File Nos. 33-76190
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. 27 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
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(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 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
Additional Information. . . . . . . . . . . . . Table of Contents of
the Statement of Ad-
ditional Information
</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.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
HOME OFFICE: VIP SERVICE CENTER:
1750 Hennepin Avenue P.O. Box 30343
Minneapolis, MN 55403-2195 Tampa, FL 33630-3343
(800) 542-5427 (800) 774-5001
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
NOVEMBER 8, 1996
The Individual Immediate Variable Annuity Contracts (the "Contracts") described
in this Prospectus provide lifetime income to the Annuitant and Joint Annuitant,
if any, under the Annuity Option selected. The Annuitant is the Contract Owner.
The Contract Owner selects the Annuity Option and the frequency of payment
(e.g., monthly, quarterly, semi-annual, annual).
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 Contracts"). They can also be purchased as a "Qualified
Contract" that is an Individual Retirement Annuity with contributions
rolled-over from tax-qualified plans such as 403(b) plans, 401 plans, or IRAs.
The Contracts are acquired by the payment of a single purchase payment. Some
states assess premium taxes (see "Charges and Deductions - Premium Taxes"). The
Single Purchase Payment less the premium tax is referred to as the Net Purchase
Payment. The Single Purchase Payment 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").
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). The Trust is a series fund with twenty-three Funds, fifteen of which
are currently available in connection with the Contracts offered under this
Prospectus: the Money Market Fund, the Growth and Income Fund, the Income
Securities Fund, the Mutual Shares 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 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. 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).
Under certain circumstances, Contract Owners may make withdrawals after the
Income Date other than the Annuity Payments they will receive under the
Contract. See "Annuity Provisions - Contract Withdrawals (Liquidations)" for
more information regarding the ability to make withdrawals under the Contract.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACT IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
CONTRACT OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE RETURNED
WITHIN THE FREE LOOK PERIOD, THE REFUND MAY BE HIGHER OR LOWER THAN THE PURCHASE
PAYMENT.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the "Statement of Additional Information," which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information can be found on the
last page of this Prospectus. For the Statement of Additional Information, call
or write the VIP Service Center address shown above.
INQUIRIES: Any inquiries can be made by telephone or in writing to the Company
at the VIP Service Center 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.
IN THE STATE OF OREGON, ALL REFERENCES TO "FRANKLIN TEMPLETON VALUEMARK INCOME
PLUS" REFER TO "VALUEMARK INCOME PLUS."
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.
TABLE OF CONTENTS PAGE
DEFINITIONS ...................................... 2
HIGHLIGHTS ....................................... 3
FEE TABLE ........................................ 5
CONDENSED FINANCIAL
INFORMATION ..................................... 6
THE COMPANY ..................................... 8
THE VARIABLE ACCOUNT ............................. 8
FRANKLIN VALUEMARK FUNDS ......................... 8
General.......................................... 9
Substitution of Securities ...................... 9
Voting Rights ................................... 9
CHARGES AND DEDUCTIONS............................ 10
Deduction for Mortality and
Expense Risk Charge ............................ 10
Deduction for Administrative
Expense Charge.................................. 10
Deduction for Premium Taxes ..................... 10
Deduction for Income Taxes ...................... 10
Deduction for Trust Expenses .................... 10
ANNUITY PROVISIONS ............................... 10
Income Date ..................................... 10
Annuity Options ................................. 10
Contract Withdrawals (Liquidations).............. 12
Determination of Annuity Payments ............... 12
THE CONTRACTS .................................... 13
Ownership ....................................... 13
Assignment ...................................... 13
Beneficiary ..................................... 14
Change of Beneficiary ........................... 14
Death of Beneficiary ............................ 14
Annuitant ....................................... 14
PROCEEDS PAYABLE AT DEATH......................... 14
PURCHASE PAYMENTS AND
CONTRACT VALUE................................... 14
Single Purchase Payment ........................ 14
Net Purchase Payment............................ 14
Allocation of Net Purchase Payment ............. 14
Contract Value.................................. 15
VIP Unit ....................................... 15
Transfers ...................................... 15
DISTRIBUTOR ...................................... 16
Delay of Payments ............................... 16
ADMINISTRATION OF THE CONTRACTS .................. 16
PERFORMANCE DATA ................................. 16
Money Market Sub-Account ........................ 16
Other Sub-Accounts .............................. 17
Performance Ranking ............................. 17
TAX STATUS ....................................... 18
General.......................................... 18
Diversification ................................. 18
Multiple Contracts .............................. 19
Tax Treatment of Distributions -
Non-Qualified Contracts ........................ 19
Qualified Plans ................................. 20
Tax Treatment of Distributions -
IRA Contracts .................................. 20
Tax Treatment of Assignments .................... 21
Income Tax Withholding .......................... 21
FINANCIAL STATEMENTS.............................. 21
LEGAL PROCEEDINGS................................. 21
APPENDIX A - ILLUSTRATION OF VALUES............... 21
APPENDIX B - PERFORMANCE
INFORMATION OF SELECTED
PUBLIC FUNDS..................................... 26
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION .......................... 27
DEFINITIONS
- --------------------------------------------------------------------------------
Age - Age to the nearest month unless otherwise specified.
Annuitant - The primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. See also, Joint Annuitant.
Annuity Calculation Date - The date on which the first annuity payment is
calculated which will be no more than 10 business days prior to the Income Date.
Annuity Option - An arrangement under which annuity payments are made under the
Contract.
Annuity Unit - An accounting unit of measure used to calculate annuity payments
after the Annuity Calculation Date.
Assumed Investment Return - The investment return upon which the annuity
payments in the Contract are based.
Company - Allianz Life Insurance Company of North America at its VIP 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 who owns the Contract as named in the Company's
records. The Annuitant is the Contract Owner.
Contract Value - The dollar value as of any Valuation Date prior to the Annuity
Calculation Date of all amounts accumulated under the Contract.
Effective Date - The date on which the Net Purchase Payment is allocated to the
Variable Account.
Eligible Investment(s) - An investment entity which can be selected by the
Contract Owner to be the underlying investment of the Contract.
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 begin.
Joint Annuitant - A person other than the Annuitant on whose life annuity
payments may also be based.
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. Each Joint Owner must be either an Annuitant
or Joint Annuitant.
Net Asset Value - The total value of the shares of the Eligible Investment or
Fund less the liabilities of the Eligible Investment or Fund held by the
Sub-Account, as of the close of trading on a Valuation Date.
Non-Qualified Contracts - As used herein, Contracts issued under Non-Qualified
Plans which do not receive favorable tax treatment under Section 408 of the
Internal Revenue Code of 1986, as amended (the "Code").
Qualified Contracts - As used herein, Contracts issued under Qualified Plans
which receive favorable tax treatment under Section 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.
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 beginning 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, in which a portion of the Company's assets has
been allocated for the Contracts and certain other contracts.
VIP Unit - An accounting unit of measure used to calculate the Contract Value
prior to the Annuity Calculation Date.
HIGHLIGHTS
- --------------------------------------------------------------------------------
Net 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").
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 longer in states where required)
after it is received (the "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 net amount allocated to the Variable Account
modified for investment experience plus any taxes deducted less any benefits
paid in states where permitted. This may be more or less than the Single
Purchase Payment. Once the Free-Look Period expires, under certain
circumstances, Contract Owners may make withdrawals after the Income Date other
than the Annuity Payments they will receive under the Contract. See "Annuity
Provisions - Contract Withdrawals (Liquidations)" for more information regarding
the ability to make withdrawals under the Contract. The Company has the right to
allocate the Single Purchase Payment to the Money Market Sub-Account until the
expiration of the Free-Look Period. If the Company does so allocate the purchase
payment, it will refund the Single Purchase Payment, less any benefits paid. It
is the Company's current practice to directly allocate the Single Purchase
Payment to the Sub-Account(s) (see "Purchase Payments and Contract Value -
Allocation of Net Purchase Payment") designated by the Contract Owner.
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
Contracts and the Variable Account. (See "Charges and Deductions - Deduction for
Administrative Expense Charge.")
Under certain circumstances, there is a ten percent (10%) federal income tax
penalty that may be applied to the income portion of any distribution from the
Contracts. (See "Tax Status - Tax Treatment of Distributions - Non-Qualified
Contracts" and "Tax Status - Tax Treatment of Distributions - IRA Contracts.")
For a further discussion of the taxation of the Contracts, see "Tax Status."
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
investments underlying the contract. The issuance of such guidelines may require
the Company to impose limitations on a Contract Owner's right to control the
investments. It is not known whether any such guidelines would have a
retroactive effect (see "Tax Status - Diversification").
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Single Purchase Payment. (See "Charges and
Deductions - Deduction for Premium Taxes.")
The Company also offers deferred variable annuity contracts and reserves the
right to permit exchange of those contracts for the Contracts offered by this
Prospectus.
ALLIANZ LIFE VARIABLE ACCOUNT B FEE TABLE*
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION FEES
NONE
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.
The effects of the charges shown above are reflected in the illustrations of
annuity income contained in the Appendix on Page 21. The illustrations are
intended to assist the purchaser in assessing the effects of these charges and
the effect of investment performance on the amount of variable annuity income.
<TABLE>
<CAPTION>
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 by each Fund 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.
MANAGEMENT TOTAL
AND FUND OTHER ANNUAL
ADMINISTRATION FEES1 EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund2............................................................. 0.51% 0.02% 0.53%
Growth and Income Fund......................................................... 0.49% 0.03% 0.52%
Utility Equity Fund............................................................ 0.47% 0.03% 0.50%
Income Securities Fund......................................................... 0.47% 0.04% 0.51%
Rising Dividends Fund.......................................................... 0.75% 0.03% 0.78%
Templeton International Equity Fund............................................ 0.83% 0.09% 0.92%
Templeton Pacific Growth Fund.................................................. 0.90% 0.11% 1.01%
Templeton Global Growth Fund................................................... 0.93% 0.04% .97%
Templeton Developing Markets Equity Fund....................................... 1.25% 0.16% 1.41%
Templeton Global Asset Allocation Fund3........................................ 0.80% 0.10% .90%
Small Cap Fund4................................................................ 0.75% 0.15% 0.90%
Templeton International Smaller Companies Fund5................................ 1.00% 0.10% 1.10%
Capital Growth Fund5........................................................... 0.75% 0.04% .79%
Mutual Discovery Securities Fund6.............................................. 0.95% 0.10% 1.05%
Mutual Shares Securities Fund6................................................. 0.75% 0.10% 0.85%
<FN>
1 The Fund Administration Fee is a direct expense for the Templeton Global Asset Allocation Fund, the Templeton
International Smaller Companies Fund, the Mutual Discovery Securities Fund and the Mutual Shares Securities Fund; other
Funds pay for similar services indirectly through the Management Fee. See "Management" in the Trust Prospectus for
further information regarding Management and Fund Administration Fees.
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 actual 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 The Templeton Global Asset Allocation Fund commenced operations May 1, 1995. The expenses shown are estimated expenses
for the Fund for 1996.
4 The Small Cap Fund commenced operations November 1, 1995. The expenses shown are estimated expenses for the Fund for 1996.
5 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.
6 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>
<PAGE>
<TABLE>
<CAPTION>
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.
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
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 $15.889 $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
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 $9.769 $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
</TABLE>
<PAGE>
<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 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 and the Mutual Shares Securities Sub-Accounts had not yet
commenced operations.
*Unit Value at inception was $10.00.
</FN>
</TABLE>
<PAGE>
The Accumulation Unit Value at inception was $10.00 for each Sub-Account.
Inception was 1/24/89 for the Growth and Income, Income Securities, Utility
Equity and Money Market 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 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
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Allianz Life Insurance Company of North America (the "Company") is a stock life
insurance company organized under the laws of the state of Minnesota in 1896.
The Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets
throughout the world. The Company offers fixed and variable life insurance and
annuities, and group life, accident and health insurance.
NALAC Financial Plans, 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 Contract is provided at the Company's VIP ServiceCenter:
P.O. Box 30343, Tampa, FL 33630-3343, (800) 774-5001.
THE VARIABLE ACCOUNT
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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.
FRANKLIN VALUEMARK FUNDS
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FIFTEEN OF THE TWENTY-THREE FUNDS CURRENTLY AVAILABLE CONSTITUTING THE FRANKLIN
VALUEMARK FUNDS ARE AVAILABLE UNDER THE CONTRACTS DESCRIBED IN THIS PROSPECTUS.
Franklin Valuemark Funds (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, advisers 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 GROWTH AND INCOME
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
FUNDS SEEKING CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities 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.
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 Net Purchase Payment.")
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 the Single Purchase Payment and the
Variable Account. These charges and deductions are:
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 risks assumed by the
Company arise from its contractual obligation to make annuity payments for the
life of the Annuitant in accordance with annuity rates guaranteed in the
Contracts. 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 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.
The Mortality and Expense Risk Charge is assessed both before and after the
Income Date. The Company will continue to assess the Mortality and Expense Risk
Charge during payment of an Annuity Option that does not involve a life
contingency even though it no longer bears any mortality risk on such payment
obligation.
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 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
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 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 PREMIUM TAXES
Premium taxes or other taxes payable to a state, municipality or other
governmental entity will be charged against the Single Purchase Payment. Premium
taxes currently imposed by certain states on the Contracts range from 0% to 3.5%
of premiums paid. For information regarding a particular state's premium tax a
purchaser should contact his or her agent or the Company's VIP Service Center.
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.
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.
ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
INCOME DATE
The Income Date is the date on which annuity payments begin. The Contract Owner
selects an Income Date at the time of issue. The Income Date must be the first
or fifteenth day of a calendar month and not later than 60 days from the
Effective Date.
ANNUITY OPTIONS
The Contract provides for an Annuity under any of the Annuity Options described
below, provided the Annuitant or any Joint Annuitant is alive on the Income
Date. Except for Annuity Option 6, once selected the Option is irrevocable. The
amount of each payment depends upon the Annuity Option chosen and for Annuity
Options 1-5, the Annuitant's and any Joint Annuitant's Age on the Annuity
Calculation Date. Additionally, annuity payments under all Options will vary
with the investment experience of the Sub-Accounts of the Variable Account and
may be either higher or lower than the first payment.
The Annuity Options currently available are:
Option 1 - 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.
Option 2 - Life Annuity with 60, 120, 180, or 240 Monthly Payments Guaranteed.
Monthly annuity payments are paid during the life of an Annuitant with a
guarantee that if, at the Annuitant's death, annuity payments have been made for
less than a 60, 120, 180 or 240 month period as elected, then annuity payments
will be continued thereafter to the Beneficiary for the remainder of the
guaranteed period. The Beneficiary may elect to have the present value
(determined as set forth in the Contract) of the guaranteed annuity payments
remaining commuted at the Assumed Investment Return and paid in a lump sum, less
the applicable commutation fee of 5% of the proceeds in Contract Years 1 and 2
reducing by 1% per year until it is 1% for Contract Year 6 and thereafter
(subject to applicable state law and regulation). The Company will require the
return of the Contract and proof of death prior to the payment of any commuted
values.
Option 3 - Joint and Last Survivor Annuity. Monthly annuity payments are paid
during the joint lifetime of the Annuitant and the Joint Annuitant. Upon the
death of the Annuitant, if the Joint Annuitant is then living, payments will be
paid thereafter during the remaining lifetime of the Joint Annuitant at a level
of 100%, 75% or 50% of the original level as elected. Monthly payments cease
with the final annuity payment due prior to the survivor's death.
Option 4 - Joint and Last Survivor Annuity with 60, 120, 180 or 240 Monthly
Payments Guaranteed. Monthly annuity payments are paid during the joint lifetime
of the Annuitant and the Joint Annuitant. Monthly payments are paid thereafter
during the remaining lifetime of the Joint Annuitant at 100% of the original
level. If, after the death of both the Annuitant and the Joint Annuitant,
annuity payments have been made for less than a 60, 120, 180 or 240 month period
as elected, then annuity payments will be continued thereafter to the
Beneficiary for the remainder of the guaranteed period. The Beneficiary may
elect to have the present value (determined as set forth in the Contract) of the
guaranteed annuity payments remaining commuted at the Assumed Investment Rate
and paid in a lump sum, less the applicable commutation fee of 5% of the
proceeds in Contract Years 1 and 2 reducing by 1% per year until it is 1% for
Contract Year 6 and thereafter (subject to applicable state law and regulation).
The Company will require the return of the Contract and proof of death prior to
the payment of any commuted values.
Option 5 - Unit Refund 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 with a guarantee that at the Annuitant's death, the
Beneficiary will receive a single cash payment (refund) equal to the then dollar
value of the number of Annuity Units equal to (1) the total net amount applied
to purchase the Annuity divided by the Annuity Unit value used to determine the
first annuity payment, minus (2) the product of the number of the Annuity Units
represented by each payment and the number of payments made. This calculation
will be made based upon the assumption that the allocation of Annuity Units
actually in-force at the time of the Annuitant's death had been the allocation
of Annuity Units at issue and at all times thereafter. If this value is
negative, a zero result occurs.
Option 6 - Specified Period Certain Annuity. Monthly annuity payments are paid
for a specified period of time. The Specified Period Certain is elected by the
Contract Owner and must be specified as a whole number of years from 5 to 30. If
at the time of the death of the last Annuitant and any Joint Annuitant, the
annuity payments actually made have been for less than the Specified Period
Certain, then annuity payments will be continued thereafter to the Beneficiary
for the remainder of the Specified Period Certain. OPTION 6 MAY NOT BE AVAILABLE
IN ALL STATES.
After the first Contract Anniversary, an Option 6 payout can be exchanged for a
life contingent payout (Options 1-5) if the Total Withdrawal Value is at least
$25,000 and in the case of a Non-Qualified Contract the Contract Owner has
attained age 591/2 and in the case of a Qualified Contract the exchange is made
after the later of the Contract Owner attaining age 591/2 or 5 years from the
date of the first annuity payment, and prior to the year in which the Contract
Owner reaches age 701/2. The annuity purchase rates used will be those that were
in effect as of the original Effective Date of the Option 6 Contract. A new
Contract will be exchanged for the existing Contract which must be returned to
the Company. The Contract Owner/Annuitant and Joint Annuitant, if any, must be
the same under both Contracts.
CONTRACT WITHDRAWALS (LIQUIDATIONS)
Annuity Options 2 and 4
If the Contract Owner has selected Annuity Option 2 or 4, partial withdrawals
from the Contract may be made after the first Contract Year as follows. During
the lifetime of the Annuitant(s) and while the number of annuity payments made
is less than the guaranteed number of payments elected, the Contract Owner may
once each Contract Year request a withdrawal representing a partial liquidation
of the Total Withdrawal Value. The Total Withdrawal Value is equal to the
present value of the remaining guaranteed annuity payments, to the end of the
period certain, commuted at the Assumed Investment Return less a commutation fee
of 5% of the amount withdrawn in Contract Year 2 and reducing by 1% per year
until it is 1% for Contract Year 6 and thereafter. The commutation fee is a
charge collected by the Company equal to a percentage of the Total Withdrawal
Value liquidated. Partial liquidations will be processed on the next Annuity
Calculation Date following the Contract Owner's written request. After a partial
liquidation, the subsequent monthly annuity payment during the guaranteed period
certain will be reduced by the percentage of the Total Withdrawal Value
liquidated, including the commutation fee. After the guaranteed number of
payments has been paid, the number of Annuity Units used in calculating the
monthly payments will be restored to their original value as if no liquidations
had taken place. The total amount allowed to be liquidated as a cumulative
percentage of the Total Withdrawal Value cannot exceed 25% of the Total
Withdrawal Value. The minimum allowable partial liquidation is the lesser of
$2,500 or the remaining portion of the Total Withdrawal Value available to be
liquidated. PARTIAL WITHDRAWALS MAY NOT BE AVAILABLE IN ALL STATES.
Annuity Option 6
If the Contract Owner has selected Annuity Option 6, withdrawals from the
Contract may be made as follows. A withdrawal may be made at least once per
Contract Year up to the Total Withdrawal Value in the Contract. The Total
Withdrawal Value is equal to the present value of the remaining annuity
payments, to the end of the Specified Period Certain, commuted at the Assumed
Investment Return, less a commutation fee of 1% of the amount withdrawn in the
first Contract Year. The Company reserves the right to restrict the amount of a
partial withdrawal to a minimum of $2,500. The Company may require a complete
withdrawal if the remaining Total Withdrawal Value after a requested partial
withdrawal would be less than $35,000. Partial withdrawals will be processed on
the next Annuity Calculation Date following the Contract Owner's written
request. The Company will require the return of the Contract prior to the
payment of the entire commuted value.
See "Tax Status - Tax Treatment of Distributions - Non-Qualified Contracts" and
"Tax Status - Tax Treatment of Distributions - IRA Contracts" for a discussion
of the tax treatment of withdrawals from the Contracts.
DETERMINATION OF ANNUITY PAYMENTS
On the Annuity Calculation Date, a fixed number of Annuity Units will be
purchased, determined as follows:
The first annuity payment is equal to the Contract Value allocated to the
Variable Account divided first by $1,000 and then multiplied by the appropriate
annuity payment amount for each $1,000 of value for the Annuity Option selected.
In each Sub-Account the fixed number of Annuity Units is determined by dividing
the amount of the initial annuity payment determined for each Sub-Account by the
Annuity Unit value on the Annuity Calculation Date. Thereafter, the number of
Annuity Units in each Sub-Account remains unchanged unless the Contract Owner
elects to transfer between Sub-Accounts. All calculations will appropriately
reflect the annuity payment frequency selected.
On each subsequent annuity payment date, the total annuity payment is the sum of
the annuity payments determined for each Sub-Account. The annuity payment in
each Sub-Account is determined by multiplying the number of Annuity Units then
allocated to such Sub-Account by the Annuity Unit value for that Sub-Account.
For each Sub-Account, the value of an Annuity Unit was initially established at
$1.00. On each subsequent Valuation Date the value of an Annuity Unit is
determined in the following way:
FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
a. is the net increase or decrease in the Net Asset Value per share of the
Fund (or other Eligible Investment) plus the per share amount of any dividend or
capital gain distribution paid by the Fund (or Eligible Investment) during the
Valuation Period, plus or minus a per share charge or credit for any taxes
incurred by or reserved for in the Sub-Account as of the end of the current
Valuation Period which the Company determines to have resulted from maintenance
of the Sub-Account; and
b. is the Net Asset Value per share of the Fund (or other Eligible
Investment) at the beginning of the Valuation Period, plus or minus a per share
charge or credit for any taxes incurred by or reserved for in the Sub-Account as
of the end of the immediately preceding Valuation Period which the Company
determines to have resulted from maintenance of the Sub-Account; and
c. is the net result of 1.000 less the Valuation Period deduction for
the charges to the Sub-Account.
The Net Investment Factor may be more or less than one.
SECOND: The value of an Annuity Unit for a Valuation Date is equal to:
a. the value of the Annuity Unit on the immediately preceding Valuation
Date;
b. multiplied by the Net Investment Factor for the Valuation Period ending
on the current Valuation Date;
c. divided by the Assumed Net Investment Factor (see below) for the
Valuation Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. For example, with a 5%
Assumed Investment Return, the Assumed Net Investment Factor for a one-year
Valuation Period would be 1.05. For a one-day Valuation Period, the Assumed Net
Investment Factor would be 1.00013368062.
The Assumed Investment Return is the investment return upon which annuity
payments are based. Income will increase from one annuity Income Date to the
next if the annualized Net Rate of Return during that time is greater than the
Assumed Investment Return and will decrease if the annualized Net Rate of Return
is less than the Assumed Investment Return.
A Contract Owner may choose either a 5% or a 3% Assumed Investment Return. If
the Contract Owner does not choose one, the 5% Assumed Investment Return
automatically applies. Choosing the 5% Assumed Investment Return instead of the
3% Assumed Investment Return will result in a higher initial amount of income,
but income will increase more slowly during periods of good investment
performance of the Trust and decrease more rapidly during periods of poor
investment performance.
The variable annuity benefits provided for under the Contract are based upon:
(a) the 1983(a) Blended Unisex Mortality Table with 50% female content,
projected to the year 2000 with Projection Scale G; (b) the Assumed Investment
Return, and (c) any applicable taxes.
THE CONTRACTS
- --------------------------------------------------------------------------------
OWNERSHIP
The Annuitant is the Contract Owner. The Contract Owner exercises all the rights
of the Contract, subject to the rights of (1) any assignee under an assignment
filed with the Company's VIP Service Center, and (2) any irrevocably named
Beneficiary.
Upon the death of the Contract Owner, the Joint Annuitant, if not already a
Joint Owner, will become the Contract Owner. On or after the Income Date, if
there is no Joint Annuitant or upon the death of the Joint Annuitant, the
Beneficiary(ies) become the Owner(s) of their respective shares.
If the Contract Owner dies before the Income Date and there is no Joint
Annuitant, the Contract will be treated as if it had never been issued and the
Company will return the Single Purchase Payment to the Contract Owner's estate.
ASSIGNMENT
The Contract Owner may assign the Contract. A copy of any assignment must be
filed with the Company's VIP Service Center. The Company is not responsible for
the validity of any assignment. If the Contract is assigned, 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 it may take before such assignment has been recorded at its VIP 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 are entitled to receive any death benefits to be paid.
CHANGE OF BENEFICIARY
The Contract Owner may change a Beneficiary or Contingent Beneficiary by filing
a written request with the Company at its VIP 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 VIP Service Center after the Contract Owner dies but before
any payment to a Beneficiary 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.
DEATH OF BENEFICIARY
Unless the Contract Owner provided otherwise, any amount payable after his/her
death and that of any Joint Annuitant will be payable:
(1) in equal shares to such Beneficiaries as are then living;
(2) if no Beneficiary is then living, payment will be made in equal shares
to such Contingent Beneficiaries as are then living;
(3) if no Beneficiary or Contingent Beneficiary is then living, payment will
be made to the Contract Owner's estate.
ANNUITANT
The Annuitant is the primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. A Joint Annuitant is a person other than the Annuitant on whose life
annuity payments may also be based. The Annuitant, and any Joint Annuitant, must
be a natural person.
PROCEEDS PAYABLE AT DEATH
- --------------------------------------------------------------------------------
If the Contract Owner dies before the Income Date and there is no Joint
Annuitant, the Contract will be treated as if it had never been issued and the
Company will return the Single Purchase Payment to the Contract Owner's estate.
If the Contract Owner has chosen either Option 3, Option 4 or Option 6 with a
Joint Annuitant and either the Contract Owner or the Joint Annuitant dies before
the Income Date, the Annuity Option will be changed to Option 2 with 120 monthly
payments guaranteed. If the life expectancy of the survivor is less than 120
months, the period of guaranteed payments will be 60 months.
If the Contract Owner or Joint Annuitant die on or after the Income Date, the
death benefit, if any, will be payable under the selected Annuity Option. The
Company will require proof of death.
PURCHASE PAYMENTS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
SINGLE PURCHASE PAYMENT
The Single Purchase Payment is paid to the Company at its VIP Service Center.
The minimum purchase payment the Company will accept is $35,000. Contract Owners
can acquire more than one Contract and the Single Purchase Payment for each need
not be $35,000 if the average purchase payment for each Contract is $35,000 or
more.
NET PURCHASE PAYMENT
The Net Purchase Payment is equal to the Single Purchase Payment less any taxes
levied on the purchase payment.
ALLOCATION OF NET PURCHASE PAYMENT
The Net Purchase Payment is allocated to one or more of the Sub-Accounts of the
Variable Account on the Effective Date. 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 requested allocation to each Sub-Account is made in
percentages of the Net Purchase Payment. Whole percentages must be used and each
must be at least 10%. The Company has the right to allocate the Net Purchase
Payment to the Money Market Sub-Account until the expiration of the Free-Look
Period. Thereafter, the allocations will be made to one or more of the
Sub-Accounts as selected by the Contract Owner. The Company reserves the right
to limit the number of Sub-Accounts that a Contract Owner may invest in at any
one time (except in Texas). Currently, the Contract Owner may initially select
up to nine Sub-Accounts, and may only be invested in a maximum of ten
Sub-Accounts at any one time throughout the life of the Contract.
When all forms required to issue the Contract are received and in good order,
the Company will apply the Net Purchase Payment to the Variable Account and
credit the Contract with VIP Units 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). The Company requires proof,
satisfactory to it, of the Age of the Annuitant and any Joint Annuitant. The
Company will not issue a Contract if either the Annuitant or the Joint Annuitant
are over Age 90. If the required forms for the Contract are not in good order,
the Company will attempt to get them in good order or the Company will return
the form(s) and the purchase payment within five business days. The Company will
not retain the Net Purchase Payment for more than five business days while
processing incomplete forms unless it has been so authorized by the purchaser.
CONTRACT VALUE
The Net Purchase Payment is allocated among the various Sub-Accounts within the
Variable Account. For each Sub-Account, the Net Purchase Payment is converted
into VIP Units. The Contract Value on or before the Annuity Calculation Date is
the sum of the values for the Contract within each Sub-Account. The value within
each Sub-Account is determined by multiplying the number of VIP Units
attributable to the Contract in the Sub-Account by the VIP Unit value for the
Sub-Account. On the Annuity Calculation Date, the Contract Value is converted to
annuity payments.
VIP UNIT
When the Net Purchase Payment is allocated to the Variable Account, the amount
allocated to each Sub-Account is converted to VIP Units. The number of VIP Units
credited to each Sub-Account is determined by dividing the portion of the Net
Purchase Payment that is allocated to the Sub-Account by the value of the VIP
Unit for the Sub-Account as of the Effective Date. The VIP Unit value for each
Sub-Account was arbitrarily set initially. The VIP Unit value for any later
Valuation Period on or before the Annuity Calculation Date 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 VIP 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 VIP Units outstanding at the end of such Valuation
Period.
The VIP Unit value may increase or decrease from Valuation Period to Valuation
Period.
TRANSFERS
The Contract Owner may transfer all or part of the Contract Owner's interest in
a Sub-Account to another Sub-Account without the imposition of any fee or
charge.
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.
All transfers are subject to the following:
a. no partial transfer will be made if it would result in any selected
Sub-Account providing less than 10% of the benefits under the Contract.
b. 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. No transfers may
occur until the end of the Free-Look Period. (See "Highlights.")
c. any transfer direction must clearly specify the new allocation
percentage(s) and the Sub- Accounts which are to be re-allocated.
d. the Company reserves the right to limit the number of transfers among
Sub-Accounts to not fewer than 6 transfers per calendar year. The
Company also reserves the right at any time and without prior notice to
any party to modify the transfer provisions 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.
DISTRIBUTOR
- --------------------------------------------------------------------------------
NALAC Financial Plans, Inc. ("NFP"), 1750 Hennepin Avenue, Minneapolis,
Minnesota, acts as the distributor of the Contracts. NFP is a wholly-owned
subsidiary of the Company. The Contracts are offered on a continuous basis. NFP
has subcontracted with Franklin Advisers, Inc. ("Advisers") for it and/or
certain of its affiliates to provide certain marketing support services and NFP
compensates these entities for their services. Commissions will be paid to
broker-dealers who sell the Contracts. Broker-dealers will be paid commissions
at the time of purchase up to 4% of the Single Purchase Payment. Broker-dealers
are also paid a trail commission of up to 40 basis points on the net single
premium reserve for the Contract. 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 4%
of the Single Purchase Payment). Amounts paid to broker-dealers by the Company
will be paid out of general assets of the Company which may include proceeds
derived from the Mortality and Expense Risk Charge the Company deducts from the
Variable Account. 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.
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.
ADMINISTRATION OF THE CONTRACTS
- --------------------------------------------------------------------------------
While the Company has primary responsibility for all administration of the
Contracts, it has retained the services of Templeton Funds Annuity Company
("TFAC" or "VIP Service Center") (in California d.b.a. Templeton Funds Life &
Annuity Insurance Company) 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 TFAC. TFAC is
an indirect wholly-owned subsidiary of Franklin Resources, Inc. which is also
the ultimate parent of all Managers to the Trust. TFAC has also entered into a
reinsurance agreement with the Company with respect to certain risks under the
Contracts.
PERFORMANCE DATA
- --------------------------------------------------------------------------------
MONEY MARKET SUB-ACCOUNT
From time to time, the Company or NFP may advertise the "yield" and "effective
yield" of the Money Market Sub-Account. Both yield figures will be based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Money Market Sub-Account refers to the income generated by
Contract Values in the Money Market Sub-Account over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the Contract Values in the Money Market Sub-Account. The
"effective yield" is calculated similarly but, when annualized, the income
earned by Contract Values in the Money Market Sub-Account is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The computation
of the yield calculation includes a deduction for the Mortality and Expense Risk
Charge and Administrative Expense 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 VIP 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 VIP Units acquired through a hypothetical $1,000
investment of the VIP Unit value at the beginning of the specified period and
the value of the VIP Unit at the end of such period, assuming reinvestment of
all distributions and the deduction of the Mortality and Expense Risk Charge and
the Administrative Expense Charge. Each Sub-Account may also advertise
cumulative and total return information over different periods of time.
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 monthly income which assumes the deduction of the Mortality and
Expense Risk Charge, the Administrative Expense Charge and the fees and expenses
that the Public Funds paid. This hypothetical illustration shows how annuity
income can fluctuate based on investment performance assuming a Contract with an
Assumed Investment Return ("AIR") of 5%, providing an initial monthly annuity
income of $500, was purchased at the beginning of each period illustrated. The
hypothetical performance figures 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 advertising 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
- --------------------------------------------------------------------------------
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 Internal Revenue Code of 1986, as amended (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 Annuity Option elected.
For annuity payments, the portion of a payment includable in income equals the
excess of the payment over the exclusion amount. The exclusion amount for
payments based on a variable annuity option is determined by dividing the
investment in the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid (determined
by Treasury Regulations). Payments received after the investment in the Contract
has been recovered (i.e. the total of the excludable amounts equal the
investment in the Contract) are fully taxable. The taxable portion of an annuity
payment 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 the 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
Section 72(e)(11) of 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. The legislative history
of Section 72(e)(11) indicates that it was not intended to apply to immediate
annuities. However, the legislative history also states that no inference is
intended as to whether the Treasury Department, under its authority to prescribe
rules to enforce the tax laws, may treat the combination purchase of a deferred
annuity contract with an immediate annuity contract as a single contract for
purposes of determining the tax consequences of any distribution.
TAX TREATMENT OF DISTRIBUTIONS -
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 includable 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 and his Beneficiary; (e) as an annuity payment
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 Distributions -IRA Contracts.")
The availability of total or partial withdrawals from an immediate annuity is
not expressly provided for in the Code or Treasury Regulations. The only tax
guidance currently available for such issue is a Private Letter Ruling holding
that the right to make withdrawals does not prevent a contract from qualifying
as an immediate annuity. However, the Private Letter Ruling does not address the
issue of whether the making of a withdrawal would adversely affect the favorable
tax treatment of annuity payments made before or after such partial withdrawal
because of the requirement that all immediate annuity payments must be
"substantially equal". The loss of favorable tax treatment would mean that the
income portion of each annuity payment received prior to the taxpayer's
attaining age 591/2 would be subject to a 10% penalty tax unless another
exception to the penalty tax applies. While the Company currently believes that
such withdrawals will not adversely affect the favorable tax treatment of
annuity payments received before or after a withdrawal and the Company intends
to perform its tax reporting functions accordingly, there can be no assurance
that the Internal Revenue Service will not take a contrary position. Contract
Owners should obtain competent tax advice prior to making a partial or total
withdrawal.
QUALIFIED PLANS
The Contracts offered by this Prospectus may also be used with a plan qualified
under Section 408(b) of the Code ("IRA Contracts"). Contract Owners, Annuitants
and Beneficiaries are cautioned that benefits under an IRA Contract 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. The following
discussion of IRA Contracts is not exhaustive and is for general informational
purposes only. The tax rules regarding IRA Contracts are very complex and will
have differing applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to purchasing IRA
Contracts.
IRA Contracts include special provisions restricting Contract provisions that
may otherwise be available as described in this Prospectus. Generally, IRA
Contracts 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 distributions from IRA Contracts. (See
"Tax Treatment of Distributions - IRA Contracts".)
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. IRA Contracts will utilize annuity tables which do
not differentiate on the basis of sex because of the use of the IRA Contracts in
a Simplified Employee Pension. Such annuity tables will also be available for
use in connection with certain non-qualified deferred compensation plans.
Under applicable limitations, certain amounts may be contributed to an IRA
Contract which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Distributions - IRA 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 Contract.
Sales of Contracts for use as IRA Contracts 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.
TAX TREATMENT OF DISTRIBUTIONS - IRA 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 IRA Contracts. To
the extent amounts are not includible in gross income because they have been
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 Annuitant reaches age
591/2; (b) distributions following the death or disability of the Annuitant (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant and
his or her designated Beneficiary. If the series of substantially equal periodic
payments is modified before the later of the annuitant attaining age 591/2 or 5
years from the date of the first annuity payment, then the tax for the year of
the modification is increased by an amount equal to the tax which would have
been imposed (the 10% penalty tax) but for the exception, plus interest for the
tax years in which the exception was used. A partial withdrawal may result in
the modification of the series of annuity payments made after such withdrawal
and therefore could result in the imposition of the 10% penalty tax and interest
for the period as described above. Competent tax advice should be obtained prior
to making any withdrawals from an IRA Contract. Any amounts distributed will
only be paid to the Annuitant, Joint Annuitant or Beneficiary. The Company will
not transfer or pay such amounts to another IRA or tax qualified plan.
Generally, distributions from an IRA Contract must commence no later than April
1 of the calendar year, following the year in which the employee attains age
701/2. Generally, 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 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.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 A - ILLUSTRATION OF VALUES
- --------------------------------------------------------------------------------
The following tables have been prepared to show how investment performance
affects variable annuity income over time. The variable annuity income amounts
reflect three different assumptions for a constant investment return before all
expenses: 0%, 6% and 12%. These are hypothetical rates of return and, of course,
the Company does not guarantee that the Contract will earn these returns for any
one year or any sustained period of time. The tables are for illustrative
purposes only and do not represent past or future investment returns.
The variable annuity income may be more or less than the income shown if the
actual returns of the Eligible Investments are different than those illustrated.
Since it is very likely that investment returns will fluctuate over time, the
amount of variable annuity income will also fluctuate. The total amount of
annuity income ultimately received will depend on cumulative investment returns
and how long the Annuitant lives and the option chosen.
Another factor which determines the amount of variable annuity income is the
Assumed Investment Return. Income will increase from one annuity Income Date to
the next if the annualized Net Rate of Return during that time is greater than
the Assumed Investment Return, and will decrease if the annualized Net Rate of
Return is less than the Assumed Investment Return.
Two illustrations follow. The first is based on a 3% Assumed Investment Return,
and the second is based on a 5% Assumed Investment Return.
The income amounts shown reflect the deduction of all fees and expenses. Actual
Trust fees and expenses will vary from year to year and from Fund to Fund and
may thus be higher or lower than the assumed rate. The illustrations assume that
each Fund of the Trust will incur expenses at an annual rate of 0.76% of the
average daily net assets of the Fund. This is the average in 1995, weighted by
Fund net assets as of 12/31/95. The Mortality and Expense Risk Charge and
Administrative Expense Charge are calculated, in the aggregate, at an annual
rate of 1.40% of the average daily net assets of the Variable Account. After
taking these expenses and charges into consideration, the illustrated gross
investment returns of 0%, 6% and 12% are approximately equal to net rates of
- -2.14%, 3.73% and 9.60%, respectively.
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/27 EFFECTIVE DATE: 12/1/96
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/97
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 3%
The amount of monthly variable annuity income shown in the table below and the graph that follows
assumes a constant annual investment return. The amount of variable annuity income that is actually
received will depend on the investment performance of the underlying Fund(s) selected. The variable
annuity income can go up or down and no minimum dollar amount of variable annuity income is
guaranteed. The amounts shown are based on a 3% Assumed Investment Return. Income will remain
constant at $625 per month when the annualized net rate of return after expenses is 3%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.14% 3.73% 9.60%
- -------------------- ---- -------------------------------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
January 1, 1997 70 $622 $625 $ 628
January 1, 1998 71 591 629 668
January 1, 1999 72 561 634 711
January 1, 2000 73 533 638 757
January 1, 2001 74 507 643 805
January 1, 2006 79 392 666 1,099
January 1, 2011 84 304 690 1,499
January 1, 2016 89 235 715 2,045
January 1, 2021 94 182 741 2,790
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 3%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
______________________________________________________
-2.14% 3.73% 9.60%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
After Expenses After Expenses After Expenses
Year
_____ ________________ ________________ _______________
<S> <C> <C> <C>
1 $ 622 $ 625 628
2 591 629 668
3 561 634 711
4 533 638 757
5 507 643 805
6 481 647 857
7 457 652 912
8 435 657 970
9 413 661 1,032
10 392 666 1,099
11 373 671 1,169
12 354 675 1,244
13 336 680 1,324
14 320 685 1,409
15 304 690 1,499
16 288 695 1,595
17 274 700 1,697
18 260 705 1,806
19 247 710 1,922
20 235 715 2,045
21 223 720 2,176
22 212 725 2,316
23 202 730 2,464
24 192 735 2,622
25 182 741 2,790
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/27 EFFECTIVE DATE: 12/1/96
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/97
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 5%
The amount of monthly variable annuity income shown in the table below and the graph that follows
assumes a constant annual investment return. The amount of variable annuity income that is actually
received will depend on the investment performance of the underlying Fund(s) selected. The variable
annuity income can go up or down and no minimum dollar amount of variable annuity income is
guaranteed. The amounts shown are based on a 5% Assumed Investment Return. Income will remain
constant at $742 per month when the annual rate of return after expenses is 5%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.14% 3.73% 9.60%
- -------------------- ---- -------------------------------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
January 1, 1997 70 $738 $741 $ 745
January 1, 1998 71 687 732 778
January 1, 1999 72 641 724 812
January 1, 2000 73 597 715 847
January 1, 2001 74 557 706 884
January 1, 2006 79 391 664 1,096
January 1, 2011 84 275 625 1,358
January 1, 2016 89 193 588 1,683
January 1, 2021 94 136 554 2,086
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 5%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
_______________________________________________________
-2.14% 3.73% 9.60%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
After Expenses After Expenses After Expenses
Year
_____ ________________ ________________ ________________
<C> <C> <C> <C>
1 $ 738 $ 741 $ 745
2 687 732 778
3 641 724 812
4 597 715 847
5 557 706 884
6 519 698 923
7 483 689 964
8 451 681 1,006
9 420 673 1,050
10 391 664 1,096
11 365 656 1,144
12 340 648 1,194
13 317 641 1,247
14 295 633 1,301
15 275 625 1,358
16 256 618 1,418
17 239 610 1,480
18 223 603 1,545
19 208 596 1,613
20 193 588 1,683
21 180 581 1,757
22 168 574 1,834
23 157 567 1,914
24 146 560 1,998
25 136 554 2,086
</TABLE>
<PAGE>
APPENDIX B
- --------------------------------------------------------------------------------
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.
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 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.
Part 3 illustrates hypothetical monthly income based on past performance of the
Public Funds and the deduction of all current recurring expenses of the Separate
Account, 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 annuity
income shown. This hypothetical illustration shows how annuity income can
fluctuate based on investment performance assuming a Contract with an Assumed
Investment Return ("AIR") of 5%, providing an initial monthly annuity income of
$500, was purchased at the beginning of each period illustrated. Annuity income
increases for a given month if the annualized Net Rate of Return for that month
is higher than the AIR, and decreases for a given month if the annualized Net
Rate of Return is lower than the AIR.
The Purchase Payment necessary for an initial monthly annuity income of $500
will vary depending on the age of the Annuitant (and Joint Annuitant, if any),
the annuity income option chosen and the first Income Date. Suppose a 70 year
old who lives in a state that does not charge a premium tax wishes to purchase
$500 of initial monthly variable annuity income beginning on the Income Date. If
there is no Joint Annuitant and no guarantee period and he chooses a 5% AIR, the
Purchase Payment needed would be $69,659.
Past performance cannot predict or guarantee future results of the New Valuemark
funds. In addition, the investment performance of the New Valuemark funds 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.
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.
<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 Illustration of Monthly Income (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.......................... $556 -- -- $829 12/31/92
Mutual Shares Securities
Sub-Account.......................... $533 $813 $1,060 -- 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 Income .................................. 4
Annuity Provisions ............................... 4
Variable Annuity Payout ......................... 4
Financial Statements.............................. 4
</TABLE>
This page intentionally left blank
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL IMMEDIATE
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 IMMEDIATE 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 Income ................................. 4
Annuity Provisions .............................. 4
Variable Annuity Payout ........................ 4
Financial Statements ............................ 4
</TABLE>
VIP 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.
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 a VIP 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
VIP 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 and the fees of the Funds being advertised.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual VIP Unit Values for an
initial $1,000 purchase payment. 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
where:
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 cumulative and total return information over
different periods of time. Cumulative total return is calculated in a similar
manner as described above except that the results are not annualized.
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, 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 VIP 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 VIP 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 and the Administrative Expense Charge.
<PAGE>
The effective yield reflects the effects of com-pounding 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
VIP Unit earned during the period (minus the deduction for the Mortality and
Expense Risk Charge and Administrative Expense Charge) by the VIP 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 VIP Units outstanding during the period;
d = the maximum offering price per VIP 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. 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.
<TABLE>
<CAPTION>
Standardized Total Return
Average Annual Total Return for the periods ended June 30, 1996
Inception One Five Since
Sub-Account Date Year Year Inception
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth......................................................... 5/1/96 NA NA NA
Growth and Income...................................................... 1/24/89 20.05% 11.53% 8.34%
Income Securities...................................................... 1/24/89 12.05% 11.13% 10.09%
Money Market........................................................... 1/24/89 3.91% 2.60% 3.72%
Rising Dividends....................................................... 1/27/92 20.62% NA 6.67%
Small Cap.............................................................. 11/1/95 NA NA NA
Templeton Developing Markets Equity.................................... 3/15/94 13.97% NA 4.36%
Templeton Global Asset Allocation...................................... 5/1/95 12.74% NA 11.73%
Templeton Global Growth................................................ 3/15/94 14.96% NA 10.13%
Templeton International Equity......................................... 1/27/92 13.74% NA 9.25%
Templeton International Smaller Companies.............................. 5/1/96 NA NA NA
Templeton Pacific Growth............................................... 1/27/92 16.64% NA 9.89%
Utility Equity......................................................... 1/24/89 20.00% 10.21% 9.98%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Total Return
Total Return for the periods ended June 30, 1996
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%
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%
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 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%
Utility Equity...................... 1/24/89 20.00% 5.25% 10.21% 9.98% 16.59% 62.61% 102.87%
<FN>
As of June 30, 1996, the Mutual Discovery Securities Sub-Account and the Mutual
Shares Securities Sub-Account had not yet commenced operations.
</FN>
</TABLE>
The Company may also present performance information computed on a different
basis.
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 Income
Periodic annuity income amounts may be illustrated using the historical
performance of the Sub-Accounts, the Standard & Poor's 500 Composite Stock Price
Index or other recognized investment benchmark portfolios. All illustrations
will reflect the 1.25% annual Mortality and Expense Risk Charge and the 0.15%
Administrative Expense Charge and actual or assumed Fund expenses.
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. Annuity payments also
depend upon the Age of the Annuitant and any Joint Annuitant and the Assumed Net
Investment Factor utilized. On the Annuity Calculation 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. Unisex Annuity
Tables are utilized by the Company. 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 Annuity Calculation 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. For each Sub-Account, the fixed number of Annuity Units is multiplied by the
Annuity Unit value on each subsequent annuity payment date. This result is the
dollar amount of the payment for each Sub-Account.
3. The total dollar amount of each Variable Annuity variable payout is the sum
of all Sub-Account Variable Annuity payments.
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 Immediate Variable Annuity Contract****
5. Application for Individual Immediate Variable Annuity ##
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 Schedule
* Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Form N-4 filed on September 20, 1988 (File No. 811-05618).
** Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Form N-4 filed on April 27, 1990 (File No. 811-05618).
*** Incorporated by reference to Post-Effective Amendment No. 12 to
Registrant's Form N-4 filed on February 23, 1994 (File No. 811-05618).
**** Incorporated by reference to Registrant's Form N-4 filed on March 8,
1994 (File No. 33-76190).
***** Incorporated by reference to Registrant's Post-Effective Amendment No.
1 to Form N-4 filed on April 25, 1995 (File No. 33-76190).
# Incorporated by reference to Registrant's Post-Effective Amendment No.
2 to Form N-4 which was electronically filed on November 1, 1995.
## Incorporated by reference to Registrant's Post-Effective Amendment No.
3 to Form N-4 which was electronically filed on April 24, 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
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Blvd.
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 17
D - 70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief Financial
1750 Hennepin Avenue Officer and Treasurer
Minneapolis, MN 55403
Alan A. Grove Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President-Individual Marketing
1750 Hennepin Avenue
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Reverend Dennis J. Dease Director
c/o University of St.Thomas
2115 Summit Avenue
Box AQU100
St. Paul, MN 55105-1096
James R. Campbell Director
c/o 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. 9 to Form N-4 as filed on April 30, 1993 (File
No. 811-05618).
Item 27. Number of Contract Owners
As of August 31, 1996, there were 96 qualified Contract Owners and 49
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>
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
James P. Kelso 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
Edward J. Bonach 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
</TABLE>
c. Not Applicable
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.
<TABLE>
<CAPTION>
<S> <C>
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
By: /s/ ALAN A. GROVE
------------------------------
</TABLE>
<TABLE>
<CAPTION>
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
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board,
Lowell C. Anderson President and Chief 11/05/96
Executive Officer Date
Herbert F. Hansmeyer* Director 11/05/96
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 11/05/96
Michael P. Sullivan Date
Dr. Jerry E. Robertson* Director 11/05/96
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 11/05/96
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 11/05/96
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 11/05/96
Rev. Dennis J. Dease Date
James R. Campbell* Director 11/05/96
James R. Campbell Date
* By /s/ ALAN A. GROVE
---------------------
Attorney-in-Fact
</TABLE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 4
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
99.B9 Opinion and Consent of Counsel
99.B10 Independent Auditors' Consent
99.B13 Calculation of Performance Information
27 Financial Data Schedule
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
October 24, 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 Immediate
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 TEMPLETON VALUEMARK INCOME PLUS
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 Current Value 18.14157976 0.000 66.172 1,200.46
Cumulative and Avg. Annual Total Return 20.05% A
Income Securities
6-30-95 Purchase $1,000.00 $18.24244923 54.817 54.817 $1,000.00
6-30-96 Current Value 20.44085417 0.000 54.817 1,120.51
Cumulative and Avg. Annual Total Return 12.05% A
Money Market
6-30-95 Purchase $1,000.00 $12.62219925 79.225 79.225 $1,000.00
6-30-96 Current Value 13.11596925 0.000 79.225 1,039.12
Cumulative and Avg. Annual Total Return 3.91% A
Rising Dividends
6-30-95 Purchase $1,000.00 $11.03504909 90.620 90.620 $1,000.00
6-30-96 Current Value 13.31084899 0.000 90.620 1,206.23
Cumulative and Avg. Annual Total Return 20.62% A
Templeton Developing Markets Equity
6-30-95 Purchase $1,000.00 $9.67842440 103.323 103.323 $1,000.00
6-30-96 Current Value 11.03044915 0.000 103.323 1,139.69
Cumulative and Avg. Annual Total Return 13.97% A
Templeton Global Asset Allocation
6-30-95 Purchase $1,000.00 $10.09661646 99.043 99.043 $1,000.00
6-30-96 Current Value 11.38243612 0.000 99.043 1,127.35
Cumulative and Avg. Annual Total Return 12.74% A
Templeton Global Growth
6-30-95 Purchase $1,000.00 $10.85475264 92.126 92.126 $1,000.00
6-30-96 Current Value 12.47898971 0.000 92.126 1,149.63
Cumulative and Avg. Annual Total Return 14.96% A
Templeton International Equity
6-30-95 Purchase $1,000.00 $13.00465580 76.896 76.896 $1,000.00
6-30-96 Current Value 14.79181647 0.000 76.896 1,137.42
Cumulative and Avg. Annual Total Return 13.74% A
Templeton Pacific Growth
6-30-95 Purchase $1,000.00 $13.01539431 76.832 76.832 $1,000.00
6-30-96 Current Value 15.18114534 0.000 76.832 1,166.40
Cumulative and Avg. Annual Total Return 16.64% A
Utility Equity
6-30-95 Purchase $1,000.00 $16.90593418 59.151 59.151 $1,000.00
6-30-96 Current Value 20.28737569 0.000 59.151 1,200.02
Cumulative and Avg. Annual Total Return 20.00% A
<FN>
A = (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 Current Value 13.00069386 0.000 77.653 1,009.54
6-30-95 Current Value 15.11222373 0.000 77.653 1,173.50
6-30-96 Current Value 18.14157976 0.000 77.653 1,408.74
Cumulative Total Return 40.87% A
Average Annual Total Return 12.10% B
Income Securities
6-30-93 Purchase $1,000.00 $16.65047647 60.058 60.058 $1,000.00
6-30-94 Current Value 16.57666096 0.000 60.058 995.57
6-30-95 Current Value 18.24244923 0.000 60.058 1,095.61
6-30-96 Current Value 20.44085417 0.000 60.058 1,227.64
Cumulative Total Return 22.76% A
Average Annual Total Return 7.08% B
Money Market
6-30-93 Purchase $1,000.00 $11.99714210 83.353 83.353 $1,000.00
6-30-94 Current Value 12.16194540 0.000 83.353 1,013.74
6-30-95 Current Value 12.62219925 0.000 83.353 1,052.10
6-30-96 Current Value 13.11596925 0.000 83.353 1,093.26
Cumulative Total Return 9.33% A
Average Annual Total Return 3.02% B
Rising Dividends
6-30-93 Purchase $1,000.00 $10.22323737 97.816 97.816 $1,000.00
6-30-94 Current Value 9.72901110 0.000 97.816 951.66
6-30-95 Current Value 11.03504909 0.000 97.816 1,079.41
6-30-96 Current Value 13.31084899 0.000 97.816 1,302.02
Cumulative Total Return 30.20% A
Average Annual Total Return 9.20% B
Templeton International Equity
6-30-93 Purchase $1,000.00 $10.02709125 99.730 99.730 $1,000.00
6-30-94 Current Value 12.19803663 0.000 99.730 1,216.51
6-30-95 Current Value 13.00465580 0.000 99.730 1,296.95
6-30-96 Current Value 14.79181647 0.000 99.730 1,475.19
Cumulative Total Return 47.52% A
Average Annual Total Return 13.84% B
Templeton Pacific Growth
6-30-93 Purchase $1,000.00 $10.89039681 91.824 91.824 $1,000.00
6-30-94 Current Value 13.26191976 0.000 91.824 1,217.76
6-30-95 Current Value 13.01539431 0.000 91.824 1,195.13
6-30-96 Current Value 15.18114534 0.000 91.824 1,393.99
Cumulative Total Return 39.40% A
Average Annual Total Return 11.71% B
Utility Equity
6-30-93 Purchase $1,000.00 $17.40075723 57.469 57.469 $1,000.00
6-30-94 Current Value 14.39814174 0.000 57.469 827.44
6-30-95 Current Value 16.90593418 0.000 57.469 971.56
6-30-96 Current Value 20.28737569 0.000 57.469 1,165.89
Cumulative Total Return 16.59% A
Average Annual Total Return 5.25% B
<FN>
A = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+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 Current Value 11.40531634 0.000 95.108 1,084.74
6-30-93 Current Value 12.87788053 0.000 95.108 1,224.79
6-30-94 Current Value 13.00069386 0.000 95.108 1,236.47
6-30-95 Current Value 15.11222373 0.000 95.108 1,437.30
6-30-96 Current Value 18.14157976 0.000 95.108 1,725.41
Cumulative Total Return 72.54% A
Average Annual Total Return 11.53% B
Income Securities
6-30-91 Purchase $1,000.00 $12.05870281 82.928 82.928 $1,000.00
6-30-92 Current Value 14.82244660 0.000 82.928 1,229.19
6-30-93 Current Value 16.65047647 0.000 82.928 1,380.79
6-30-94 Current Value 16.57666096 0.000 82.928 1,374.66
6-30-95 Current Value 18.24244923 0.000 82.928 1,512.80
6-30-96 Current Value 20.44085417 0.000 82.928 1,695.11
Cumulative Total Return 69.51% A
Average Annual Total Return 11.13% B
Money Market
6-30-91 Purchase $1,000.00 $11.53755190 86.673 86.673 $1,000.00
6-30-92 Current Value 11.85545160 0.000 86.673 1,027.55
6-30-93 Current Value 11.99714210 0.000 86.673 1,039.83
6-30-94 Current Value 12.16194540 0.000 86.673 1,054.12
6-30-95 Current Value 12.62219925 0.000 86.673 1,094.01
6-30-96 Current Value 13.11596925 0.000 86.673 1,136.81
Cumulative Total Return 13.68% A
Average Annual Total Return 2.60% B
Utility Equity
6-30-91 Purchase $1,000.00 $12.47645987 80.151 80.151 $1,000.00
6-30-92 Current Value 14.85824515 0.000 80.151 1,190.90
6-30-93 Current Value 17.40075723 0.000 80.151 1,394.69
6-30-94 Current Value 14.39814174 0.000 80.151 1,154.02
6-30-95 Current Value 16.90593418 0.000 80.151 1,355.03
6-30-96 Current Value 20.28737569 0.000 80.151 1,626.05
Cumulative Total Return 62.61% A
Average Annual Total Return 10.21% B
<FN>
A = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+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 Current Value 10.15737732 0.000 100.000 1,015.74
Cumulative Total Return 1.57% A
Average Annual Total Return NA B
Growth and Income
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 9.60621064 0.000 100.000 960.62
1-24-91 Current Value 10.04911751 0.000 100.000 1,004.91
1-24-92 Current Value 12.19460473 0.000 100.000 1,219.46
1-24-93 Current Value 12.76781499 0.000 100.000 1,276.78
1-24-94 Current Value 14.16249217 0.000 100.000 1,416.25
1-24-95 Current Value 13.34952631 0.000 100.000 1,334.95
1-24-96 Current Value 17.36302808 0.000 100.000 1,736.30
6-30-96 Current Value 18.14157976 0.000 100.000 1,814.16
Cumulative Total Return 81.42% A
Average Annual Total Return 8.34% B
Income Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.71309911 0.000 100.000 1,071.31
1-24-91 Current Value 9.95244729 0.000 100.000 995.24
1-24-92 Current Value 14.03346495 0.000 100.000 1,403.35
1-24-93 Current Value 15.41432935 0.000 100.000 1,541.43
1-24-94 Current Value 17.72926866 0.000 100.000 1,772.93
1-24-95 Current Value 16.36456156 0.000 100.000 1,636.46
1-24-96 Current Value 20.20965612 0.000 100.000 2,020.97
6-30-96 Current Value 20.44085417 0.000 100.000 2,044.09
Cumulative Total Return 104.41% A
Average Annual Total Return 10.09% B
Money Market
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.67978818 0.000 100.000 1,067.98
1-24-91 Current Value 11.32877884 0.000 100.000 1,132.88
1-24-92 Current Value 11.75876120 0.000 100.000 1,175.88
1-24-93 Current Value 11.94239828 0.000 100.000 1,194.24
1-24-94 Current Value 12.07592840 0.000 100.000 1,207.59
1-24-95 Current Value 12.38828249 0.000 100.000 1,238.83
1-24-96 Current Value 12.92030455 0.000 100.000 1,292.03
6-30-96 Current Value 13.11596925 0.000 100.000 1,311.60
Cumulative Total Return 31.16% A
Average Annual Total Return 3.72% B
Rising Dividends
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 10.69831588 0.000 100.000 1,069.83
1-27-94 Current Value 10.38483458 0.000 100.000 1,038.48
1-27-95 Current Value 9.97357881 0.000 100.000 997.36
1-27-96 Current Value 12.53425588 0.000 100.000 1,253.43
6-30-96 Current Value 13.31084899 0.000 100.000 1,331.08
Cumulative Total Return 33.11% A
Average Annual Total Return 6.67% B
Small Cap
11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
6-30-96 Current Value 11.97069680 0.000 100.000 1,197.07
Cumulative Total Return 19.71% A
Average Annual Total Return NA B
Templeton Developing Markets Equity
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 8.62834892 0.000 100.000 862.83
3-15-96 Current Value 10.29583833 0.000 100.000 1,029.58
6-30-96 Current Value 11.03044915 0.000 100.000 1,103.04
Cumulative Total Return 10.30% A
Average Annual Total Return 4.36% B
Templeton Global Asset Allocation
5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
5-1-96 Current Value 11.25238519 0.000 100.000 1,125.24
6-30-96 Current Value 11.38243612 0.000 100.000 1,138.24
Cumulative Total Return 13.82% A
Average Annual Total Return 11.73% B
Templeton Global Growth
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 10.10361217 0.000 100.000 1,010.36
3-15-96 Current Value 11.81545835 0.000 100.000 1,181.55
6-30-96 Current Value 12.47898971 0.000 100.000 1,247.90
Cumulative Total Return 24.79% A
Average Annual Total Return 10.13% B
Templeton International Equity
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.54360836 0.000 100.000 954.36
1-27-94 Current Value 12.87738433 0.000 100.000 1,287.74
1-27-95 Current Value 11.94433728 0.000 100.000 1,194.43
1-27-96 Current Value 13.57666971 0.000 100.000 1,357.67
6-30-96 Current Value 14.79181647 0.000 100.000 1,479.18
Cumulative Total Return 47.92% A
Average Annual Total Return 9.25% B
Templeton International Smaller Companies
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
6-30-96 Current Value 10.30704398 0.000 100.000 1,030.70
Cumulative Total Return 3.07% A
Average Annual Total Return NA B
Templeton Pacific Growth
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.92851087 0.000 100.000 992.85
1-27-94 Current Value 14.10178760 0.000 100.000 1,410.18
1-27-95 Current Value 11.94769270 0.000 100.000 1,194.77
1-27-96 Current Value 14.49670523 0.000 100.000 1,449.67
6-30-96 Current Value 15.18114534 0.000 100.000 1,518.11
Cumulative Total Return 51.81% A
Average Annual Total Return 9.89% B
Utility Equity
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 11.48396786 0.000 100.000 1,148.40
1-24-91 Current Value 11.97256112 0.000 100.000 1,197.26
1-24-92 Current Value 14.23979461 0.000 100.000 1,423.98
1-24-93 Current Value 16.00386148 0.000 100.000 1,600.39
1-24-94 Current Value 16.50535338 0.000 100.000 1,650.54
1-24-95 Current Value 15.57082970 0.000 100.000 1,557.08
1-24-96 Current Value 19.81799065 0.000 100.000 1,981.80
6-30-96 Current Value 20.28737569 0.000 100.000 2,028.74
Cumulative Total Return 102.87% A
Average Annual Total Return 9.98% B
<FN>
A = (Accumulated Value as of June 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+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 Current Value 19.89985017 0.000 58.704 1,168.20
Average Annual Total Return 16.82% B
Mutual Shares Securities Sub-Account
9-30-95 Purchase $1,000.00 $494.26676636 2.023 2.023 $1,000.00
9-30-96 Current Value 553.20141399 0.000 2.023 1,119.24
Average Annual Total Return 11.92% B
<FN>
B = (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 Current Value 298.69304214 0.000 3.755 1,121.47
9-30-93 Current Value 370.30580394 0.000 3.755 1,390.34
9-30-94 Current Value 400.78402346 0.000 3.755 1,504.77
9-30-95 Current Value 494.26676636 0.000 3.755 1,855.76
9-30-96 Current Value 553.20141399 0.000 3.755 2,077.04
Cumulative Total Return 107.70% C
Average Annual Total Return 15.74% D
<FN>
C = (Accumulated Value as of September 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 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 Current Value 207.12736533 0.000 6.243 1,293.18
9-30-88 Current Value 218.64162680 0.000 6.243 1,365.07
9-30-89 Current Value 261.57455082 0.000 6.243 1,633.11
9-30-90 Current Value 218.12900815 0.000 6.243 1,361.87
9-30-91 Current Value 266.34154236 0.000 6.243 1,662.88
9-30-92 Current Value 298.69304214 0.000 6.243 1,864.86
9-30-93 Current Value 370.30580394 0.000 6.243 2,311.97
9-30-94 Current Value 400.78402346 0.000 6.243 2,502.26
9-30-95 Current Value 494.26676636 0.000 6.243 3,085.91
9-30-96 Current Value 553.20141399 0.000 6.243 3,453.86
Cumulative Total Return 245.39% C
Average Annual Total Return 13.20% D
<FN>
C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
D = [(C+1)^(1/10 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of 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 Current Value 13.39109512 0.000 100.000 1,339.11
12-31-94 Current Value 13.67637317 0.000 100.000 1,367.64
12-31-95 Current Value 17.33223864 0.000 100.000 1,733.22
9-30-96 Current Value 19.89985017 0.000 100.000 1,989.99
Cumulative Total Return 99.00% C
Average Annual Total Return 20.14% D
<FN>
C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
D = [(C+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>
