 Contract Fee (1.00) 15.21339202 (0.066) 71.282 1,084.45
6-30-96 Value before Surr Chg 15.21339202 0.000 71.282 1,084.45
6-30-96 Surrender Charge (51.00) 15.21339202 (3.352) 67.930 1,033.45
Cumulative and Average Annual Total Returns
without/with charges 8.54% A 3.34% B
Real Estate Securities
6-30-95 Purchase $1,000.00 $16.13892210 61.962 61.962 $1,000.00
6-30-96 Contract Fee (1.00) 19.23483158 (0.052) 61.910 1,190.83
6-30-96 Value before Surr Chg 19.23483158 0.000 61.910 1,190.83
6-30-96 Surrender Charge (51.00) 19.23483158 (2.651) 59.259 1,139.83
Cumulative and Average Annual Total Returns
without/with charges 19.18% A 13.98% B
Rising Dividends
6-30-95 Purchase $1,000.00 $11.03504909 90.620 90.620 $1,000.00
6-30-96 Contract Fee (1.00) 13.31084899 (0.075) 90.545 1,205.23
6-30-96 Value before Surr Chg 13.31084899 0.000 90.545 1,205.23
6-30-96 Surrender Charge (51.00) 13.31084899 (3.831) 86.714 1,154.23
Cumulative and Average Annual Total Returns
without/with charges 20.62% A 15.42% B
Templeton Developing Markets Equity
6-30-95 Purchase $1,000.00 $9.67842440 103.323 103.323 $1,000.00
6-30-96 Contract Fee (1.00) 11.03044915 (0.091) 103.232 1,138.69
6-30-96 Value before Surr Chg 11.03044915 0.000 103.232 1,138.69
6-30-96 Surrender Charge (51.00) 11.03044915 (4.624) 98.608 1,087.69
Cumulative and Average Annual Total Returns
without/with charges 13.97% A 8.77% B
Templeton Global Asset Allocation
6-30-95 Purchase $1,000.00 $10.09661646 99.043 99.043 $1,000.00
6-30-96 Contract Fee (1.00) 11.38243612 (0.088) 98.955 1,126.35
6-30-96 Value before Surr Chg 11.38243612 0.000 98.955 1,126.35
6-30-96 Surrender Charge (51.00) 11.38243612 (4.481) 94.475 1,075.35
Cumulative and Average Annual Total Returns
without/with charges 12.74% A 7.54% B
Templeton Global Growth
6-30-95 Purchase $1,000.00 $10.85475264 92.126 92.126 $1,000.00
6-30-96 Contract Fee (1.00) 12.47898971 (0.080) 92.045 1,148.63
6-30-96 Value before Surr Chg 12.47898971 0.000 92.045 1,148.63
6-30-96 Surrender Charge (51.00) 12.47898971 (4.087) 87.959 1,097.63
Cumulative and Average Annual Total Returns
without/with charges 14.96% A 9.76% B
Templeton Global Income Securities
6-30-95 Purchase $1,000.00 $14.72539209 67.910 67.910 $1,000.00
6-30-96 Contract Fee (1.00) 15.61016701 (0.064) 67.846 1,059.08
6-30-96 Value before Surr Chg 15.61016701 0.000 67.846 1,059.08
6-30-96 Surrender Charge (51.00) 15.61016701 (3.267) 64.579 1,008.08
Cumulative and Average Annual Total Returns
without/with charges 6.01% A 0.81% B
Templeton International Equity
6-30-95 Purchase $1,000.00 $13.00465580 76.896 76.896 $1,000.00
6-30-96 Contract Fee (1.00) 14.79181647 (0.068) 76.828 1,136.42
6-30-96 Value before Surr Chg 14.79181647 0.000 76.828 1,136.42
6-30-96 Surrender Charge (51.00) 14.79181647 (3.448) 73.380 1,085.42
Cumulative and Average Annual Total Returns
without/with charges 13.74% A 8.54% B
Templeton Pacific Growth
6-30-95 Purchase $1,000.00 $13.01539431 76.832 76.832 $1,000.00
6-30-96 Contract Fee (1.00) 15.18114534 (0.066) 76.766 1,165.40
6-30-96 Value before Surr Chg 15.18114534 0.000 76.766 1,165.40
6-30-96 Surrender Charge (51.00) 15.18114534 (3.359) 73.407 1,114.40
Cumulative and Average Annual Total Returns
without/with charges 16.64% A 11.44% B
U.S. Government Securities
6-30-95 Purchase $1,000.00 $15.45060725 64.722 64.722 $1,000.00
6-30-96 Contract Fee (1.00) 15.94773587 (0.063) 64.660 1,031.18
6-30-96 Value before Surr Chg 15.94773587 0.000 64.660 1,031.18
6-30-96 Surrender Charge (51.00) 15.94773587 (3.198) 61.462 980.18
Cumulative and Average Annual Total Returns
without/with charges 3.22% A -1.98% B
Utility Equity
6-30-95 Purchase $1,000.00 $16.90593418 59.151 59.151 $1,000.00
6-30-96 Contract Fee (1.00) 20.28737569 (0.049) 59.102 1,199.02
6-30-96 Value before Surr Chg 20.28737569 0.000 59.102 1,199.02
6-30-96 Surrender Charge (51.00) 20.28737569 (2.514) 56.588 1,148.02
Cumulative and Average Annual Total Returns
without/with charges 20.00% A 14.80% B
Zero Coupon - 2000
6-30-95 Purchase $1,000.00 $17.36776508 57.578 57.578 $1,000.00
6-30-96 Contract Fee (1.00) 17.78631427 (0.056) 57.522 1,023.10
6-30-96 Value before Surr Chg 17.78631427 0.000 57.522 1,023.10
6-30-96 Surrender Charge (51.00) 17.78631427 (2.867) 54.654 972.10
Cumulative and Average Annual Total Returns
without/with charges 2.41% A -2.79% B
Zero Coupon - 2005
6-30-95 Purchase $1,000.00 $19.06076227 52.464 52.464 $1,000.00
6-30-96 Contract Fee (1.00) 19.38709243 (0.052) 52.412 1,016.12
6-30-96 Value before Surr Chg 19.38709243 0.000 52.412 1,016.12
6-30-96 Surrender Charge (51.00) 19.38709243 (2.631) 49.782 965.12
Cumulative and Average Annual Total Returns
without/with charges 1.71% A -3.49% B
Zero Coupon - 2010
6-30-95 Purchase $1,000.00 $19.59589189 51.031 51.031 $1,000.00
6-30-96 Contract Fee (1.00) 19.90678287 (0.050) 50.981 1,014.87
6-30-96 Value before Surr Chg 19.90678287 0.000 50.981 1,014.87
6-30-96 Surrender Charge (51.00) 19.90678287 (2.562) 48.419 963.87
Cumulative and Average Annual Total Returns
without/with charges 1.59% A -3.61% B
<FN>
A = (Unit Value as of June 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of June 30, 1993
Valuation Date as of June 30, 1996
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Growth and Income
6-30-93 Purchase $1,000.00 $12.87788053 77.653 77.653 $1,000.00
6-30-94 Contract Fee (1.00) 13.00069386 (0.077) 77.576 1,008.54
6-30-95 Contract Fee (1.00) 15.11222373 (0.066) 77.509 1,171.34
6-30-96 Contract Fee (1.00) 18.14157976 (0.055) 77.454 1,405.14
6-30-96 Value before Surr Chg 18.14157976 0.000 77.454 1,405.14
6-30-96 Surrender Charge (22.00) 18.14157976 (1.213) 76.242 1,383.14
Cumulative Total Returns without/with chrgs. 40.87% A 38.31% C
Avg. Annual Total Returns without/with chrgs. 12.10% B 11.42% D
High Income
6-30-93 Purchase $1,000.00 $14.33253103 69.771 69.771 $1,000.00
6-30-94 Contract Fee (1.00) 14.49362689 (0.069) 69.702 1,010.24
6-30-95 Contract Fee (1.00) 16.44426282 (0.061) 69.642 1,145.20
6-30-96 Contract Fee (1.00) 17.77714583 (0.056) 69.585 1,237.03
6-30-96 Value before Surr Chg 17.77714583 0.000 69.585 1,237.03
6-30-96 Surrender Charge (22.00) 17.77714583 (1.238) 68.348 1,215.03
Cumulative Total Returns without/with chrgs. 24.03% A 21.50% C
Avg. Annual Total Returns without/with chrgs. 7.44% B 6.71% D
Income Securities
6-30-93 Purchase $1,000.00 $16.65047647 60.058 60.058 $1,000.00
6-30-94 Contract Fee (1.00) 16.57666096 (0.060) 59.998 994.57
6-30-95 Contract Fee (1.00) 18.24244923 (0.055) 59.943 1,093.51
6-30-96 Contract Fee (1.00) 20.44085417 (0.049) 59.894 1,224.29
6-30-96 Value before Surr Chg 20.44085417 0.000 59.894 1,224.29
6-30-96 Surrender Charge (22.00) 20.44085417 (1.076) 58.818 1,202.29
Cumulative Total Returns without/with chrgs. 22.76% A 20.23% C
Avg. Annual Total Returns without/with chrgs. 7.08% B 6.33% D
Money Market
6-30-93 Purchase $1,000.00 $11.99714210 83.353 83.353 $1,000.00
6-30-94 Contract Fee (1.00) 12.16194540 (0.082) 83.271 1,012.74
6-30-95 Contract Fee (1.00) 12.62219925 (0.079) 83.192 1,050.06
6-30-96 Contract Fee (1.00) 13.11596925 (0.076) 83.115 1,090.14
6-30-96 Value before Surr Chg 13.11596925 0.000 83.115 1,090.14
6-30-96 Surrender Charge (22.00) 13.11596925 (1.677) 81.438 1,068.14
Cumulative Total Returns without/with chrgs. 9.33% A 6.81% C
Avg. Annual Total Returns without/with chrgs. 3.02% B 2.22% D
Precious Metals
6-30-93 Purchase $1,000.00 $12.93411643 77.315 77.315 $1,000.00
6-30-94 Contract Fee (1.00) 13.50777802 (0.074) 77.241 1,043.35
6-30-95 Contract Fee (1.00) 14.01578927 (0.071) 77.170 1,081.59
6-30-96 Contract Fee (1.00) 15.21339202 (0.066) 77.104 1,173.01
6-30-96 Value before Surr Chg 15.21339202 0.000 77.104 1,173.01
6-30-96 Surrender Charge (22.00) 15.21339202 (1.446) 75.658 1,151.01
Cumulative Total Returns without/with chrgs. 17.62% A 15.10% C
Avg. Annual Total Returns without/with chrgs. 5.56% B 4.80% D
Real Estate Securities
6-30-93 Purchase $1,000.00 $14.71629470 67.952 67.952 $1,000.00
6-30-94 Contract Fee (1.00) 15.76546234 (0.063) 67.888 1,070.29
6-30-95 Contract Fee (1.00) 16.13892210 (0.062) 67.826 1,094.65
6-30-96 Contract Fee (1.00) 19.23483158 (0.052) 67.775 1,303.63
6-30-96 Value before Surr Chg 19.23483158 0.000 67.775 1,303.63
6-30-96 Surrender Charge (22.00) 19.23483158 (1.144) 66.631 1,281.63
Cumulative Total Returns without/with chrgs. 30.70% A 28.16% C
Avg. Annual Total Returns without/with chrgs. 9.34% B 8.62% D
Rising Dividends
6-30-93 Purchase $1,000.00 $10.22323737 97.816 97.816 $1,000.00
6-30-94 Contract Fee (1.00) 9.72901110 (0.103) 97.714 950.66
6-30-95 Contract Fee (1.00) 11.03504909 (0.091) 97.623 1,077.27
6-30-96 Contract Fee (1.00) 13.31084899 (0.075) 97.548 1,298.44
6-30-96 Value before Surr Chg 13.31084899 0.000 97.548 1,298.44
6-30-96 Surrender Charge (22.00) 13.31084899 (1.653) 95.895 1,276.44
Cumulative Total Returns without/with chrgs. 30.20% A 27.64% C
Avg. Annual Total Returns without/with chrgs. 9.20% B 8.48% D
Templeton Global Income Securities
6-30-93 Purchase $1,000.00 $13.91118009 71.885 71.885 $1,000.00
6-30-94 Contract Fee (1.00) 13.52815719 (0.074) 71.811 971.47
6-30-95 Contract Fee (1.00) 14.72539209 (0.068) 71.743 1,056.44
6-30-96 Contract Fee (1.00) 15.61016701 (0.064) 71.679 1,118.92
6-30-96 Value before Surr Chg 15.61016701 0.000 71.679 1,118.92
6-30-96 Surrender Charge (22.00) 15.61016701 (1.409) 70.269 1,096.92
Cumulative Total Returns without/with chrgs. 12.21% A 9.69% C
Avg. Annual Total Returns without/with chrgs. 3.92% B 3.13% D
Templeton International Equity
6-30-93 Purchase $1,000.00 $10.02709125 99.730 99.730 $1,000.00
6-30-94 Contract Fee (1.00) 12.19803663 (0.082) 99.648 1,215.51
6-30-95 Contract Fee (1.00) 13.00465580 (0.077) 99.571 1,294.89
6-30-96 Contract Fee (1.00) 14.79181647 (0.068) 99.503 1,471.84
6-30-96 Value before Surr Chg 14.79181647 0.000 99.503 1,471.84
6-30-96 Surrender Charge (22.00) 14.79181647 (1.487) 98.016 1,449.84
Cumulative Total Returns without/with chrgs. 47.52% A 44.98% C
Avg. Annual Total Returns without/with chrgs. 13.84% B 13.18% D
Templeton Pacific Growth
6-30-93 Purchase $1,000.00 $10.89039681 91.824 91.824 $1,000.00
6-30-94 Contract Fee (1.00) 13.26191976 (0.075) 91.749 1,216.76
6-30-95 Contract Fee (1.00) 13.01539431 (0.077) 91.672 1,193.14
6-30-96 Contract Fee (1.00) 15.18114534 (0.066) 91.606 1,390.68
6-30-96 Value before Surr Chg 15.18114534 0.000 91.606 1,390.68
6-30-96 Surrender Charge (22.00) 15.18114534 (1.449) 90.157 1,368.68
Cumulative Total Returns without/with chrgs. 39.40% A 36.87% C
Avg. Annual Total Returns without/with chrgs. 11.71% B 11.03% D
U.S. Government Securities
6-30-93 Purchase $1,000.00 $14.47271709 69.096 69.096 $1,000.00
6-30-94 Contract Fee (1.00) 13.77718973 (0.073) 69.023 950.94
6-30-95 Contract Fee (1.00) 15.45060725 (0.065) 68.958 1,065.45
6-30-96 Contract Fee (1.00) 15.94773587 (0.063) 68.896 1,098.73
6-30-96 Value before Surr Chg 15.94773587 0.000 68.896 1,098.73
6-30-96 Surrender Charge (22.00) 15.94773587 (1.380) 67.516 1,076.73
Cumulative Total Returns without/with chrgs. 10.19% A 7.67% C
Avg. Annual Total Returns without/with chrgs. 3.29% B 2.49% D
Utility Equity
6-30-93 Purchase $1,000.00 $17.40075723 57.469 57.469 $1,000.00
6-30-94 Contract Fee (1.00) 14.39814174 (0.069) 57.399 826.44
6-30-95 Contract Fee (1.00) 16.90593418 (0.059) 57.340 969.39
6-30-96 Contract Fee (1.00) 20.28737569 (0.049) 57.291 1,162.28
6-30-96 Value before Surr Chg 20.28737569 0.000 57.291 1,162.28
6-30-96 Surrender Charge (22.00) 20.28737569 (1.084) 56.206 1,140.28
Cumulative Total Returns without/with chrgs. 16.59% A 14.03% C
Avg. Annual Total Returns without/with chrgs. 5.25% B 4.47% D
Zero Coupon - 2000
6-30-93 Purchase $1,000.00 $16.31243966 61.303 61.303 $1,000.00
6-30-94 Contract Fee (1.00) 15.53833043 (0.064) 61.239 951.54
6-30-95 Contract Fee (1.00) 17.36776508 (0.058) 61.181 1,062.58
6-30-96 Contract Fee (1.00) 17.78631427 (0.056) 61.125 1,087.18
6-30-96 Value before Surr Chg 17.78631427 0.000 61.125 1,087.18
6-30-96 Surrender Charge (22.00) 17.78631427 (1.237) 59.888 1,065.18
Cumulative Total Returns without/with chrgs. 9.04% A 6.52% C
Avg. Annual Total Returns without/with chrgs. 2.93% B 2.13% D
Zero Coupon - 2005
6-30-93 Purchase $1,000.00 $17.44299964 57.330 57.330 $1,000.00
6-30-94 Contract Fee (1.00) 16.06803251 (0.062) 57.267 920.17
6-30-95 Contract Fee (1.00) 19.06076227 (0.052) 57.215 1,090.56
6-30-96 Contract Fee (1.00) 19.38709243 (0.052) 57.163 1,108.23
6-30-96 Value before Surr Chg 19.38709243 0.000 57.163 1,108.23
6-30-96 Surrender Charge (22.00) 19.38709243 (1.135) 56.029 1,086.23
Cumulative Total Returns without/with chrgs. 11.15% A 8.62% C
Avg. Annual Total Returns without/with chrgs. 3.59% B 2.80% D
Zero Coupon - 2010
6-30-93 Purchase $1,000.00 $17.00274895 58.814 58.814 $1,000.00
6-30-94 Contract Fee (1.00) 15.65991587 (0.064) 58.750 920.02
6-30-95 Contract Fee (1.00) 19.59589189 (0.051) 58.699 1,150.26
6-30-96 Contract Fee (1.00) 19.90678287 (0.050) 58.649 1,167.51
6-30-96 Value before Surr Chg 19.90678287 0.000 58.649 1,167.51
6-30-96 Surrender Charge (22.00) 19.90678287 (1.105) 57.544 1,145.51
Cumulative Total Returns without/with chrgs. 17.08% A 14.55% C
Avg. Annual Total Returns without/with chrgs. 5.40% B 4.63% D
<FN>
A = (Unit Value as of June 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = [(A+1)^(1/3 Years)]-1
C = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
D = [(C+1)^(1/3 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of June 30, 1991
Valuation Date as of June 30, 1996
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Growth and Income
6-30-91 Purchase $1,000.00 $10.51433906 95.108 95.108 $1,000.00
6-30-92 Contract Fee (1.00) 11.40531634 (0.088) 95.021 1,083.74
6-30-93 Contract Fee (1.00) 12.87788053 (0.078) 94.943 1,222.66
6-30-94 Contract Fee (1.00) 13.00069386 (0.077) 94.866 1,233.32
6-30-95 Contract Fee (1.00) 15.11222373 (0.066) 94.800 1,432.64
6-30-96 Contract Fee (1.00) 18.14157976 (0.055) 94.745 1,718.82
6-30-96 Value before Surr Chg 18.14157976 0.000 94.745 1,718.82
6-30-96 Surrender Charge (3.75) 18.14157976 (0.207) 94.538 1,715.07
Cumulative Total Returns without/with chrgs. 72.54% A 71.51% C
Avg. Annual Total Returns without/with chrgs. 11.53% B 11.39% D
High Income
6-30-91 Purchase $1,000.00 $10.56733354 94.631 94.631 $1,000.00
6-30-92 Contract Fee (1.00) 12.57666477 (0.080) 94.552 1,189.15
6-30-93 Contract Fee (1.00) 14.33253103 (0.070) 94.482 1,354.17
6-30-94 Contract Fee (1.00) 14.49362689 (0.069) 94.413 1,368.39
6-30-95 Contract Fee (1.00) 16.44426282 (0.061) 94.352 1,551.55
6-30-96 Contract Fee (1.00) 17.77714583 (0.056) 94.296 1,676.31
6-30-96 Value before Surr Chg 17.77714583 0.000 94.296 1,676.31
6-30-96 Surrender Charge (3.75) 17.77714583 (0.211) 94.085 1,672.56
Cumulative Total Returns without/with chrgs. 68.23% A 67.26% C
Avg. Annual Total Returns without/with chrgs. 10.96% B 10.83% D
Income Securities
6-30-91 Purchase $1,000.00 $12.05870281 82.928 82.928 $1,000.00
6-30-92 Contract Fee (1.00) 14.82244660 (0.067) 82.860 1,228.19
6-30-93 Contract Fee (1.00) 16.65047647 (0.060) 82.800 1,378.66
6-30-94 Contract Fee (1.00) 16.57666096 (0.060) 82.740 1,371.55
6-30-95 Contract Fee (1.00) 18.24244923 (0.055) 82.685 1,508.38
6-30-96 Contract Fee (1.00) 20.44085417 (0.049) 82.636 1,689.15
6-30-96 Value before Surr Chg 20.44085417 0.000 82.636 1,689.15
6-30-96 Surrender Charge (3.75) 20.44085417 (0.183) 82.453 1,685.40
Cumulative Total Returns without/with chrgs. 69.51% A 68.54% C
Avg. Annual Total Returns without/with chrgs. 11.13% B 11.00% D
Money Market
6-30-91 Purchase $1,000.00 $11.53755190 86.673 86.673 $1,000.00
6-30-92 Contract Fee (1.00) 11.85545160 (0.084) 86.589 1,026.55
6-30-93 Contract Fee (1.00) 11.99714210 (0.083) 86.506 1,037.82
6-30-94 Contract Fee (1.00) 12.16194540 (0.082) 86.424 1,051.08
6-30-95 Contract Fee (1.00) 12.62219925 (0.079) 86.344 1,089.86
6-30-96 Contract Fee (1.00) 13.11596925 (0.076) 86.268 1,131.49
6-30-96 Value before Surr Chg 13.11596925 0.000 86.268 1,131.49
6-30-96 Surrender Charge (3.75) 13.11596925 (0.286) 85.982 1,127.74
Cumulative Total Returns without/with chrgs. 13.68% A 12.77% C
Avg. Annual Total Returns without/with chrgs. 2.60% B 2.43% D
Precious Metals
6-30-91 Purchase $1,000.00 $10.90092404 91.735 91.735 $1,000.00
6-30-92 Contract Fee (1.00) 10.89045367 (0.092) 91.644 998.04
6-30-93 Contract Fee (1.00) 12.93411643 (0.077) 91.566 1,184.33
6-30-94 Contract Fee (1.00) 13.50777802 (0.074) 91.492 1,235.86
6-30-95 Contract Fee (1.00) 14.01578927 (0.071) 91.421 1,281.34
6-30-96 Contract Fee (1.00) 15.21339202 (0.066) 91.355 1,389.82
6-30-96 Value before Surr Chg 15.21339202 0.000 91.355 1,389.82
6-30-96 Surrender Charge (3.75) 15.21339202 (0.246) 91.109 1,386.07
Cumulative Total Returns without/with chrgs. 39.56% A 38.61% C
Avg. Annual Total Returns without/with chrgs. 6.89% B 6.75% D
Real Estate Securities
6-30-91 Purchase $1,000.00 $10.75501006 92.980 92.980 $1,000.00
6-30-92 Contract Fee (1.00) 11.83743779 (0.084) 92.895 1,099.64
6-30-93 Contract Fee (1.00) 14.71629470 (0.068) 92.827 1,366.08
6-30-94 Contract Fee (1.00) 15.76546234 (0.063) 92.764 1,462.47
6-30-95 Contract Fee (1.00) 16.13892210 (0.062) 92.702 1,496.11
6-30-96 Contract Fee (1.00) 19.23483158 (0.052) 92.650 1,782.11
6-30-96 Value before Surr Chg 19.23483158 0.000 92.650 1,782.11
6-30-96 Surrender Charge (3.75) 19.23483158 (0.195) 92.455 1,778.36
Cumulative Total Returns without/with chrgs. 78.85% A 77.84% C
Avg. Annual Total Returns without/with chrgs. 12.33% B 12.20% D
Templeton Global Income Securities
6-30-91 Purchase $1,000.00 $11.96640183 83.567 83.567 $1,000.00
6-30-92 Contract Fee (1.00) 13.23942640 (0.076) 83.492 1,105.38
6-30-93 Contract Fee (1.00) 13.91118009 (0.072) 83.420 1,160.47
6-30-94 Contract Fee (1.00) 13.52815719 (0.074) 83.346 1,127.52
6-30-95 Contract Fee (1.00) 14.72539209 (0.068) 83.278 1,226.30
6-30-96 Contract Fee (1.00) 15.61016701 (0.064) 83.214 1,298.98
6-30-96 Value before Surr Chg 15.61016701 0.000 83.214 1,298.98
6-30-96 Surrender Charge (3.75) 15.61016701 (0.240) 82.974 1,295.23
Cumulative Total Returns without/with chrgs. 30.45% A 29.52% C
Avg. Annual Total Returns without/with chrgs. 5.46% B 5.31% D
U.S. Government Securities
6-30-91 Purchase $1,000.00 $11.63274812 85.964 85.964 $1,000.00
6-30-92 Contract Fee (1.00) 13.05205517 (0.077) 85.888 1,121.01
6-30-93 Contract Fee (1.00) 14.47271709 (0.069) 85.818 1,242.03
6-30-94 Contract Fee (1.00) 13.77718973 (0.073) 85.746 1,181.34
6-30-95 Contract Fee (1.00) 15.45060725 (0.065) 85.681 1,323.83
6-30-96 Contract Fee (1.00) 15.94773587 (0.063) 85.618 1,365.42
6-30-96 Value before Surr Chg 15.94773587 0.000 85.618 1,365.42
6-30-96 Surrender Charge (3.75) 15.94773587 (0.235) 85.383 1,361.67
Cumulative Total Returns without/with chrgs. 37.09% A 36.17% C
Avg. Annual Total Returns without/with chrgs. 6.51% B 6.37% D
Utility Equity
6-30-91 Purchase $1,000.00 $12.47645987 80.151 80.151 $1,000.00
6-30-92 Contract Fee (1.00) 14.85824515 (0.067) 80.084 1,189.90
6-30-93 Contract Fee (1.00) 17.40075723 (0.057) 80.026 1,392.52
6-30-94 Contract Fee (1.00) 14.39814174 (0.069) 79.957 1,151.23
6-30-95 Contract Fee (1.00) 16.90593418 (0.059) 79.898 1,350.74
6-30-96 Contract Fee (1.00) 20.28737569 (0.049) 79.848 1,619.91
6-30-96 Value before Surr Chg 20.28737569 0.000 79.848 1,619.91
6-30-96 Surrender Charge (3.75) 20.28737569 (0.185) 79.663 1,616.16
Cumulative Total Returns without/with chrgs. 62.61% A 61.62% C
Avg. Annual Total Returns without/with chrgs. 10.21% B 10.08% D
Zero Coupon - 2000
6-30-91 Purchase $1,000.00 $11.61621059 86.087 86.087 $1,000.00
6-30-92 Contract Fee (1.00) 13.61813394 (0.073) 86.013 1,171.34
6-30-93 Contract Fee (1.00) 16.31243966 (0.061) 85.952 1,402.08
6-30-94 Contract Fee (1.00) 15.53833043 (0.064) 85.888 1,334.55
6-30-95 Contract Fee (1.00) 17.36776508 (0.058) 85.830 1,490.67
6-30-96 Contract Fee (1.00) 17.78631427 (0.056) 85.774 1,525.60
6-30-96 Value before Surr Chg 17.78631427 0.000 85.774 1,525.60
6-30-96 Surrender Charge (3.75) 17.78631427 (0.211) 85.563 1,521.85
Cumulative Total Returns without/with chrgs. 53.12% A 52.18% C
Avg. Annual Total Returns without/with chrgs. 8.89% B 8.76% D
Zero Coupon - 2005
6-30-91 Purchase $1,000.00 $11.48297285 87.085 87.085 $1,000.00
6-30-92 Contract Fee (1.00) 13.57487956 (0.074) 87.012 1,181.17
6-30-93 Contract Fee (1.00) 17.44299964 (0.057) 86.954 1,516.75
6-30-94 Contract Fee (1.00) 16.06803251 (0.062) 86.892 1,396.19
6-30-95 Contract Fee (1.00) 19.06076227 (0.052) 86.840 1,655.23
6-30-96 Contract Fee (1.00) 19.38709243 (0.052) 86.788 1,682.57
6-30-96 Value before Surr Chg 19.38709243 0.000 86.788 1,682.57
6-30-96 Surrender Charge (3.75) 19.38709243 (0.193) 86.595 1,678.82
Cumulative Total Returns without/with chrgs. 68.83% A 67.88% C
Avg. Annual Total Returns without/with chrgs. 11.04% B 10.92% D
Zero Coupon - 2010
6-30-91 Purchase $1,000.00 $11.05131279 90.487 90.487 $1,000.00
6-30-92 Contract Fee (1.00) 13.15783457 (0.076) 90.411 1,189.61
6-30-93 Contract Fee (1.00) 17.00274895 (0.059) 90.352 1,536.24
6-30-94 Contract Fee (1.00) 15.65991587 (0.064) 90.288 1,413.91
6-30-95 Contract Fee (1.00) 19.59589189 (0.051) 90.237 1,768.28
6-30-96 Contract Fee (1.00) 19.90678287 (0.050) 90.187 1,795.33
6-30-96 Value before Surr Chg 19.90678287 0.000 90.187 1,795.33
6-30-96 Surrender Charge (3.75) 19.90678287 (0.188) 89.999 1,791.58
Cumulative Total Returns without/with chrgs. 80.13% A 79.16% C
Avg. Annual Total Returns without/with chrgs. 12.49% B 12.37% D
<FN>
A = (Unit Value as of June 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = [(A+1)^(1/5 Years)]-1
C = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
D = [(C+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of Sub-Account Inception
Valuation as of June 30, 1996
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Capital Growth
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
6-30-96 Contract Fee (1.00) 10.15737732 (0.098) 99.902 1,014.74
6-30-96 Value before Surr Chg 10.15737732 0.000 99.902 1,014.74
6-30-96 Surrender Charge (51.00) 10.15737732 (5.021) 94.881 963.74
Cumulative Total Returns without/with chgs. 1.57% A -3.63% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Growth and Income
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 9.60621064 (0.104) 99.896 959.62
1-24-91 Contract Fee (1.00) 10.04911751 (0.100) 99.796 1,002.87
1-24-92 Contract Fee (1.00) 12.19460473 (0.082) 99.714 1,215.98
1-24-93 Contract Fee (1.00) 12.76781499 (0.078) 99.636 1,272.13
1-24-94 Contract Fee (1.00) 14.16249217 (0.071) 99.565 1,410.09
1-24-95 Contract Fee (1.00) 13.34952631 (0.075) 99.491 1,328.15
1-24-96 Contract Fee (1.00) 17.36302808 (0.058) 99.433 1,726.46
6-30-96 Value before Surr Chg 18.14157976 0.000 99.433 1,803.87
6-30-96 Contract Fee (1.00) 18.14157976 (0.055) 99.378 1,802.87
6-30-96 Surrender Charge 0.00 18.14157976 0.000 99.378 1,802.87
Cumulative Total Returns without/with chgs. 81.42% A 80.29% C
Avg. Annual Total Returns without/with chgs. 8.34% B 8.25% D
High Income
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 9.99164502 (0.100) 99.900 998.16
1-24-91 Contract Fee (1.00) 8.99722470 (0.111) 99.789 897.82
1-24-92 Contract Fee (1.00) 11.88821941 (0.084) 99.705 1,185.31
1-24-93 Contract Fee (1.00) 13.46803207 (0.074) 99.630 1,341.83
1-24-94 Contract Fee (1.00) 15.36027784 (0.065) 99.565 1,529.35
1-24-95 Contract Fee (1.00) 14.72506390 (0.068) 99.497 1,465.11
1-24-96 Contract Fee (1.00) 17.51218685 (0.057) 99.440 1,741.42
6-30-96 Value before Surr Chg 17.77714583 0.000 99.440 1,767.76
6-30-96 Contract Fee (1.00) 17.77714583 (0.056) 99.384 1,766.76
6-30-96 Surrender Charge 0.00 17.77714583 0.000 99.384 1,766.76
Cumulative Total Returns without/with chgs. 77.77% A 76.68% C
Avg. Annual Total Returns without/with chgs. 8.04% B 7.95% D
Income Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.71309911 (0.093) 99.907 1,070.31
1-24-91 Contract Fee (1.00) 9.95244729 (0.100) 99.806 993.32
1-24-92 Contract Fee (1.00) 14.03346495 (0.071) 99.735 1,399.63
1-24-93 Contract Fee (1.00) 15.41432935 (0.065) 99.670 1,536.35
1-24-94 Contract Fee (1.00) 17.72926866 (0.056) 99.614 1,766.08
1-24-95 Contract Fee (1.00) 16.36456156 (0.061) 99.553 1,629.13
1-24-96 Contract Fee (1.00) 20.20965612 (0.049) 99.503 2,010.92
6-30-96 Value before Surr Chg 20.44085417 0.000 99.503 2,033.93
6-30-96 Contract Fee (1.00) 20.44085417 (0.049) 99.454 2,032.93
6-30-96 Surrender Charge 0.00 20.44085417 0.000 99.454 2,032.93
Cumulative Total Returns without/with chgs. 104.41% A 103.29% C
Avg. Annual Total Returns without/with chgs. 10.09% B 10.01% D
Money Market
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.67978818 (0.094) 99.906 1,066.98
1-24-91 Contract Fee (1.00) 11.32877884 (0.088) 99.818 1,130.82
1-24-92 Contract Fee (1.00) 11.75876120 (0.085) 99.733 1,172.74
1-24-93 Contract Fee (1.00) 11.94239828 (0.084) 99.649 1,190.05
1-24-94 Contract Fee (1.00) 12.07592840 (0.083) 99.567 1,202.36
1-24-95 Contract Fee (1.00) 12.38828249 (0.081) 99.486 1,232.46
1-24-96 Contract Fee (1.00) 12.92030455 (0.077) 99.408 1,284.39
6-30-96 Value before Surr Chg 13.11596925 0.000 99.408 1,303.84
6-30-96 Contract Fee (1.00) 13.11596925 (0.076) 99.332 1,302.84
6-30-96 Surrender Charge 0.00 13.11596925 0.000 99.332 1,302.84
Cumulative Total Returns without/with chgs. 31.16% A 30.28% C
Avg. Annual Total Returns without/with chgs. 3.72% B 3.62% D
Precious Metals
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 12.89722725 (0.078) 99.922 1,288.72
1-24-91 Contract Fee (1.00) 9.78594476 (0.102) 99.820 976.84
1-24-92 Contract Fee (1.00) 10.94243678 (0.091) 99.729 1,091.28
1-24-93 Contract Fee (1.00) 9.13368251 (0.109) 99.619 909.89
1-24-94 Contract Fee (1.00) 14.48022000 (0.069) 99.550 1,441.51
1-24-95 Contract Fee (1.00) 13.03370859 (0.077) 99.474 1,296.51
1-24-96 Contract Fee (1.00) 15.98656881 (0.063) 99.411 1,589.24
6-30-96 Value before Surr Chg 15.21339202 0.000 99.411 1,512.38
6-30-96 Contract Fee (1.00) 15.21339202 (0.066) 99.345 1,511.38
6-30-96 Surrender Charge 0.00 15.21339202 0.000 99.345 1,511.38
Cumulative Total Returns without/with chgs. 52.13% A 51.14% C
Avg. Annual Total Returns without/with chgs. 5.81% B 5.71% D
Real Estate Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.13988901 (0.099) 99.901 1,012.99
1-24-91 Contract Fee (1.00) 9.37706788 (0.107) 99.795 935.78
1-24-92 Contract Fee (1.00) 12.28427530 (0.081) 99.713 1,224.91
1-24-93 Contract Fee (1.00) 13.56368572 (0.074) 99.640 1,351.48
1-24-94 Contract Fee (1.00) 15.37525909 (0.065) 99.575 1,530.98
1-24-95 Contract Fee (1.00) 15.00928122 (0.067) 99.508 1,493.54
1-24-96 Contract Fee (1.00) 18.15857147 (0.055) 99.453 1,805.92
6-30-96 Value before Surr Chg 19.23483158 0.000 99.453 1,912.96
6-30-96 Contract Fee (1.00) 19.23483158 (0.052) 99.401 1,911.96
6-30-96 Surrender Charge 0.00 19.23483158 0.000 99.401 1,911.96
Cumulative Total Returns without/with chgs. 92.35% A 91.20% C
Avg. Annual Total Returns without/with chgs. 9.20% B 9.11% D
Rising Dividends
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 10.69831588 (0.093) 99.907 1,068.83
1-27-94 Contract Fee (1.00) 10.38483458 (0.096) 99.810 1,036.51
1-27-95 Contract Fee (1.00) 9.97357881 (0.100) 99.710 994.47
1-27-96 Contract Fee (1.00) 12.53425588 (0.080) 99.630 1,248.79
6-30-96 Value before Surr Chg 13.31084899 0.000 99.630 1,326.16
6-30-96 Contract Fee (1.00) 13.31084899 (0.075) 99.555 1,325.16
6-30-96 Surrender Charge (3.75) 13.31084899 (0.282) 99.273 1,321.41
Cumulative Total Returns without/with chgs. 33.11% A 32.14% C
Avg. Annual Total Returns without/with chgs. 6.67% B 6.50% D
Small Cap
11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
6-30-96 Value before Surr Chg 11.97069680 0.000 100.000 1,197.07
6-30-96 Contract Fee (1.00) 11.97069680 (0.084) 99.916 1,196.07
6-30-96 Surrender Charge (51.00) 11.97069680 (4.260) 95.656 1,145.07
Cumulative Total Returns without/with chgs. 19.71% A 14.51% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Templeton Developing Markets Equity
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Contract Fee (1.00) 8.62834892 (0.116) 99.884 861.83
3-15-96 Contract Fee (1.00) 10.29583833 (0.097) 99.787 1,027.39
6-30-96 Value before Surr Chg 11.03044915 0.000 99.787 1,100.70
6-30-96 Contract Fee (1.00) 11.03044915 (0.091) 99.696 1,099.70
6-30-96 Surrender Charge (22.00) 11.03044915 (1.994) 97.702 1,077.70
Cumulative Total Returns without/with chgs. 10.30% A 7.77% C
Avg. Annual Total Returns without/with chgs. 4.36% B 3.31% D
Templeton Global Asset Allocation
5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
5-1-96 Contract Fee (1.00) 11.25238519 (0.089) 99.911 1,124.24
6-30-96 Value before Surr Chg 11.38243612 0.000 99.911 1,137.23
6-30-96 Contract Fee (1.00) 11.38243612 (0.088) 99.823 1,136.23
6-30-96 Surrender Charge (35.00) 11.38243612 (3.075) 96.748 1,101.23
Cumulative Total Returns without/with chgs. 13.82% A 10.12% C
Avg. Annual Total Returns without/with chgs. 11.73% B 8.61% D
Templeton Global Growth
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Contract Fee (1.00) 10.10361217 (0.099) 99.901 1,009.36
3-15-96 Contract Fee (1.00) 11.81545835 (0.085) 99.816 1,179.38
6-30-96 Value before Surr Chg 12.47898971 0.000 99.816 1,245.61
6-30-96 Contract Fee (1.00) 12.47898971 (0.080) 99.736 1,244.61
6-30-96 Surrender Charge (22.00) 12.47898971 (1.763) 97.973 1,222.61
Cumulative Total Returns without/with chgs. 24.79% A 22.26% C
Avg. Annual Total Returns without/with chgs. 10.13% B 9.15% D
Templeton Global Income Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.86134310 (0.092) 99.908 1,085.13
1-24-91 Contract Fee (1.00) 11.78457305 (0.085) 99.823 1,176.37
1-24-92 Contract Fee (1.00) 12.96036211 (0.077) 99.746 1,292.74
1-24-93 Contract Fee (1.00) 12.84750678 (0.078) 99.668 1,280.49
1-24-94 Contract Fee (1.00) 14.83430586 (0.067) 99.601 1,477.51
1-24-95 Contract Fee (1.00) 13.57814674 (0.074) 99.527 1,351.39
1-24-96 Contract Fee (1.00) 15.44939310 (0.065) 99.462 1,536.63
6-30-96 Value before Surr Chg 15.61016701 0.000 99.462 1,552.62
6-30-96 Contract Fee (1.00) 15.61016701 (0.064) 99.398 1,551.62
6-30-96 Surrender Charge 0.00 15.61016701 0.000 99.398 1,551.62
Cumulative Total Returns without/with chgs. 56.10% A 55.16% C
Avg. Annual Total Returns without/with chgs. 6.17% B 6.09% D
Templeton International Equity
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 9.54360836 (0.105) 99.895 953.36
1-27-94 Contract Fee (1.00) 12.87738433 (0.078) 99.818 1,285.39
1-27-95 Contract Fee (1.00) 11.94433728 (0.084) 99.734 1,191.25
1-27-96 Contract Fee (1.00) 13.57666971 (0.074) 99.660 1,353.05
6-30-96 Value before Surr Chg 14.79181647 0.000 99.660 1,474.16
6-30-96 Contract Fee (1.00) 14.79181647 (0.068) 99.593 1,473.16
6-30-96 Surrender Charge (3.75) 14.79181647 (0.254) 99.339 1,469.41
Cumulative Total Returns without/with chgs. 47.92% A 46.94% C
Avg. Annual Total Returns without/with chgs. 9.25% B 9.08% D
Templeton International Smaller Companies
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
6-30-96 Value before Surr Chg 10.30704398 0.000 100.000 1,030.70
6-30-96 Contract Fee (1.00) 10.30704398 (0.097) 99.903 1,029.70
6-30-96 Surrender Charge (51.00) 10.30704398 (4.948) 94.955 978.70
Cumulative Total Returns without/with chgs. 3.07% A -2.13% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Templeton Pacific Growth
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 9.92851087 (0.101) 99.899 991.85
1-27-94 Contract Fee (1.00) 14.10178760 (0.071) 99.828 1,407.76
1-27-95 Contract Fee (1.00) 11.94769270 (0.084) 99.745 1,191.72
1-27-96 Contract Fee (1.00) 14.49670523 (0.069) 99.676 1,444.97
6-30-96 Value before Surr Chg 15.18114534 0.000 99.676 1,513.19
6-30-96 Contract Fee (1.00) 15.18114534 (0.066) 99.610 1,512.19
6-30-96 Surrender Charge (3.75) 15.18114534 (0.247) 99.363 1,508.44
Cumulative Total Returns without/with chgs. 51.81% A 50.84% C
Avg. Annual Total Returns without/with chgs. 9.89% B 9.73% D
U.S. Government Securities
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-90 Contract Fee (1.00) 10.30827187 (0.097) 99.903 1,029.83
3-16-91 Contract Fee (1.00) 11.46249369 (0.087) 99.816 1,144.14
3-16-92 Contract Fee (1.00) 12.39922047 (0.081) 99.735 1,236.64
3-17-93 Contract Fee (1.00) 14.03885755 (0.071) 99.664 1,399.17
3-18-94 Contract Fee (1.00) 14.26756980 (0.070) 99.594 1,420.96
3-19-95 Contract Fee (1.00) 14.67376156 (0.068) 99.526 1,460.42
3-19-96 Contract Fee (1.00) 15.92525375 (0.063) 99.463 1,583.97
6-30-96 Value before Surr Chg 15.94773587 0.000 99.463 1,586.21
6-30-96 Contract Fee (1.00) 15.94773587 (0.063) 99.400 1,585.21
6-30-96 Surrender Charge 0.00 15.94773587 0.000 99.400 1,585.21
Cumulative Total Returns without/with chgs. 59.48% A 58.52% C
Avg. Annual Total Returns without/with chgs. 6.60% B 6.51% D
Utility Equity
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 11.48396786 (0.087) 99.913 1,147.40
1-24-91 Contract Fee (1.00) 11.97256112 (0.084) 99.829 1,195.21
1-24-92 Contract Fee (1.00) 14.23979461 (0.070) 99.759 1,420.55
1-24-93 Contract Fee (1.00) 16.00386148 (0.062) 99.697 1,595.53
1-24-94 Contract Fee (1.00) 16.50535338 (0.061) 99.636 1,644.53
1-24-95 Contract Fee (1.00) 15.57082970 (0.064) 99.572 1,550.42
1-24-96 Contract Fee (1.00) 19.81799065 (0.050) 99.521 1,972.31
6-30-96 Value before Surr Chg 20.28737569 0.000 99.521 2,019.03
6-30-96 Contract Fee (1.00) 20.28737569 (0.049) 99.472 2,018.03
6-30-96 Surrender Charge 0.00 20.28737569 0.000 99.472 2,018.03
Cumulative Total Returns without/with chgs. 102.87% A 101.80% C
Avg. Annual Total Returns without/with chgs. 9.98% B 9.90% D
Zero Coupon - 2000
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.38718687 (0.096) 99.904 1,037.72
3-14-91 Contract Fee (1.00) 11.51435997 (0.087) 99.817 1,149.33
3-14-92 Contract Fee (1.00) 12.69393926 (0.079) 99.738 1,266.07
3-14-93 Contract Fee (1.00) 15.41331568 (0.065) 99.673 1,536.29
3-14-94 Contract Fee (1.00) 16.04445243 (0.062) 99.611 1,598.20
3-14-95 Contract Fee (1.00) 16.25253463 (0.062) 99.549 1,617.93
3-14-96 Contract Fee (1.00) 17.85770370 (0.056) 99.493 1,776.72
6-30-96 Value before Surr Chg 17.78631427 0.000 99.493 1,769.62
6-30-96 Contract Fee (1.00) 17.78631427 (0.056) 99.437 1,768.62
6-30-96 Surrender Charge 0.00 17.78631427 0.000 99.437 1,768.62
Cumulative Total Returns without/with chgs. 77.86% A 76.86% C
Avg. Annual Total Returns without/with chgs. 8.21% B 8.12% D
Zero Coupon - 2005
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.39705125 (0.096) 99.904 1,038.71
3-14-91 Contract Fee (1.00) 11.55409702 (0.087) 99.817 1,153.30
3-14-92 Contract Fee (1.00) 12.77593818 (0.078) 99.739 1,274.26
3-14-93 Contract Fee (1.00) 16.23688367 (0.062) 99.677 1,618.45
3-14-94 Contract Fee (1.00) 16.93608168 (0.059) 99.618 1,687.14
3-14-95 Contract Fee (1.00) 17.21684037 (0.058) 99.560 1,714.11
3-14-96 Contract Fee (1.00) 19.49696511 (0.051) 99.509 1,940.12
6-30-96 Value before Surr Chg 19.38709243 0.000 99.509 1,929.19
6-30-96 Contract Fee (1.00) 19.38709243 (0.052) 99.457 1,928.19
6-30-96 Surrender Charge 0.00 19.38709243 0.000 99.457 1,928.19
Cumulative Total Returns without/with chgs. 93.87% A 92.82% C
Avg. Annual Total Returns without/with chgs. 9.49% B 9.41% D
Zero Coupon - 2010
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.26881437 (0.097) 99.903 1,025.88
3-14-91 Contract Fee (1.00) 11.36823998 (0.088) 99.815 1,134.72
3-14-92 Contract Fee (1.00) 12.39609106 (0.081) 99.734 1,236.31
3-14-93 Contract Fee (1.00) 16.01961394 (0.062) 99.672 1,596.70
3-14-94 Contract Fee (1.00) 16.90519719 (0.059) 99.612 1,683.97
3-14-95 Contract Fee (1.00) 17.12909327 (0.058) 99.554 1,705.27
3-14-96 Contract Fee (1.00) 19.99862777 (0.050) 99.504 1,989.94
6-30-96 Value before Surr Chg 19.90678287 0.000 99.504 1,980.80
6-30-96 Contract Fee (1.00) 19.90678287 (0.050) 99.454 1,979.80
6-30-96 Surrender Charge 0.00 19.90678287 0.000 99.454 1,979.80
Cumulative Total Returns without/with chgs. 99.07% A 97.98% C
Avg. Annual Total Returns without/with chgs. 9.89% B 9.81% D
<FN>
A = (Unit Value as of June 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = [(A+1)^(1/Years since Inception)]-1
C = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
D = [(C+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Performance Information of Selected Public Funds
Original Purchase as of September 30, 1995
Valuation Date as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
---- ----------- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Discovery Fund
9-30-95 Purchase $1,000.00 $15.66 63.857 63.857 $1,000.00
12-29-95 Dividend Distribution ($.83/shr) 53.00 14.99 3.536 67.393 1,010.22
6-14-96 Dividend Distribution ($.35/shr) 23.59 16.89 1.397 68.789 1,161.85
9-30-96 Current Value 17.23 0.000 68.789 1,185.24
Average Annual Total Return 18.52% A
Mutual Shares Fund
9-30-95 Purchase $1,000.00 $97.25 10.283 10.283 $1,000.00
12-29-95 Dividend Distribution ($12.14/shr) 124.83 85.63 1.458 11.741 1,005.35
6-14-96 Dividend Distribution ($3.00/shr) 35.22 91.93 0.383 12.124 1,114.53
9-30-96 Current Value 93.69 0.000 12.124 1,135.87
Average Annual Total Return 13.59% A
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Discovery Securities Sub-Account
9-30-95 Purchase $1,000.00 $17.03457804 58.704 58.704 $1,000.00
9-30-96 Contract Fee (1.00) 19.89985017 (0.050) 58.654 1,167.20
9-30-96 Value before Surr Chg 19.89985017 0.000 58.654 1,167.20
9-30-96 Surrender Charge (51.00) 19.89985017 (2.563) 56.091 1,116.20
Average Annual Total Returns without/with charges 16.82% B 11.62% C
Mutual Shares Securities Sub-Account
9-30-95 Purchase $1,000.00 $494.26676636 2.023 2.023 $1,000.00
9-30-96 Contract Fee (1.00) 553.20141399 (0.002) 2.021 1,118.24
9-30-96 Value before Surr Chg 553.20141399 0.000 2.021 1,118.24
9-30-96 Surrender Charge (51.00) 553.20141399 (0.092) 1.929 1,067.24
Average Annual Total Returns without/with charges 11.92% B 6.72% C
<FN>
B = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of September 30, 1991
Valuation Date as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
---- ----------- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Fund
9-30-91 Purchase $1,000.00 $66.67 14.999 14.999 $1,000.00
12-31-91 Dividend Distribution ($2.73/shr) 40.95 63.27 0.647 15.646 989.95
7-6-92 Dividend Distribution ($1.00/shr) 15.65 70.18 0.223 15.869 1,113.71
12-31-92 Dividend Distribution ($3.75/shr) 59.51 72.71 0.818 16.688 1,213.37
7-12-93 Dividend Distribution ($.70/shr) 11.68 79.65 0.147 16.835 1,340.87
12-31-93 Dividend Distribution ($6.99/shr) 117.67 80.56 1.461 18.295 1,473.86
7-11-94 Dividend Distribution ($.60/shr) 10.98 80.60 0.136 18.431 1,485.57
12-29-94 Dividend Distribution ($5.30/shr) 97.69 78.31 1.247 19.679 1,541.05
7-10-95 Dividend Distribution ($2.60/shr) 51.16 88.78 0.576 20.255 1,798.25
12-29-95 Dividend Distribution ($12.14/shr) 245.90 85.63 2.872 23.127 1,980.34
6-14-96 Dividend Distribution ($3.00/shr) 69.38 91.93 0.755 23.881 2,195.42
9-30-96 Current Value 93.69 0.000 23.881 2,237.46
Cumulative Total Return 123.75% A
Average Annual Total Return 17.47% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Securities Sub-Account
9-30-91 Purchase $1,000.00 $266.34154236 3.755 3.755 $1,000.00
9-30-92 Contract Fee (1.00) 298.69304214 (0.003) 3.751 1,120.47
9-30-93 Contract Fee (1.00) 370.30580394 (0.003) 3.749 1,388.10
9-30-94 Contract Fee (1.00) 400.78402346 (0.002) 3.746 1,501.35
9-30-95 Contract Fee (1.00) 494.26676636 (0.002) 3.744 1,850.54
9-30-96 Contract Fee (1.00) 553.20141399 (0.002) 3.742 2,070.19
9-30-96 Value before Surr Chg 553.20141399 0.000 3.742 2,070.19
9-30-96 Surrender Charge (8.25) 553.20141399 (0.015) 3.727 2,061.94
Cumulative Total Rtns. without/with chrgs. 107.70% C 106.19% E
Avg. Annual Total Rtns. without/with chrgs. 15.74% D 15.57% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
D = [(C+1)^(1/5 Years)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of September 30, 1986
Valuation Date as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
---- ----------- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Fund
9-30-86 Purchase $1,000.00 $63.86 15.659 15.659 $1,000.00
1-9-87 Dividend Distribution ($5.65/shr) 88.47 60.08 1.473 17.132 1,029.28
7-17-87 Dividend Distribution ($1.35/shr) 23.13 71.24 0.325 17.457 1,243.60
12-31-87 Dividend Distribution ($5.26/shr) 91.82 58.12 1.580 19.036 1,106.39
7-15-88 Dividend Distribution ($1.75/shr) 33.31 70.00 0.476 19.512 1,365.86
12-29-88 Dividend Distribution ($5.93/shr) 115.71 67.38 1.717 21.230 1,430.45
6-23-89 Dividend Distribution ($1.85/shr) 39.27 74.45 0.528 21.757 1,619.81
12-29-89 Dividend Distribution ($8.79/shr) 191.24 66.80 2.863 24.620 1,644.62
6-18-90 Dividend Distribution ($.75/shr) 18.47 66.20 0.279 24.899 1,648.31
12-31-90 Dividend Distribution ($3.48/shr) 86.65 56.16 1.543 26.442 1,484.97
7-8-91 Dividend Distribution ($.90/shr) 23.80 63.59 0.374 26.816 1,705.23
12-31-91 Dividend Distribution ($2.73/shr) 73.21 63.27 1.157 27.973 1,769.86
7-6-92 Dividend Distribution ($1.00/shr) 27.97 70.18 0.399 28.372 1,991.13
12-31-92 Dividend Distribution ($3.75/shr) 106.39 72.71 1.463 29.835 2,169.30
7-12-93 Dividend Distribution ($.70/shr) 20.88 79.65 0.262 30.097 2,397.24
12-31-93 Dividend Distribution ($6.99/shr) 210.38 80.56 2.611 32.709 2,635.01
7-11-94 Dividend Distribution ($.60/shr) 19.63 80.60 0.243 32.952 2,655.94
12-29-94 Dividend Distribution ($5.30/shr) 174.65 78.31 2.230 35.182 2,755.13
7-10-95 Dividend Distribution ($2.60/shr) 91.47 88.78 1.030 36.213 3,214.96
12-29-95 Dividend Distribution ($12.14/shr) 439.62 85.63 5.134 41.347 3,540.51
6-14-96 Dividend Distribution ($3.00/shr) 124.04 91.93 1.349 42.696 3,925.04
9-30-96 Current Value 93.69 0.000 42.696 4,000.18
Cumulative Total Return 300.02% A
Average Annual Total Return 14.87% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/10 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Securities Sub-Account
9-30-86 Purchase $1,000.00 $160.16912615 6.243 6.243 $1,000.00
9-30-87 Contract Fee (1.00) 207.12736533 (0.005) 6.239 1,292.18
9-30-88 Contract Fee (1.00) 218.64162680 (0.005) 6.234 1,363.01
9-30-89 Contract Fee (1.00) 261.57455082 (0.004) 6.230 1,629.66
9-30-90 Contract Fee (1.00) 218.12900815 (0.005) 6.226 1,357.98
9-30-91 Contract Fee (1.00) 266.34154236 (0.004) 6.222 1,657.13
9-30-92 Contract Fee (1.00) 298.69304214 (0.003) 6.218 1,857.42
9-30-93 Contract Fee (1.00) 370.30580394 (0.003) 6.216 2,301.74
9-30-94 Contract Fee (1.00) 400.78402346 (0.002) 6.232 2,497.49
9-30-95 Contract Fee (1.00) 494.26676636 (0.002) 6.229 3,079.03
9-30-96 Contract Fee (1.00) 553.20141399 (0.002) 6.228 3,445.16
9-30-96 Value before Surr Chg 553.20141399 0.000 6.228 3,445.16
9-30-96 Surrender Charge 553.20141399 0.000 6.228 3,445.16
Cumulative Total Rtns. without/with chrgs. 245.39% C 244.52% E
Avg. Annual Total Rtns. without/with chrgs. 13.20% D 13.17% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
D = [(C+1)^(1/10 Years)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/10 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of Sub-Account Inception
Valuation as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
---- ----------- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Discovery Fund
12-31-92 Purchase $1,000.00 $10.00 100.000 100.000 $1,000.00
12-31-93 Dividend Distribution ($.53/shr) 53.00 12.93 4.099 104.099 1,346.00
7-11-94 Dividend Distribution ($.20/shr) 20.82 13.28 1.568 105.667 1,403.25
12-29-94 Dividend Distribution ($.77/shr) 81.36 12.52 6.499 112.165 1,404.31
7-10-95 Dividend Distribution ($.13/shr) 14.58 14.49 1.006 113.172 1,639.86
12-29-95 Dividend Distribution ($.83/shr) 93.93 14.99 6.266 119.438 1,790.38
6-14-96 Dividend Distribution ($.35/shr) 41.80 16.89 2.475 121.913 2,059.11
9-30-96 Current Value 17.23 0.000 121.913 2,100.56
Cumulative Total Return 110.06% A
Average Annual Total Return 21.90% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
---- ----------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mutual Discovery Securities Sub-Account
12-31-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-93 Contract Fee (1.00) 13.39109512 (0.075) 99.925 1,338.11
12-31-94 Contract Fee (1.00) 13.67637317 (0.073) 99.852 1,365.62
12-31-95 Contract Fee (1.00) 17.33223864 (0.058) 99.795 1,729.66
9-30-96 Contract Fee (1.00) 19.89985017 (0.050) 99.744 1,984.90
9-30-96 Value before Surr Chg 19.89985017 0.000 99.925 1,988.50
9-30-96 Surrender Charge (12.00) 19.89985017 (0.603) 99.322 1,976.50
Cumulative Total Rtns. without/with chgs. 99.00% C 97.65% E
Avg. Annual Total Rtns. without/with chgs. 20.14% D 19.92% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
D = [(C+1)^(1/Years since Inception)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 7,584,086
<INVESTMENTS-AT-VALUE> 8,249,052
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,249,052
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 427
<TOTAL-LIABILITIES> 427
<SENIOR-EQUITY> 6,650,229
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 508,515
<SHARES-COMMON-PRIOR> 489,099
<ACCUMULATED-NII-CURRENT> 602,991
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 330,358
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 665,047
<NET-ASSETS> 8,248,625
<DIVIDEND-INCOME> 327,674
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 55,699
<NET-INVESTMENT-INCOME> 271,975
<REALIZED-GAINS-CURRENT> 194,775
<APPREC-INCREASE-CURRENT> (111,109)
<NET-CHANGE-FROM-OPS> 355,641
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,033
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 545,414
<ACCUMULATED-NII-PRIOR> 331,016
<ACCUMULATED-GAINS-PRIOR> 135,583
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 55,699
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,699
<AVERAGE-NET-ASSETS> 7,975,918
<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> 0.007
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
