File Nos. 333-06709
811-05618
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. 1 (X)
Post-Effective Amendment No. ( )
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 28 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
-----------------------------------------------
(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
------------------------------------------- -----
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
-------------------------------------
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Calculation of Registration Fee under the Securities Act of 1933: $500 -
Registrant is registering an indefinite number of securities under the
Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
=============================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Location
- -------- -----------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . Index of Terms
Item 3. Synopsis or Highlights. . . . . . . . . . . Profile
Item 4. Condensed Financial Information. . . . . . . Not Applicable
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies. . . . . . . . . . . The Separate Account,
Allianz Life,
Investment Options
Item 6. Deductions. . . . . . . . .. . . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . The Valuemark IV
Variable Annuity
Contract
Item 8. Annuity Period. . .. . . . . . . . . . . . . Annuity Payments
(The Income Phase)
Item 9. Death Benefit. . . . . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value. . . . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . Table of Contents
of the Statement of
Additional Information
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Location
- -------- --------------------
PART B
Item 15. Cover Page. . . . . . . . .. . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . Insurance 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.
PART A
PROFILE OF THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
_____________ , 1996
This Profile is a summary of some of the more important points that you should
consider and know before purchasing the Valuemark IV Variable Annuity Contract
with a fixed account option. The Contract is more fully described in the
prospectus which accompanies this Profile. Please read the prospectus
carefully.
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT. The variable annuity contract
with a fixed account option offered by Allianz Life is a contract between you,
the owner, and Allianz Life Insurance Company of North America, an insurance
company. The Contract provides a means for investing on a tax-deferred basis
in 23 funds of Franklin Valuemark Funds, a series fund, and a fixed account of
Allianz Life. The Contract is intended for retirement savings or other
long-term investment purposes and provides for a death benefit and guaranteed
annuity income options.
The Contract has 24 investment options. There are 23 funds which are managed
by professional money managers. A list of the available funds is contained in
Section 4. Depending upon market conditions, you can make or lose money in the
funds.
The fixed account offers an interest rate that is guaranteed by Allianz Life.
The interest rate is set monthly and is guaranteed for 12 months. While your
money is in the fixed account, the interest your money will earn as well as
your principal is guaranteed by Allianz Life.
Allianz Life reserves the right to limit the number of funds which you may
invest in at any one time (now or in the future). Currently, you can put your
money in 10 investment options (which includes any of the 23 funds listed in
Section 4 and the Allianz Life fixed account).
Like all deferred annuity contracts, your Contract has two phases: the
accumulation phase and the income phase. During the accumulation phase, your
earnings accumulate on a tax-deferred basis and are based on the investment
performance of the fund(s) you selected and/or the interest rate earned on the
money you have in the fixed account. During the accumulation phase, the
earnings are taxed as income only when you make a withdrawal. The income
phase occurs when you begin receiving regular payments from your Contract. The
amount of the payments you may receive during the income phase depends in part
upon the amount of money you are able to accumulate in your Contract during
the accumulation phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE). You can receive monthly annuity
payments from your Contract by selecting one of the following annuity options
(all of these options assume you are the owner and the annuitant): (1)
payments for your life; (2) payments for your life, but if you die before
payments have been made for the guaranteed period you selected, payments will
continue for the remainder of the guaranteed period (5,10, 15 or 20 years);
(3) payments during the joint lifetime of you and the joint annuitant - when
either of you die, payments will continue as long as the survivor lives; (4)
payments during the joint lifetime of you and the joint annuitant, but if you
or the joint annuitant die before payments have been made for the guaranteed
period you selected, payments will continue for the remainder of the
guaranteed period (5, 10, 15 or 20 years); and (5) payments during your life
ending with the last payment due prior to your death with a guarantee that at
your death Allianz Life will make a refund to your beneficiary. Once you begin
receiving regular payments, you cannot change your annuity option or surrender
your contract.
During the income phase, you have the same investment choices you had during
the accumulation phase. You can choose to have payments come from the fixed
account, the funds or both. If you choose to have any part of your payments
come from the funds, the dollar amount of your annuity payments may go up or
down, depending on the investment performance.
3. PURCHASE. You can buy the Contract with $5,000 or more under most
circumstances. You can add $250 or more any time you like during the
accumulation phase. You and the annuitant cannot be older than 85 years old
at the time you buy the Contract.
4.INVESTMENT OPTIONS. You may invest in the Allianz Life fixed account or the
following funds of Franklin Valuemark Funds:
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME:
Money Market
FUNDS SEEKING CURRENT INCOME:
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME:
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH:
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
The funds are fully described in the attached prospectus for Franklin
Valuemark Funds. You can make or lose money in the funds, depending upon
market conditions.
5. EXPENSES. The Contract has insurance features and investment features,
and there are costs related to each.
The annual insurance charges total 1.49% of the average daily value of your
Contract allocated to the funds during the accumulation period (1.40% during
the income period). Each year Allianz Life deducts a $30 contract maintenance
charge from your Contract. Allianz Life currently waives this charge if the
cumulative value of all your Valuemark IV Contracts (registered with the
same social security number) are at least $50,000. There are also annual
fund charges which range from .40% to 1.41% of the average daily value of the
funds depending upon the fund(s) you invest in.
You can transfer between accounts up to 12 times a year without charge. After
12 transfers, the charge is $25 or 2% of the amount transferred, whichever is
less.
If you make a withdrawal from the Contract, Allianz Life may assess a
contingent deferred sales charge (withdrawal charge). The amount of the charge
depends upon how long Allianz Life has had your payment. The charge is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of complete years from receipt 0 1 2 3 4 5 6 7 or more
Contingent Deferred Sales Charge
(as a percentage of purchase payments) 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
Under certain circumstances, after the first year, Allianz Life will permit
you to access your money in the Contract without deducting a contingent
deferred sales charge: 1) if you become confined to a nursing home; 2) if you
become terminally ill; or 3) if you become disabled. Also, if you are
unemployed for at least 90 days, you can take up to 50% of your money out
without incurring a contingent deferred sales charge. These options may not be
available in all states.
Allianz Life will assess a state premium tax charge which ranges from 0-3.5%
(depending upon the state) when you die, start receiving annuity payments or
make a complete withdrawal.
We have provided the following chart to help you understand the charges in
your Contract. The column "Total Annual Charges" shows the total of the $30
contract maintenance charge (which is represented as .10% below), the 1.49%
insurance charges and the total annual fund charges for each fund. The next
two columns show you two examples of the charges, in dollars, you would pay
under a Contract. The examples assume that you invested $1,000 in a Contract
which earns 5% annually and that you withdraw your money: (1) at the end of
year 1, and (2) at the end of year 10. For year 1, the Total Annual Charges
are assessed as well as the contingent deferred sales charge. For year 10, the
Total Annual Charges are assessed but no contingent deferred sales charge is
deducted. The premium tax is assumed to be 0% in both examples. These are just
examples. Future expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
EXAMPLES:
<S> <C> <C> <C> <C> <C>
Total Total Total Expenses Expenses
Insurance Annual Fund Annual at end of at end of
Fund Charges Charges Charges 1 Year 10 Years
- ----------------------------------- ---------- ------------ -------- ---------- ----------
Money Market 1.59% .53% 2.12% $ 82 $ 245
High Income 1.59% .56% 2.15% $ 82 $ 248
Templeton Global Income Securities 1.59% .64% 2.23% $ 83 $ 256
The U.S. Government Securities 1.59% .52% 2.11% $ 81 $ 244
Zero Coupon 2000 1.59% .40% 1.99% $ 80 $ 231
Zero Coupon 2005 1.59% .40% 1.99% $ 80 $ 231
Zero Coupon 2010 1.59% .40% 1.99% $ 80 $ 231
Growth and Income 1.59% .52% 2.11% $ 81 $ 244
Income Securities 1.59% .51% 2.10% $ 81 $ 243
Mutual Shares Securities 1.59% .85% 2.44% $ 85 $ 278
Real Estate Securities 1.59% .59% 2.18% $ 82 $ 251
Rising Dividends 1.59% .78% 2.37 $ 84 $ 271
Templeton Global Asset Allocation 1.59% .90% 2.49% $ 85 $ 283
Utility Equity 1.59% .50% 2.09% $ 81 $ 242
Capital Growth 1.59% .79% 2.38% $ 84 $ 272
Mutual Discovery Securities 1.59% 1.05% 2.64% $ 87 $ 298
Precious Metals 1.59% .66% 2.25% $ 83 $ 258
Small Cap 1.59% .90% 2.49% $ 85 $ 283
Templeton Developing Markets Equity 1.59% 1.41% 3.00% $ 90 $ 332
Templeton Global Growth 1.59% .97% 2.56% $ 86 $ 290
Templeton International Equity 1.59% .92% 2.51% $ 85 $ 285
Templeton International Smaller
Companies 1.59% 1.10% 2.69% $ 87 $ 302
Templeton Pacific Growth 1.59% 1.01% 2.60% $ 86 $ 294
</TABLE>
The charges for the newly formed funds have been estimated. The charges for
some of the funds reflect expense reimbursement and/or fee waiver
arrangements. For more detailed information, see the Fee Table in the
prospectus for the Contract.
6. TAXES. Your earnings are not taxed until you take them out. In most cases,
if you take money out, earnings come out first and are taxed as income. If you
are younger than 59 when you take money out, you may be charged a 10%
federal tax penalty on the taxable amounts withdrawn. Payments during the
income phase are considered partly a return of your original investment. That
part of each payment is not taxable as income. If the Contract is
tax-qualified, the entire payment may be taxable.
7. ACCESS TO YOUR MONEY. You may make a withdrawal at any time during the
accumulation phase. Any partial withdrawal must be for at least $500. You may
request a withdrawal or elect the Systematic Withdrawal Program or Minimum
Distribution Program which are briefly described in Section 10 of this
Profile. After the first year, you can make multiple withdrawals up to a total
of 15% of the value of your Contract each year without charge from Allianz
Life. Withdrawals in excess of that amount will be subject to a contingent
deferred sales charge. After Allianz Life has had a payment for 7 years,
there is no charge for withdrawals. Each purchase payment you add to your
Contract has its own 7 year charge period. Of course, you may also have to pay
income tax and a tax penalty on any money you take out.
8. PERFORMANCE OF THE FUNDS. The value of the Contract will vary up or down
depending upon the performance of the fund(s) you choose. From time to time,
Allianz Life may advertise total return figures for each fund. As of the date
of this prospectus, the sale of the Contracts has not begun. Therefore, no
performance is presented here.
9. DEATH BENEFIT. If you die during the accumulation phase, the person you
have selected as your beneficiary will receive a death benefit. This death
benefit will be the greater of: 1) the current value of your Contract, less
any taxes, on the day all claims proofs and payment election forms are
received by Allianz Life at the Valuemark Service Center; or 2) (if
applicable) the guaranteed minimum death benefit, less any taxes, as of the
day you die. During the first year, the guaranteed minimum death benefit is
equal to the payments you have made, less any money you have taken out and any
charges paid on the money you have taken out. After the first year and before
your 76th birthday, the guaranteed minimum death benefit as of the date of
death is the greater of: A) payments you have made, less any money you have
taken out and charges paid on the money you have taken out, increased by 5%
per year on each Contract anniversary; or B) the highest of the Contract
values for each six year Contract anniversary determined by the Contract value
on such six year anniversary plus any payments made, less any money taken out
since that Contract anniversary, and charges paid on the money you have taken
out. Different rules will apply after your 76th birthday.
10. OTHER INFORMATION.
Free Look. If you cancel the Contract within 10 days after receiving it
(or whatever period is required in your state), we will send your money back
without assessing a contingent deferred sales charge. You will receive
whatever your Contract is worth on the day we receive your request. This may
be more or less than your original payment. (Some states require that we
return your payment.)
No Probate. In most cases, when you die, your beneficiary will receive
the death benefit without going through probate.
Who should purchase the Contract? The Valuemark IV Variable Annuity
Contract is designed for people seeking long-term tax-deferred accumulation of
assets, generally for retirement or other long-term purposes. The
tax-deferred feature is most attractive to people in high federal and state
tax brackets. You should not buy this Contract if you are looking for a
short-term investment or if you cannot accept the risk of getting back less
money than you put in.
Additional Features. The Contract offers additional features which you
might be interested in. These include:
Automatic Investment Plan - You can automatically add to your Contract on
a monthly or quarterly basis for as little as $100 by electronic transfer of
funds from your savings or checking account.
Dollar Cost Averaging Program - You can arrange to have a regular amount
of money automatically transferred to selected funds each month, theoretically
giving you a lower average cost per unit over time than a single one time
purchase. However, there are no guarantees that this will take place.
Flexible Rebalancing - Allianz Life will automatically readjust your
money among the funds to maintain your specified allocation mix. This can be
done quarterly, semi-annually or annually.
Systematic Withdrawal Program - You can elect to receive monthly or
quarterly payments from Allianz Life while your Contract is in the
accumulation phase. Of course, you may have to pay taxes on the money you
receive.
Minimum Distribution Program - You can arrange to have money sent to you
each month or quarter to meet certain required distribution requirements
imposed by the Internal Revenue Code.
These features are not available in all states and may not be suitable for
your particular situation.
11. INQUIRIES. If you have any questions about your Contract or need more
information, please contact us at:
Valuemark Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
ISSUED BY
ALLIANZ LIFE VARIABLE ACCOUNT B
AND
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
This prospectus describes the Valuemark IV Variable Annuity Contract with a
fixed account option offered by Allianz Life Insurance Company of North
America (Allianz Life).
The annuity has 24 investment options - the 23 funds of Franklin Valuemark
Funds which are listed below and a fixed account option of Allianz Life. You
can put your money in 10 investment options (which includes any of the funds
listed below and the fixed account). The fixed account may not be available in
your state.
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME
Money Market
FUNDS SEEKING CURRENT INCOME
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
Please read this prospectus before investing and keep it for future reference.
It contains important information about the Valuemark IV Variable Annuity
Contract with a fixed account option.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated _______, 1996.
The SAI has been filed with the Securities and Exchange Commission (SEC) and
is incorporated by reference into this prospectus. The Table of Contents of
the SAI is on Page __ of this prospectus. For a free copy of the SAI, call us
at (800) 342-3863 or write us at: 1750 Hennepin Avenue, Minneapolis, Minnesota
55403-2195.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. 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.
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.
________________, 1996
TABLE OF CONTENTS
PAGE
INDEX OF TERMS
FEE TABLE
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
Contract Owner
Joint Owner
Annuitant
Assignment
2. ANNUITY PAYMENTS (THE INCOME PHASE)
ANNUITY OPTIONS
3. PURCHASE
Purchase Payments
Automatic Investment Plan
Allocation of Purchase Payments
Free Look
Accumulation Units
4. INVESTMENT OPTIONS
Transfers
Dollar Cost Averaging Program
Flexible Rebalancing
Voting Rights
Substitution
5. EXPENSES
Insurance Charges
Mortality and Expense Risk Charge
Administrative Charge
Contract Maintenance Charge
Contingent Deferred Sales Charge
Waiver of Contingent Deferred Sales Charge Benefits
Reduction or Elimination of the Contingent Deferred Sales Charge
Transfer Fee
Premium Taxes
Income Taxes
Fund Expenses
6. TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
7. ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Minimum Distribution Program
Suspension of Payments or Transfers
8. PERFORMANCE
9. DEATH BENEFIT
Upon Your Death
Death of Annuitant
10. OTHER INFORMATION
Allianz Life
The Separate Account
Distribution
Administration
Financial Statements
APPENDIX
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
INDEX OF TERMS
We have tried to make this prospectus as understandable for you as possible.
Below is a list of some of the technical terms used in this prospectus. They
are identified in the prospectus in italics. The page that is indicated below
is where you will find the definition for the word or term.
Page
Accumulation Phase.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Contract Owner...........................................................
Fixed Account............................................................
Funds....................................................................
Income Date..............................................................
Income Phase.............................................................
Joint Owner..............................................................
Non-Qualified............................................................
Purchase Payment.........................................................
Qualified................................................................
Tax Deferral.............................................................
FEE TABLE
Contract Owner Transaction Fees
Contingent Deferred Sales Charge*
(as a percentage of purchase payments)
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Complete Years From Receipt Charge
---------------------------------------- -------
0 6%
1 6%
2 6%
3 5%
4 4%
5 3%
6 2%
7 years or more 0%
Transfer Fee First 12 transfers in a Contract year
are free. Thereafter, the fee is $25
(or 2% of the amount transferred, if
less). Dollar Cost Averaging transfers
and Flexible Rebalancing transfers are
not counted.
Contract Maintenance Charge ** 30 per Contract per year
Separate Account Annual Expenses
(as a percentage of average
account value)
Mortality and Expense Risk Charge*** 1.34%
Administrative Charge .15%
----------------------------------------
Total Separate Account Annual Expenses 1.49%
<FN>
* Each year after the first contract year, you may make multiple partial withdrawals of
up to a total of 15% of the value of your contract and no contingent deferred sales charge
will be assessed. See Section 7 - Access to Your Money for additional options.
** During the accumulation phase, the charge is waived if the value of your contract is at
least $50,000. If you own more than one Valuemark IV Contract (registered with the same
social security number), we will determine the total value of all your Contracts. If the
total value of all your contracts is at least $50,000, the charge is waived.
*** The Mortality and Expense Risk Charge is 1.25% during the income phase.
</TABLE>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES
(as a percentage of Franklin Valuemark Funds' average net assets)
The Management Fees for each fund are based on a percentage of that fund's
assets under management. See the prospectus for Franklin Valuemark Funds for
more information.
The "Management and Fund Administration Fees" below are the amounts that were
paid to the Managers and Fund Administrators 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Other
and Fund Expenses (after Total
Administration expense Annual
Fees(1/) reductions) Expenses
Money Market Fund (2/) .51% .02% .53%
High Income Fund .53% .03% .56%
Templeton Global Income
Securities Fund (3/) .55% .09% .64%
The U.S. Government Securities Fund .49% .03% .52%
Zero Coupon Fund-2000 (4/) .37% .03% .40%
Zero Coupon Fund-2005 (4/) .37% .03% .40%
Zero Coupon Fund-2010 (4/) .37% .03% .40%
Growth and Income Fund .49% .03% .52%
Income Securities Fund .47% .04% .51%
Mutual Shares Securities Fund (5/) .75% .10% .85%
Real Estate Securities Fund .56% .03% .59%
Rising Dividends Fund .75% .03% .78%
Templeton Global Asset Allocation Fund (5/) .80% .10% .90%
Utility Equity Fund .47% .03% .50%
Capital Growth Fund (5/) .75% .04% .79%
Mutual Discovery Securities Fund (5/) .95% .10% 1.05%
Precious Metals Fund .61% .05% .66%
Small Cap Fund (5/) .75% .15% .90%
Templeton Developing Markets Equity Fund 1.25% .16% 1.41%
Templeton Global Growth Fund .93% .04% .97%
Templeton International Equity Fund .83% .09% .92%
Templeton International Smaller Companies
Fund (5/) 1.00% .10% 1.10%
Templeton Pacific Growth Fund .90% .11% 1.01%
<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 Shares
Securities Fund and the Mutual Discovery Securities Fund; other funds pay for similar
services indirectly through the Management Fee. See the Franklin Valuemark Funds
prospectus for further information regarding these fees.
2/ Franklin Advisers, Inc. agreed to waive a portion of its Management Fee and to
pay certain expenses of the Money Market Fund during 1995. It is currently continuing
this arrangement in 1996. This arrangement may be terminated at any time. With this
reduction, the fund's total annual expenses for 1995 were 0.40% of the average daily net
assets of the fund.
3/ Prior to May 1, 1996, the Templeton Global Income Securities Fund was known as
the Global Income Fund.
4/ Although not obligated to, Franklin Advisers, Inc. has agreed to waive a portion
of its Management Fees and to pay certain expenses of the three Zero Coupon Funds through
at least December 31, 1996 so that the total expenses of the Zero Coupon Funds will not
exceed 0.40% of each fund's net assets. Absent the management fee waivers and expense
payments, for the year ended December 31, 1995, the Total Annual Expenses and Management
and Fund Administration Fees would have been as follows: Zero Coupon Fund-2000, .63% and
.60%; Zero Coupon Fund-2005, .66% and .63%; and Zero Coupon Fund- 2010, .66% and .63%.
5/ The Templeton Global Asset Allocation Fund began operations on May 1, 1995; the
Small Cap Fund began operations on November 1, 1995; the Capital Growth and Templeton
International Smaller Companies Funds began operations on May 1, 1996; and the Mutual
Shares Securities and Mutual Discovery Securities Funds began operations on November 8,
1996. The expenses shown above for these funds are therefore estimated for 1996.
</TABLE>
The purpose of this Fee Table is to show you the expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of
the Separate Account as well as the funds. The examples below should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown. The $30 contract maintenance charge is
included in the Examples as a prorated charge of $1. Since the average
contract account size is greater than $1,000, the contract maintenance charge
is reduced accordingly. Premium taxes are not reflected in the tables.
Premium taxes may apply. For additional information, see Section 5 - Expenses
and the Franklin Valuemark Funds prospectus.
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if you surrender your Contract at the end of each
time period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 3 5 10
Year Years Years Years
Money Market Fund $ 82 $ 117 $ 148 $ 245
High Income Fund $ 82 $ 118 $ 149 $ 248
Templeton Global Income Securities Fund $ 83 $ 121 $ 153 $ 256
The U.S. Government Securities Fund $ 81 $ 117 $ 147 $ 244
Zero Coupon Fund-2000# $ 80 $ 113 $ 141 $ 231
Zero Coupon Fund-2005# $ 80 $ 113 $ 141 $ 231
Zero Coupon Fund-2010# $ 80 $ 113 $ 141 $ 231
Growth and Income Fund $ 81 $ 117 $ 147 $ 244
Income Securities Fund $ 81 $ 117 $ 147 $ 243
Mutual Shares Securities Fund ** $ 85 $ 127
Real Estate Securities Fund $ 82 $ 119 $ 151 $ 251
Rising Dividends Fund $ 84 $ 125 $ 161 $ 271
Templeton Global Asset Allocation Fund** $ 85 $ 129 $ 167 $ 283
Utility Equity Fund $ 81 $ 116 $ 146 $ 242
Capital Growth Fund** $ 84 $ 125 $ 161 $ 272
Mutual Discovery Securities ** $ 87 $ 133
Precious Metals Fund $ 83 $ 121 $ 154 $ 258
Small Cap Fund** $ 85 $ 129 $ 167 $ 283
Templeton Developing Markets Equity Fund $ 90 $ 144 $ 192 $ 332
Templeton Global Growth Fund $ 86 $ 131 $ 170 $ 290
Templeton International Equity Fund $ 85 $ 129 $ 168 $ 285
Templeton International Smaller Companies
Fund** $ 87 $ 135 $ 177 $ 302
Templeton Pacific Growth Fund $ 86 $ 132 $ 172 $ 294
</TABLE>
** Estimated
# Calculated with waiver of fees and reimbursement of expenses
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if your contract is not surrendered or is
annuitized:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 3 5 10
Year Years Years Years
Money Market Fund $ 22 $ 66 $ 114 $ 245
High Income Fund $ 22 $ 67 $ 115 $ 248
Templeton Global Income Securities Fund $ 23 $ 70 $ 119 $ 256
The U.S. Government Securities Fund $ 22 $ 66 $ 113 $ 244
Zero Coupon Fund-2000# $ 20 $ 62 $ 107 $ 231
Zero Coupon Fund-2005# $ 20 $ 62 $ 107 $ 231
Zero Coupon Fund-2010# $ 20 $ 62 $ 107 $ 231
Growth and Income Fund $ 21 $ 66 $ 113 $ 244
Income Securities Fund $ 21 $ 66 $ 113 $ 243
Mutual Shares Securities Fund** $ 25 $ 76
Real Estate Securities Fund $ 22 $ 68 $ 117 $ 251
Rising Dividends Fund $ 24 $ 74 $ 127 $ 271
Templeton Global Asset Allocation Fund** $ 25 $ 78 $ 133 $ 283
Utility Equity Fund $ 21 $ 65 $ 112 $ 242
Capital Growth Fund** $ 24 $ 74 $ 127 $ 272
Mutual Discovery Securities Fund** $ 27 $ 82
Precious Metals Fund $ 23 $ 70 $ 120 $ 258
Small Cap Fund** $ 25 $ 78 $ 133 $ 283
Templeton Developing Markets Equity Fund $ 30 $ 93 $ 158 $ 332
Templeton Global Growth Fund $ 26 $ 80 $ 136 $ 290
Templeton International Equity Fund $ 25 $ 78 $ 134 $ 285
Templeton International Smaller Companies
Fund** $ 27 $ 84 $ 143 $ 302
Templeton Pacific Growth Fund $ 26 $ 81 $ 138 $ 294
</TABLE>
** Estimated
# Calculated with waiver of fees and reimbursement of other expenses
As of the date of this prospectus, no contracts have been sold. Therefore,
Allianz Life has not provided Condensed Financial Information.
1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT
This prospectus describes a variable annuity contract with a fixed account
option offered by Allianz Life.
An annuity is a contract between you, the owner, and an insurance company (in
this case Allianz Life), where the insurance company promises to pay you (or
someone else you choose) an income, in the form of annuity payments, beginning
on a designated date that is at least two years in the future. Until you
decide to begin receiving annuity payments, your annuity is in the
accumulation phase. Once you begin receiving annuity payments, your contract
switches to the income phase. The contract benefits from tax deferral.
Tax deferral means that you are not taxed on earnings or appreciation on the
assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 23
funds. Depending upon market conditions, you can make or lose money in any of
these funds. If you select the variable annuity portion of the contract, the
amount of money you are able to accumulate in your contract during the
accumulation phase depends in part upon the investment performance of the
fund(s) you select. The amount of the annuity payments you receive during the
income phase from the variable annuity portion of the contract also depends
upon the investment performance of the funds you select for the income phase.
The contract also contains a fixed account. The fixed account offers an
interest rate that is guaranteed for all deposits made within the twelve month
period by Allianz Life. This interest rate is set monthly and is guaranteed
for 12 months. Allianz Life guarantees that the interest credited to the fixed
account will not be less than 3% per year. If you select the fixed account,
your money will be placed with the other general assets of Allianz Life. If
you select the fixed account, the amount of money you are able to accumulate
in your contract during the accumulation phase depends upon the total interest
credited to your contract.
We will not make any changes to your contract without your permission except
as may be required by law.
CONTRACT OWNER . You, as the contract owner, have all the rights under the
contract. The contract owner is as designated at the time the contract is
issued, unless changed. You may change contract owners at any time. This may
be a taxable event. You should consult with your tax adviser before doing
this.
JOINT OWNER . The contract can be owned by joint owners. Any joint owner must
be the spouse of the other contract owner (except in Pennsylvania and Oregon).
Upon the death of either joint owner, the surviving spouse will be the
designated beneficiary. Any other beneficiary designation at the time the
contract was issued or as may have been later changed will be treated as a
contingent beneficiary unless otherwise indicated.
ANNUITANT . You name an annuitant. You may change the annuitant at any time
before the income date unless the contract is owned by a non-individual (for
example, a corporation).
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary or contingent beneficiary.
ASSIGNMENT
You can assign the contract at any time during your lifetime. Allianz Life
will not be bound by the assignment until it receives the written notice of
the assignment. Allianz Life will not be liable for any payment or other
action we take in accordance with the contract before we receive notice of the
assignment. Any assignment made after the death benefit has become payable can
only be done with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the contract.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
You can receive regular monthly income payments under your contract. You can
choose the month and year in which those payments begin. We call that date the
income date. Your income date must be the first day of a calendar month and
must be at least 2 years after you buy the contract. You can also choose among
income plans. We call those annuity options.
We ask you to choose your income date when you purchase the contract. You can
change it at any time before the income date with 30 days notice to us.
Annuity payments must begin by the annuitant's 85th birthday or 10 years from
the date the contract was issued, whichever is later. The annuitant is the
person whose life we look to when we make annuity payments. You (or someone
you designate) will receive the annuity payments. You will receive tax
reporting on those payments.
If you do not choose an annuity option prior to the income date, we will
assume that you selected Option 2 which provides a life annuity with 10 years
of guaranteed payments.
You may elect to receive your annuity payments as a variable payout, a fixed
payout, or a combination of both. Under a fixed payout, all of the annuity
payments will be the same dollar amount (equal installments). Under a variable
payout, you have the same investment choices from the funds that were
available during the accumulation phase. If you do not tell us otherwise, your
annuity payments will be based on the investment allocations that were in
place on the income date.
If you choose to have any portion of your annuity payments come from the
fund(s), the dollar amount of your payment will depend upon three things: 1)
the value of your contract in the fund(s) on the income date, 2) the 5%
assumed investment rate used in the annuity table for the contract, and 3) the
performance of the fund(s) you selected. If the actual performance exceeds the
5% assumed rate, your annuity payments will increase. Similarly, if the actual
rate is less than 5%, your annuity payments will decrease.
ANNUITY OPTIONS
You can choose one of the following annuity options or any other annuity
option you want and that Allianz Life agrees to provide. After annuity
payments begin, you cannot change the annuity option.
OPTION 1. LIFE ANNUITY. Under this option, we will make monthly annuity
payments so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under
this option, we will make monthly annuity payments so long as the annuitant is
alive. However, if, when the annuitant dies, we have made annuity payments for
less than the selected guaranteed period, we will continue to make annuity
payments to you for the rest of the guaranteed period. If you do not want to
receive annuity payments, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
monthly annuity payments during the joint lifetime of the annuitant and the
joint annuitant. When the annuitant dies, if the joint annuitant is still
alive, we will continue to make annuity payments, so long as the joint
annuitant continues to live. The amount of the annuity payments we will make
to the survivor can be equal to 100%, 75% or 50% of the amount that we would
have paid if they both were alive. The monthly annuity payments will end when
the last surviving annuitant dies.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS
GUARANTEED. Under this option, we will make monthly annuity payments during
the joint lifetime of the annuitant and the joint annuitant. When the
annuitant dies, if the joint annuitant is still alive, we will continue to
make annuity payments, so long as the surviving annuitant continues to live,
at 100% of the amount that would have been paid if they were both alive. If,
when the last death occurs, we have made annuity payments for less than the
selected guaranteed period, we will continue to make annuity payments to you
or any person you designate for rest of the guaranteed period. If you do not
want to receive annuity payments, you can ask us for a single lump sum.
OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly annuity
payments during the annuitant's lifetime. The last annuity payment will be
made before the annuitant dies with a guarantee that Allianz Life will pay you
a refund.
3. PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you invest in the contract. The minimum
payment Allianz Life will accept is $5,000 when the contract is bought as a
non-qualified contract. If you enroll in the Automatic Investment Plan (which
is described below), your purchase payment can be $2,000. If you are buying
the contract as part of an IRA (Individual Retirement Annuity), 401(k) or
other qualified plan, the minimum amount we will accept is $2,000. The maximum
we will accept without our prior approval is $1 million. You can make
additional purchase payments of $250 (or as low as $100 if you have selected
the Automatic Investment Plan) or more to either type of contract. At the time
you buy the contract, you and the annuitant cannot be older than 85 years old.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan (AIP) is a program which allows you to make
additional purchase payments to your contract on a monthly or quarterly basis
by electronic transfer of funds from your savings or checking account. You may
participate in this program by completing the appropriate form. We must
receive your form by the first of the month in order for AIP to begin that
same month. Investments will take place on the 20th of the month, or the next
business day. The minimum investment that can be made by AIP is $100. You may
stop AIP at any time you want. We need to be notified by the first of the
month in order to stop or change AIP that month. If AIP is used for a
qualified contract, you should consult your tax adviser for advice regarding
maximum contributions.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the funds you have selected. We ask that
you allocate your money in either whole percentages or round dollars. The
fixed account may not be available in your state (check with your registered
representative). You can instruct us how to allocate additional purchase
payments you make. If you do not instruct us, we will allocate them in the
same way as your previous instructions to us. Allianz Life reserves the right
to limit the number of funds that you may invest in at one time. Currently,
you may invest in 10 investment options at one time (which includes any of the
23 funds of Franklin Valuemark Funds listed in Section 4 and the Allianz Life
fixed account). We may change this in the future. However, we will always
allow you to invest in at least five funds.
Once we receive your purchase payment, the necessary information and federal
funds (federal funds means monies credited to a bank's account with its
regional federal reserve bank), we will issue your contract and allocate your
first purchase payment within 2 business days. If you do not give us all of
the information we need, we will contact you to get it. If for some reason we
are unable to complete this process within 5 business days, we will either
send back your money or get your permission to keep it until we get all of the
necessary information. If you make additional purchase payments, we will
credit these amounts to your contract within one business day. Our business
day closes when the New York Stock Exchange closes, which is usually at 4:00
p.m. Eastern time.
FREE LOOK
If you change your mind about owning the contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you
cancel the contract within this time period, Allianz Life will not assess a
contingent deferred sales charge. You will receive back whatever your contract
is worth on the day we receive your request. In certain states or if you have
purchased the contract as an IRA, we may be required to give you back your
purchase payment if you decide to cancel your contract within 10 days after
receiving it (or whatever period is required in your state). If that is the
case, we reserve the right to put your purchase payment in the Money Market
Fund for 15 days after we issue your contract. (In some states, the period may
be longer.) At the end of that period, we will re-allocate those funds as you
selected. Currently, however, we will directly allocate your money to the
funds and/or the fixed account as you have selected.
ACCUMULATION UNITS
The value of the portion of your contract allocated to the funds will go up or
down depending upon the investment performance of the fund(s) you choose. The
value of your contract will also depend on the expenses of the contract. In
order to keep track of the value of your contract, we use a measurement called
an accumulation unit (which is like a share of a mutual fund). During the
income phase of the contract we call it an annuity unit.
Every business day we determine the value of an accumulation unit for a fund
by multiplying the accumulation unit value for the previous period by a factor
for each fund for the current period. The factor for each fund is determined
by:
1. dividing the value of a fund share at the end of the current period
by the value of a fund share for the previous period; and
2. multiplying it by one minus the daily amount of the insurance charges
and any charges for taxes.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to a fund by the value of the
accumulation unit for that fund.
We calculate the value of an accumulation unit for each fund after the New
York Stock Exchange closes each day and then credit your contract.
EXAMPLE:
On Wednesday we receive an additional purchase payment of $3,000 from you. You
have told us you want this to go to the Growth and Income Fund. When the New
York Stock Exchange closes on that Wednesday, we determine that the value of
an accumulation unit for the Growth and Income Fund is $12.50. We then divide
$3,000 by $12.50 and credit your contract on Wednesday night with 240
accumulation units for the Growth and Income Fund.
4. INVESTMENT OPTIONS
The Contract offers 23 funds of Franklin Valuemark Funds and a fixed account
option of Allianz Life. Additional funds may be available in the future.
YOU SHOULD READ THE FRANKLIN VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO
THIS PROSPECTUS) CAREFULLY BEFORE INVESTING.
Franklin Valuemark Funds is the mutual fund underlying your contract. Each
fund has its own investment objective. Franklin Advisers, Inc. serves as each
fund's investment manager (except the Templeton Global Growth Fund, the
Templeton Developing Markets Equity Fund, the Templeton Global Asset
Allocation Fund, the Templeton International Smaller Companies Fund, the
Rising Dividends Fund, the Mutual Shares Securities Fund and the Mutual
Discovery Securities Fund). The investment manager for the Templeton Global
Growth and the Templeton Global Asset Allocation Funds 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 Rising Dividends Fund is Franklin
Advisory Services, Inc.. The investment manager for the Mutual Shares
Securities and the Mutual Discovery Securities Funds is Franklin Mutual
Advisers, Inc. Certain managers have retained one or more sub-advisers to help
them manage the funds.
Franklin Valuemark Funds serves as the underlying mutual fund for variable
life insurance policies offered by Allianz Life and other variable annuity
contracts offered by Allianz Life and its affiliates. Franklin Valuemark Funds
does not believe that offering its shares in this manner will be
disadvantageous to you.
The following is a list of the funds which are available under the contract:
FUND SEEKING STABILITY OF PRINCIPAL AND INCOME:
Money Market
FUNDS SEEKING CURRENT INCOME:
High Income
Templeton Global Income Securities
The U.S. Government Securities
Zero Coupon - 2000, 2005 and 2010
FUNDS SEEKING GROWTH AND INCOME:
Growth and Income
Income Securities
Mutual Shares Securities
Real Estate Securities
Rising Dividends
Templeton Global Asset Allocation
Utility Equity
FUNDS SEEKING CAPITAL GROWTH:
Capital Growth
Mutual Discovery Securities
Precious Metals
Small Cap
Templeton Developing Markets Equity
Templeton Global Growth
Templeton International Equity
Templeton International Smaller Companies
Templeton Pacific Growth
TRANSFERS
You can transfer money among the 23 funds and/or the fixed account. Allianz
Life currently allows you to make as many transfers as you want to each year.
Allianz Life may change this practice in the future. However, this product is
not designed for professional market timing organizations or other individuals
using programmed and frequent transfers. Such activity may be disruptive to a
fund. We reserve the right to stop or prohibit these types of transfers if we
determine that they could harm a fund.
Your contract provides that you can make 3 transfers every year without
charge. However, currently Allianz Life permits you to make 12 transfers every
year without charge. We measure a year from the anniversary of the day we
issued your contract. You can make a transfer to or from the fixed account and
to or from any fund. If you make more than 12 transfers in a year, there is a
transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the
amount transferred. The following applies to any transfer:
1. The minimum amount which you can transfer is $1,000 ($500 in New
Jersey) or your entire value in the fund or fixed account. This requirement is
waived if the transfer is in connection with the Dollar Cost Averaging or
Flexible Rebalancing Programs (which are described below).
2. We may not allow you to make transfers during the free look period.
3. Your request for a transfer must clearly state which fund(s) or the
fixed account is involved in the transfer.
4. Your request for a transfer must clearly state how much the transfer
is for.
5. You cannot make any transfers within 7 calendar days prior to the date
your first annuity payment is due.
6. During the income phase, you may not make a transfer from a fixed
annuity option to a variable annuity option.
7. During the income phase, you can make at least one transfer from a
variable annuity option to a fixed annuity option.
Allianz Life has reserved the right to modify the transfer provisions subject
to the guarantees described above.
You can make transfers by telephone. We may allow you to authorize someone
else to make transfers by telephone on your behalf. If you own the contract
with a joint owner, unless Allianz Life is instructed otherwise, Allianz Life
will accept instructions from either one of you. Allianz Life will use
reasonable procedures to confirm that instructions given us by telephone are
genuine. If we do not use such procedures, we may be liable for any losses due
to unauthorized or fraudulent instructions. Allianz Life tape records all
telephone instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one fund or the fixed account
to up to eight of the other funds. By allocating amounts on a regularly
scheduled basis, as opposed to allocating the total amount at one particular
time, you may be less susceptible to the impact of market fluctuations. You
may only participate in this program during the accumulation phase.
You must participate in the program for at least six months (or two quarters)
and must transfer at least $500 each time (or $1,500 each quarter). Your
allocations can be in whole percentages or dollar amounts. The fund(s) you
transfer from may not be the fund(s) you transfer to in this program. You may
elect this program by properly completing the Dollar Cost Averaging forms
provided by Allianz Life.
All Dollar Cost Averaging transfers will be made on the 10th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day.
Your participation in the program will end when any of the following occurs:
(1) the number of desired transfers have been made; (2) you do not have enough
money in the fund(s) or fixed account to make the transfer (if less money is
available, that amount will be dollar cost averaged and the program will end);
(3) you request to terminate the program (your request must be received by us
by the first of the month to terminate that month); (4) the contract is
terminated; or (5) we receive proof of the owner's death.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
You may not participate in the Dollar Cost Averaging Program and Flexible
Rebalancing at the same time.
FLEXIBLE REBALANCING
Once your money has been invested, the performance of the funds and the
earnings from the fixed account may cause your allocation to shift. Flexible
Rebalancing is designed to help you maintain your specified allocation mix
between the different funds. You can direct us to readjust your money on a
quarterly, semi-annual or annual basis to return to your original allocations.
Flexible Rebalancing transfers will be made on the 20th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made on the previous day. If you participate in the Flexible Rebalancing
Program, the transfers made under the program are not taken into account in
determining any transfer fee. The fixed account is not permitted to be part of
Flexible Rebalancing.
VOTING RIGHTS
Allianz Life is the legal owner of the fund shares. However, Allianz Life
believes that when a fund solicits proxies in conjunction with a shareholder
vote, it is required to obtain from you and other contract owners instructions
as to how to vote those shares. When we receive those instructions, we will
vote all of the shares we own in proportion to those instructions. This will
also include any shares that Allianz Life owns on its own behalf. Should
Allianz Life determine that it is no longer required to comply with the above,
we will vote the shares in our own right.
SUBSTITUTION
Allianz Life may be required to substitute one of the funds you have selected
with another fund. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention
to do this.
5. EXPENSES
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and expenses are:
INSURANCE CHARGES
Each day, Allianz Life makes a deduction for its insurance charges. Allianz
Life does this as part of its calculation of the value of the accumulation
units and the annuity units. The insurance charge has two parts: 1) the
mortality and expense risk charge and 2) the administrative charge.
MORTALITY AND EXPENSE RISK CHARGE . During the accumulation phase, this charge
is equal, on an annual basis, to 1.34% of the average daily value of the
contract invested in a fund, after the deduction of expenses. During the
income phase, the charge is equal, on an annual basis, to 1.25% of the average
daily value of the contract invested in a fund, after the deduction of
expenses. This charge compensates us for all the insurance benefits provided
by your contract (for example, the guarantee of annuity rates, the death
benefits, certain expenses related to the contract, and for assuming the risk
(expense risk) that the current charges will be insufficient in the future to
cover the cost of administering the contract). The amount of the mortality and
expense risk charge is less during the income phase because Allianz Life does
not pay a death benefit if you die during the income phase. If this charge is
not sufficient, then Allianz Life will bear the loss. Allianz Life does,
however, expect to profit from this charge. The mortality and expense risk
charge cannot be increased. Allianz Life may use any profits it makes from
this charge to pay for the costs of distributing the contract.
ADMINISTRATIVE CHARGE . This charge is equal, on an annual basis, to .15% of
the average daily value of the contract invested in a fund, after the
deduction of expenses. This charge, together with the contract maintenance
charge (which is explained below), is for all the expenses associated with the
administration of the contract. Some of these expenses include: preparation of
the contract, confirmations, annual reports and statements, maintenance of
contract records, personnel costs, legal and accounting fees, filing fees, and
computer and systems costs. Because this charge is taken out of every unit
value, you may pay more in administrative costs than those that are associated
solely with your contract. Allianz Life does not intend to profit from this
charge. However, if this charge and the contract maintenance charge are not
enough to cover the costs of the contracts in the future, Allianz Life will
bear the loss.
CONTRACT MAINTENANCE CHARGE
Every year on the anniversary of the date when your contract was issued,
Allianz Life deducts $30 from your contract as a contract maintenance charge.
This charge is for administrative expenses (see above). This charge can not be
increased.
However, during the accumulation phase, if the value of your contract is at
least $50,000 when the deduction for the charge is to be made, Allianz Life
will not deduct this charge. If you own more than one Valuemark IV contract,
Allianz Life will determine the total value of all your contracts. If the
total value of all contracts registered under the same social security number
is at least $50,000, Allianz Life will not assess the contract maintenance
charge. If the contract is owned by a non-natural person (e.g., a
corporation), Allianz Life will look to the annuitant to determine if it will
assess the charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. During the income phase, the charge will be
collected monthly out of each annuity payment.
CONTINGENT DEFERRED SALES CHARGE
Withdrawals may be subject to a contingent deferred sales charge. During the
accumulation phase, you can make withdrawals from your contract. Allianz Life
keeps track of each purchase payment you make. The amount of the contingent
deferred sales charge depends upon how long Allianz Life has had your payment.
The charge is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of complete years from
receipt of payment: 0 1 2 3 4 5 6 7 or more
Contingent Deferred Sales Charge: 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
However, after Allianz Life has had a purchase payment for 7 years, there is
no charge when you withdraw that purchase payment. For purposes of the
contingent deferred sales charge, Allianz Life treats withdrawals as coming
from the oldest purchase payments first. Allianz Life does not assess the
contingent deferred sales charge on any payments paid out as annuity payments
or as death benefits.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money you put into the contract. Thus, for tax purposes, earnings are
considered to come out first.
Free Withdrawal Amount - Each year after the first contract year, you can make
multiple withdrawals up to 15% of the value of your contract and no contingent
deferred sales charge will be deducted from the 15% you take out. Withdrawals
in excess of that free amount will be subject to the contingent deferred sales
charge.
You may also select to participate in the Systematic Withdrawal Program or the
Minimum Distribution Program which allow you to withdraw money without the
deduction of the contingent deferred sales charge under certain circumstances.
See Section 7 - Access to Your Money for a description of the Systematic
Withdrawal Plan and the Minimum Distribution Program.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE BENEFITS
Under certain circumstances, after the first year, Allianz Life will permit
you to take your money out of the contract without deducting a contingent
deferred sales charge: 1) if you become confined to a nursing home; 2) if you
become terminally ill, which is defined as life expectancy of 12 months or
less (a full surrender of the contract will be required); or 3) if you become
totally disabled for at least 90 days.
Also, after the first year, if you become unemployed for at least 90 days, you
can take up to 50% of your money out without incurring a contingent deferred
sales charge. This benefit is available only once during the life of the
contract and you may not use both this benefit and the 15% free withdrawal
amount in the same contract year.
These benefits may not be available in your state.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
Allianz Life will reduce or eliminate the amount of the contingent deferred
sales charge when the contract is sold under circumstances which reduce its
sales expenses. Some examples are: if there is a large group of individuals
that will be purchasing the contract or a prospective purchaser already had a
relationship with Allianz Life. Allianz Life will not deduct a contingent
deferred sales charge under a contract issued to an officer, director or
employee of Allianz Life or any of its affiliates. Also, Allianz Life will not
deduct a contingent deferred sales charge when a contract is sold by an agent
of Allianz Life to any members of his or her immediate family and the
commission is reduced. Any circumstances resulting in reduction or elimination
of the contingent deferred sales charge requires prior approval of Allianz
Life.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct
a transfer fee of $25 or 2% of the amount that is transferred, whichever is
less, for each additional transfer.
If the transfer is part of the Dollar Cost Averaging Program or Flexible
Rebalancing, it will not count in determining the transfer fee.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes and will make a deduction from the value of the contract for them.
Some of these taxes are due when the contract is issued, others are due when
annuity payments begin. It is Allianz Life's current practice to not charge
you for these taxes until you die, annuity payments begin or a complete
withdrawal is made. Allianz Life may some time in the future discontinue this
practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 3.5%, depending on the state.
INCOME TAXES
Allianz Life will deduct from the contract for any income taxes which it may
incur because of the contract. Currently, Allianz Life is not making any such
deductions.
FUND EXPENSES
There are deductions from and expenses paid out of the assets of the various
funds which are described in the attached prospectus for Franklin Valuemark
Funds.
6. TAXES
NOTE: Allianz Life has prepared the following information on taxes as a
general discussion of the subject. It is not intended as tax advice. You
should consult your own tax adviser about your own circumstances. Allianz Life
has included additional information regarding taxes in the Statement of
Additional Information.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs -
usually retirement. Congress recognized how important saving for retirement
was and provided special rules in the Internal Revenue Code (Code) for
annuities.
Basically, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules regarding how you will
be taxed depending upon how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your
contract until a distribution occurs - either as a withdrawal or as annuity
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For annuity payments, different rules apply. A
portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
of the annuity payment will be treated as ordinary income. How the annuity
payment is divided between taxable and non-taxable portions depends upon the
period over which the annuity payments are expected to be made. Annuity
payments received after you have received all of your purchase payments are
fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than tax-qualified trusts), the
contract will generally not be treated as an annuity for tax purposes. This
means that the contract may not receive the benefits of tax-deferral. Income
may be taxed as ordinary income every year.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract under a qualified plan, your contract is referred
to as a qualified contract. Examples of qualified plans are: Individual
Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as
403(b) contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and
pension and profit-sharing plans, which include 401(k) plans.
If you do not purchase the contract under a qualified plan, your contract is
referred to as a non-qualified contract.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. In most
cases, such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a tax penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts: (1)
paid on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3)
paid if the taxpayer becomes totally disabled (as that term is defined in the
Code); (4) paid in a series of substantially equal payments made annually (or
more frequently) for the life or life expectancy of the taxpayer; (5) paid
under an immediate annuity; or (6) which come from purchase payments made
prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern
qualified contracts. A more complete discussion of withdrawals from qualified
contracts is contained in the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of purchase payments made by owners from
certain Tax-Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59-1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled
(as that term is defined in the Code); or (5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Allianz Life believes that the funds are being managed so as
to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not
Allianz Life would be considered the owner of the shares of the funds. If this
occurs, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent under federal tax law contract owners
are permitted to select funds, to make transfers among the funds or the number
and type of funds owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new
position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the funds.
Due to the uncertainty in this area, Allianz Life reserves the right to modify
the contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a withdrawal
(either a partial or a total withdrawal); (2) by receiving annuity payments;
or (3) when a death benefit is paid to your beneficiary. Withdrawals can only
be made during the accumulation phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any applicable contingent deferred
sales charge, less any premium tax and less any contract maintenance charge.
(See Section 5 - Expenses for a discussion of the charges.)
Any partial withdrawal must be for at least $500 and, unless you instruct
Allianz Life otherwise, and will be made pro-rata from all the funds and the
fixed account you selected. Allianz Life requires that after you make a
partial withdrawal the value of your contract must be at least $2,000.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6 - Taxes
and the discussion in the SAI.
SYSTEMATIC WITHDRAWAL PROGRAM
If the value of your contract is at least $25,000, Allianz Life offers a plan
which provides automatic monthly or quarterly payments to you each year. The
total systematic withdrawals which you can make each year without Allianz Life
deducting a contingent deferred sales charge is limited to 15% of the value of
your contract on the day the request is received. You may withdraw any amount
you want under this program if your payments are no longer subject to the
contingent deferred sales charge. You may not participate in this plan if you
own a non-qualified contract and are under age 59 1/2. If you make withdrawals
under this plan, you may not also use the 15% free withdrawal amount that
year. For a discussion of the contingent deferred sales charge and the 15%
free withdrawal amount, see Section 5 - Expenses. All Systematic Withdrawals
will be made on the 9th day of the month unless that day is not a business
day. If it is not, then the withdrawal will be made the previous business day.
INCOME TAXES MAY APPLY TO SYSTEMATIC WITHDRAWALS.
MINIMUM DISTRIBUTION PROGRAM
If you own a contract that is an Individual Retirement Annuity (IRA), you may
select the Minimum Distribution Program. Under this program, Allianz Life will
make payments to you that are designed to meet the applicable minimum
distribution requirements imposed by the Internal Revenue Code for IRAs. If
the value of your contract is at least $25,000, Allianz Life will make
payments to you on a monthly or quarterly basis. The payments will not be
subject to the contingent deferred sales charge and will be instead of the 15%
free withdrawal amount.
SUSPENSION OF PAYMENTS OR TRANSFERS
Allianz Life may be required to suspend or postpone payments for withdrawals
or transfers 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 the fund shares
is not reasonably practicable or Allianz Life cannot reasonably value the fund
shares;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the fixed account for the period permitted by law but not for
more than six months.
8. PERFORMANCE
Allianz Life periodically advertises performance of the various funds. Allianz
Life will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that
unit by the value of the accumulation unit at the beginning of the period.
This performance number reflects the deduction of the insurance charges. It
does not reflect the deduction of any applicable contingent deferred sales
charge and contract maintenance charge. The deduction of any applicable
contract maintenance charge and contingent deferred sales charges would reduce
the percentage increase or make greater any percentage decrease. Any
advertisement will also include average annual total return figures which
reflect the deduction of the insurance charges, contract maintenance charge,
contingent deferred sales charges and the expenses of the funds. Allianz Life
may also advertise aggregate total return information. Aggregate total return
is determined the same way except that the results are not annualized.
Certain funds have been in existence for some time and have investment
performance history. However, the contracts are new. In order to demonstrate
how the actual investment experience of the funds may affect your accumulation
unit values, Allianz Life has prepared hypothetical performance information
(Part A of the Appendix to this prospectus). The performance is based
on the performance of the funds, modified to reflect the charges and expenses
of your contract as if it had been in existence for the time periods shown.
The information is based upon the historical experience of the funds and does
not necessarily represent what your investment would earn in those funds.
The Mutual Shares Securities Fund and the Mutual Discovery Securities Fund
(New Valuemark funds) are newly created and therefore also do not yet have any
meaningful performance history. 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 B of the Appendix to this prospectus 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. There are hypothetical performance figures for the
accumulation units which assume the deduction of the Mortality and Expense
Risk Charge, the Administrative Charge and the fees and expenses that the
Public Funds paid. There are also hypothetical performance figures for the
accumulation units which reflect the deduction of the Mortality and Expense
Risk Charge, the Administrative Charge, the Contingent Deferred Sales Charge
and the fees and expenses that the Public Funds paid. The hypothetical
performance figures for the accumulation units have not been restated to
reflect the higher fees for the New Valuemark funds. If the higher fees were
used, the hypothetical performance shown would be lower. Future performance
may vary and the results shown are not necessarily representative of future
results.
Allianz Life may in the future also advertise yield information for one or
more of the funds. If it does, it will provide you with information regarding
how yield is calculated. More detailed information regarding how performance
is calculated is found in the SAI.
Any performance advertised will be based on historical data and does not
guarantee future results of the funds.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die during the accumulation phase, Allianz Life will pay a death
benefit to your beneficiary (see below). No death benefit is paid during the
income phase. If you have a joint owner, and the joint owner dies, the
surviving owner will be considered the beneficiary. Joint owners must be
spouses (except in Pennsylvania and Oregon).
The death benefit will be the greater of: 1) the current value of your
contract, less any taxes on the day all claim proofs and payment election
forms are received by Allianz Life at the Valuemark Service Center; or 2) as
set forth in the enhanced death benefit endorsement to the contract, the
guaranteed minimum death benefit, less any taxes, as of the day you die.
Certain owners will not receive an enhanced death benefit endorsement. For
these owners, the death benefit is as set forth in Item No. 1 above. During
the first year, the guaranteed minimum death benefit is equal to the payments
you have made, less any money you have taken out and any charges paid on the
money you have taken out. After the first year and before your 76th birthday,
the guaranteed minimum death benefit is the greater of: A) payments you have
made, less any money you have taken out and charges paid on the money you have
taken out, increased by 5% per year on each contract anniversary; or B) the
highest of the contract values for each six year contract anniversary
determined by the contract value on such six year anniversary plus any
payments made, less any money taken out since that contract anniversary, and
charges paid on the money you have taken out. After your 76th birthday, the
guaranteed minimum death benefit will only be increased by any payments you
have made since the last contract anniversary before your 76th birthday less
any money you have taken out and any charges paid on the money you have taken
out since such contract anniversary. If you have a joint owner, the age of
the oldest owner will be used to determine the guaranteed minimum death
benefit. The guaranteed minimum death benefit will be reduced by any amounts
withdrawn after the date of death. If the contract is owned by a non-natural
person, then all references to you mean the annuitant.
The death benefit provision described above may not be available in your
state. If it is not available, the death benefit will be equal to the value of
your contract (less any premium taxes) on the business day that Allianz Life
receives proof of the death and payment instructions.
A beneficiary may request that the death benefit be paid in one of the
following ways: (1) payment of the entire death benefit within 5 years of the
date of death; or (2) payment of the death benefit under an annuity option.
The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If
the beneficiary is the spouse of the contract owner, he/she can choose to
continue the contract in his/her own name at the then current value, or if
greater, the death benefit value. If a lump sum payment is elected and all the
necessary requirements are met, the payment will be made within 7 days.
If you (or any joint owner) die during the income phase and you are not the
annuitant, any payments which are remaining under the annuity option selected
will continue at least as rapidly as they were being paid at your death. If
you die during the income phase, the beneficiary becomes the contract owner.
DEATH OF ANNUITANT
If the annuitant, who is not a contract owner or joint owner, dies during the
accumulation phase, you can name a new annuitant. If a new annuitant is not
named within 30 days of the death of the annuitant, you will become the
annuitant. However, if the contract owner is a non-natural person (e.g., a
corporation), then the death of the annuitant will be treated as the death of
the contract owner, and a new annuitant may not be named.
If the annuitant dies after annuity payments have begun, the remaining amounts
payable, if any, will be as provided for in the annuity option selected. The
remaining amounts payable will be paid to the contract owner at least as
rapidly as they were being paid at the annuitant's death.
10. OTHER INFORMATION
ALLIANZ LIFE
Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin
Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the
state of Minnesota in 1896. Allianz Life offers fixed and variable life
insurance and annuities and group life, accident and health insurance. Allianz
Life is licensed to do business in 49 states and the District of Columbia.
Allianz Life is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.
THE SEPARATE ACCOUNT
Allianz Life established a separate account, Allianz Life Variable Account B
(Separate Account), to hold the assets that underlie the contracts. The Board
of Directors of Allianz Life adopted a resolution to establish the Separate
Account under Minnesota insurance law on May 31, 1985. Allianz Life has
registered the Separate Account with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. The Separate
Account is divided into sub-accounts. Each sub-account invests in a fund.
The assets of the Separate Account are held in Allianz Life's name on behalf
of the Separate Account and legally belong to Allianz Life. However, those
assets that underlie the contracts, are not chargeable with liabilities
arising out of any other business Allianz Life may conduct. All the income,
gains and losses (realized or unrealized) resulting from these assets are
credited to or charged against the contracts and not against any other
contracts Allianz Life may issue.
DISTRIBUTION
NALAC Financial Plans LLC (NFP) 1750 Hennepin Avenue, Minneapolis, MN
55403, acts as the distributor of the contracts. NFP is a wholly-owned
subsidiary of Allianz Life.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 6.0% of purchase payments.
Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay
the broker-dealer commissions as a combination of a certain amount of the
commission at the time of sale and a trail commission (which when totaled
could exceed 6% of purchase payments). In addition, Allianz Life and Franklin
Advisers, Inc. and/or its affiliates may pay certain sellers for other
services not directly related to the sale of the contracts (such as special
marketing support allowances). To the extent that the contingent deferred
sales charge is insufficient to cover the actual cost of distribution, Allianz
Life may use any of its corporate assets, including any profit from the
mortality and expense risk charge, to make up any difference.
ADMINISTRATION
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform administrative services
regarding the contracts. The administrative services include issuance of the
contracts and maintenance of contract owner's records.
FINANCIAL STATEMENTS
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
APPENDIX
PERFORMANCE INFORMATION
The following information is based on the historical investment performance of
the funds. The results shown are not necessarily representative of future
performance.
PART A - FRANKLIN VALUEMARK FUNDS - EXISTING FUNDS
The funds of Franklin Valuemark Funds have been in existence for some time and
have investment performance history (except the Small Cap, Capital Growth,
Templeton International Smaller Companies, Mutual Shares Securities and Mutual
Discovery Securities Funds). In order to show you how investment performance
of the funds affects accumulation unit values, we have developed the following
hypothetical performance information.
The chart below shows the actual historical investment performance of the
funds and hypothetical accumulation unit performance. The hypothetical
accumulation unit performance assumes that the accumulation units were
invested in each of the funds for the same periods. The performance figures in
Column I reflect the deduction of the actual fees and expenses paid by the
funds. Column II represents hypothetical performance figures for the
accumulation units which reflects the deduction of the insurance charges and
the fees and expenses of the funds. Column III represents hypothetical
performance figures for the accumulation units which reflects the insurance
charges, the contract maintenance charge, the fees and expenses of the funds
and assumes that you make a withdrawal at the end of the period (therefore the
contingent deferred sales charge is reflected).
Total Return for the periods ended 9/30/96
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Column I Column II Column III
Fund Performance Hypothetical Accumulation Unit Performance
------------------------- -------------------------- -------------------------
Inception Since Since Since
--------- ------------------------- -------------------------- -------------------------
FUND Date 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception
- ----------------------------------- --------- ------------------------- -------------------------- -------------------------
Money Market 1/24/89 5.27% 4.03% 5.14% 3.71% 2.50% 3.63% -2.39% 1.77% 3.53%
High Income 1/24/89 12.29% 12.48% 9.96% 10.61% 10.79% 8.35% 4.51% 10.79% 8.26%
Templeton Global Income Securities 1/24/89 9.29% 6.39% 7.71% 7.65% 5.01% 6.26% 1.55% 4.35% 6.18%
The U.S. Government Securities 3/14/89 4.65% 7.23% 8.04% 3.09% 5.75% 6.51% -3.01% 5.11% 6.43%
Zero Coupon - 2000 3/14/89 4.44% 8.87% 9.61% 2.89% 7.31% 8.03% -3.21% 6.71% 7.95%
Zero Coupon - 2005 3/14/89 2.80% 10.27% 10.79% 1.27% 8.82% 9.26% -4.83% 8.24% 9.18%
Zero Coupon - 2010 3/14/89 1.87% 10.92% 10.96% 0.35% 9.73% 9.61% -5.75% 9.18% 9.53%
Growth and Income 1/24/89 13.70% 11.47% 9.34% 12.00% 10.12% 7.94% 5.90% 9.57% 7.85%
Income Securities 1/24/89 10.35% 11.29% 11.42% 8.70% 9.70% 9.83% 2.60% 9.14% 9.76%
Real Estate Securities 1/24/89 20.87% 14.94% 11.38% 19.06% 13.17% 9.73% 12.96% 12.67% 9.64%
Rising Dividends 1/27/92 18.73% -- 8.64% 16.95% -- 7.05% 10.85% -- 6.37%
Utility Equity 1/24/89 10.82% 8.78% 10.58% 9.27% 7.38% 9.12% 3.17% 6.78% 9.04%
Precious Metals 1/24/89 2.55% 8.36% 6.47% 1.02% 6.74% 4.90% -5.08% 6.12% 4.81%
Templeton Developing Markets Equity 3/15/94 10.88% -- 4.53% 9.22% -- 2.98% 3.12% -- 0.91%
Templeton Global Growth 3/15/94 11.81% -- 10.81% 10.14% -- 9.17% 4.04% -- 7.28%
Templeton International Equity 1/27/92 11.60% -- 10.35% 9.93% -- 8.74% 3.83% -- 8.11%
Templeton Pacific Growth 1/27/92 11.24% -- 10.37% 9.58% -- 8.76% 3.48% -- 8.12%
Templeton Global Asset Allocation 5/1/96 14.80% -- 13.23% 13.09% -- 11.46% 6.99% -- 7.87%
</TABLE>
PART B - PUBLIC FUNDS
The Mutual Shares Securities Fund and Mutual Discovery Securities Fund ("New
Valuemark funds") are newly created series of Franklin Valuemark Funds and do
not yet have any meaningful performance history. 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").
Chart 1 below 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.
Chart 2 below 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. These figures do not reflect any Contingent Deferred Sales Charge and
have not been restated to reflect the higher expenses of the New Valuemark
funds; all of which would lower the hypothetical performance shown.
Chart 3 below shows hypothetical performance of accumulation units of the New
Valuemark funds, based on the past average annual total return of the Public
Funds and the deduction of all current recurring expenses of the Separate
Account, as well as deduction of the applicable Contingent Deferred Sales
Charge. These figures have not been restated to reflect the higher expenses of
the New Valuemark funds which would lower the hypothetical performance shown.
Past performance cannot predict or guarantee future results of the New
Valuemark funds. In addition, the investment performance of the New 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
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- ------- ---------- --------- --------- ---------
Mutual Discovery Fund................. 18.52% -- -- 21.90% 12/31/92
Mutual Shares Fund.................... 13.59% 17.47% 14.87% -- 7/1/49
</TABLE>
<TABLE>
<CAPTION>
2. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account)
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- -------- ---------- --------- --------- ---------
Mutual Discovery Securities
Sub-Account ......................... 16.71% -- -- 20.03%% 12/31/92
Mutual Shares Securities
Sub-Account ......................... 11.82% 15.64% 13.09% -- 7/1/49
</TABLE>
<TABLE>
<CAPTION>
3. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate
Account and deduction of the Contingent Deferred Sales Charge)
<S> <C> <C> <C> <C> <C>
Since Inception
Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date
---------------------- -------- ---------- --------- --------- ---------
Mutual Discovery Securities
Sub-Account.......................... 10.61% -- -- 19.31% 12/31/92
Mutual Shares Securities
Sub-Account.......................... 5.72% 15.18% 13.08% -- 7/1/49
</TABLE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Insurance Company
Experts
Legal Opinions
Distributor
Reduction or Elimination of the Contingent Deferred Sales Charge
Calculation of Performance Data
Annuity Provisions
Tax Status
Mortality and Expense Guarantee
Financial Statements
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
ISSUED BY
ALLIANZ LIFE VARIABLE ACCOUNT B
AND
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
____________________, 1996
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE
PAYMENT VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE
THE INSURANCE COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN
55403-2195,(800) 542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE
DATED ____________, 1996, AND AS MAY BE AMENDED FROM TIME TO TIME.
TABLE OF CONTENTS
PAGE
INSURANCE COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTOR
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
CALCULATION OF PERFORMANCE DATA
TAX STATUS
ANNUITY PROVISIONS
MORTALITY AND EXPENSE RISK GUARANTEE
FINANCIAL STATEMENTS
INSURANCE COMPANY
Allianz Life Insurance Company of North America (the "Insurance Company") is a
stock life insurance company organized under the laws of the state of
Minnesota in 1896. The Insurance 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 insurance
company offers fixed and variable life insurance and annuities, and group
life, accident and health insurance. On April 1, 1993, the Insurance Company
changed its name from North American Life and Casualty Company to its present
name.
The Insurance Company is rated A+ (Superior) by A.M. BEST, an independent
analyst of the insurance industry. The financial strength of an insurance
company may be relevant insofar as the ability of a company to make fixed
annuity payments from its general account.
EXPERTS
The financial statements of Allianz Life Variable Account B and the
consolidated financial statements of Allianz Life Insurance Company of North
America as of 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 LLC, a wholly owned subsidiary of the Insurance Company,
acts as the distributor. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or
to a group of individuals in a manner that results in savings of sales
expenses. The entitlement to a reduction of the Contingent Deferred Sales
Charge will be determined by the Insurance Company after examination of the
following factors: 1) the size of the group; 2) the total amount of purchase
payments expected to be received from the group; 3) the nature of the group
for which the Contracts are purchased, and the persistency expected in that
group; 4) the purpose for which the Contracts are purchased and whether that
purpose makes it likely that expenses will be reduced; and 5) any other
circumstances which the Insurance Company believes to be relevant to
determining whether reduced sales or administrative expenses may be expected.
None of the reductions in charges for sales is contractually guaranteed.
The Contingent Deferred Sales Charge will be eliminated when the Contracts are
issued to an officer, director or employee of the Insurance Company or any of
its affiliates. The Contingent Deferred Sales Charge will also be eliminated
when the Contract is sold by an agent of the Insurance Company to any members
of his or her immediate family and the commission is reduced. In no event will
any reduction or elimination of the Contingent Deferred Sales Charge be
permitted where the reduction or elimination will be unfairly discriminatory
to any person.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
From time to time, the Insurance Company may advertise the performance data
for the Funds in advertisements and Contract Owner communications. Such data
will show the percentage change in the value of an accumulation unit based on
the performance of a fund over a stated period of time, usually a calendar
year, which is determined by dividing the increase (or decrease) in value for
that unit by the accumulation unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.34% Mortality and Expense Risk Charge, a .15% Administrative
Charge, the fees of the fund being advertised and any applicable Contract
Maintenance Charge and Contingent Deferred Sales Charges.
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual accumulation unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Contingent Deferred Sales
Charge to arrive at the ending hypothetical value. The average annual total
return is then determined by computing the fixed interest rate that a $1,000
purchase payment would have to earn annually, compounded annually, to grow to
the hypothetical value at the end of the time periods described. The formula
used in these calculations is:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the time periods used at the end of such time
periods (or fractional portion thereof).
</TABLE>
The Insurance Company may also advertise performance data which will be
calculated in the same manner as described above but which will not reflect
the deduction of the Contingent Deferred Sales Charge and the Contract
Maintenance Charge. The Company may also advertise aggregate and average total
return information over different periods of time.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that no sales load is
deducted from the initial $1,000 payment at the time it is allocated to the
funds and assumes that the income earned by the investment in the fund is
reinvested.
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.
YIELD
THE MONEY MARKET FUND. The Insurance Company may advertise yield information
for the Money Market Fund. The Money Market Fund'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 Charge and the Contract Maintenance Charge and, in certain
instances, the value of the underlying Fund's investment securities. The fact
that the Fund's current yield will fluctuate and that the principal is
not guaranteed should be taken into consideration when using the Fund'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 Insurance Company does not currently
advertise any yield information for the Money Market Fund.
The Money Market Fund's current yield is computed on a base period return
of a hypothetical Contract having a beginning balance of one accumulation unit
for a particular period of time (generally seven days). The return is
determined by dividing the net change (exclusive of any capital changes) in
such accumulation unit by its beginning value, and then multiplying it by
365/7 to get the annualized current yield. The calculation of net change
reflects the value of additional shares purchased with the dividends paid by
the Fund, and the deduction of the Mortality and Expense Risk Charge, the
Administrative Charge and Contract Maintenance Charge. The effective yield
reflects the effects of compounding and represents an annualization of the
current return with all dividends reinvested.
(Effective yield = [(Base Period Return + 1)365/7]-1.)
OTHER FUNDS. The Insurance Company may also quote current yield in
advertisements and Contract Owner communications for the other Funds. Each
Fund (other than the Money Market Fund) will publish standardized total return
information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
accumulation unit earned during the period (minus the deduction for the
Mortality and Expense Risk Charge, Administrative Charge and the Contract
Maintenance Charge) by the accumulation unit value on the last day of the
period and annualizing the resulting figure, according to the following
formula:
6
Yield = 2 [[(a-b) + 1] - 1]
_____
cd
Where:
<TABLE>
<CAPTION>
<S> <C> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Fund.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day
of the period.
</TABLE>
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in the advertisement or communication.
Yield calculations assume no sales load. The Insurance Company does not
currently advertise any yield information for any Fund.
PERFORMANCE RANKING
Total return may be compared to relevant indices, including U. S. domestic and
international taxable bond indices and data from Lipper Analytical Services,
Inc., Standard & Poor's Indices, or VARDS.
From time to time, evaluation of performance by independent sources may also
be used in advertisements and in information furnished to present or
prospective contract owners.
TAX STATUS
NOTE: The following description is based upon the Insurance Company's
understanding of current federal income tax law applicable to annuities in
general. The Insurance 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 Insurance 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 herein
may be applicable in certain situations. Moreover, no attempt has been made to
consider any applicable state or other tax laws.
GENERAL
Section 72 of the Code governs taxation of annuities in general. A Contract
Owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Annuity Option elected. For a lump sum payment received as a total
surrender (total redemption) or death benefit, the recipient is taxed on the
portion of the payment that exceeds the cost basis of the Contract. For
Non-Qualified Contracts, this cost basis is generally the purchase payments,
while for Qualified Contracts there may be no cost basis. The taxable portion
of the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includable in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period certain
or refund feature) bears to the expected return under the Contract. The
exclusion amount for payments based on a variable annuity option is determined
by dividing the cost basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludable amounts equal the investment
in the Contract) are fully taxable. The taxable portion is taxed at ordinary
income rates. For certain types of Qualified Plans there may be no cost basis
in the Contract within the meaning of Section 72 of the Code. Contract Owners,
Annuitants and Beneficiaries under the Contracts should seek competent
financial advice about the tax consequences of any distributions.
The Insurance Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity
from the Insurance Company, and its operations form a part of the Insurance
Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not
adequately diversified in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"). Disqualification of the
Contract as an annuity contract would result in imposition of federal income
tax to the Contract Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract. The Code contains a safe
harbor provision which provides that annuity contracts such as the Contracts
meet the diversification requirements if, as of the end of each quarter, the
underlying assets meet the diversification standards for a regulated
investment company and no more than fifty-five percent (55%) of the total
assets consist of cash, cash items, U.S. government securities and securities
of other regulated investment companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The
regulations amplify the diversification requirements for variable contracts
set forth in the Code and provide an alternative to the safe harbor provision
described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Insurance Company intends that all Funds of Franklin Valuemark Funds
underlying the Contracts will be managed by the Managers for Franklin
Valuemark Funds 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 Separate Account will cause the Contract
Owner to be treated as the owner of the assets of the Separate 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 Separate 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 Separate Account.
Due to the uncertainty in this area, the Insurance Company reserves the right
to modify the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year period to the same contract owner by one company
or its affiliates are treated as one annuity contract for purposes of
determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. Contract Owners should
consult a tax adviser prior to purchasing more than one non-qualified annuity
contract in any calendar year period.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on purchase payments
for the Contracts will be taxed currently to the Contract Owner if the Owner
is a non-natural person, e.g., a corporation or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust
or other entity as an agent for a natural person nor to Contracts held by
qualified plans. Purchasers should consult their own tax counsel or other tax
adviser before purchasing a Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Contract Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as
wages and at the rate of 10% from non-periodic payments. However, the Contract
Owner, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or for a specified period of 10 years or more; or b)
distributions which are required minimum distributions; or (c) the portion of
the distributions not includible in gross income (i.e. returns of after-tax
contributions). Participants should consult their own tax counsel or other tax
adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of
the Contract Owner; (c) if the taxpayer is totally disabled (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or for the joint lives (or
joint life expectancies) of the taxpayer and his Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.")
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase
payment requirements, these Contracts may not be appropriate for some periodic
payment retirement plans. Taxation of participants in each Qualified Plan
varies with the type of plan and terms and conditions of each specific plan.
Contract Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Insurance Company's administrative
procedures. Contract Owners, participants and Beneficiaries are responsible
for determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Following are general
descriptions of the types of Qualified Plans with which the Contracts may be
used. Such descriptions are not exhaustive and are for general informational
purposes only. The tax rules regarding Qualified Plans are very complex and
will have differing applications, depending on individual facts and
circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Insurance Company in
connection with Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain non-qualified deferred compensation plans.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in violation
of applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts.")
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary,
depending upon the particular Plan design. However, the Code places
limitations and restrictions on all Plans, including on such items as: amounts
of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals
- - Qualified Contracts.") Purchasers of Contracts for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
b. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includable in the gross income of the
employee until the employee receives distributions from the Contract. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals
Qualified Contracts" and "Tax-Sheltered Annuities - Withdrawal Limitations.")
Employee loans are not allowed under these Contracts. Any employee should
obtain competent tax advice as to the tax treatment and
suitability of such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which may be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.")
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Contracts to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the Plan.
Contributions to the Plan for the benefit of employees will not be includable
in the gross income of the employee until distributed from the Plan. The tax
consequences to participants may vary, depending upon the particular Plan
design. However, the Code places limitations and restrictions on all Plans,
including on such items as: amount of allowable contributions; form, manner
and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Participant loans are not allowed under the Contracts purchased in
connection with these Plans. (See "Tax Treatment of Withdrawals Qualified
Contracts.") Purchasers of Contracts for use with Corporate Pension or Profit-
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). To the extent amounts are not
includible in gross income because they have been properly rolled over to an
IRA or to another eligible Qualified Plan, no tax penalty will be imposed. The
tax penalty will not apply to the following distributions: (a) if distribution
is made on or after the date on which the Contract Owner or Annuitant (as
applicable) reaches age 59 ; (b) distributions following the death or
disability of the Contract Owner or Annuitant (as applicable) (for this
purpose disability is as defined in Section 72(m)(7) of the Code); (c) after
separation from service, distributions that are part of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the Contract Owner or Annuitant (as applicable) or the joint
lives (or joint life expectancies) of such Contract Owner or Annuitant (as
applicable) and his designated beneficiary; (d) distributions to a Contract
Owner or Annuitant (as applicable) who has separated from service after he has
attained age 55; (e) distributions made to the Contract Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount
allowable as a deduction under Code Section 213 to the Contract Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order; and (g) distributions from an Individual Retirement
Annuity for the purchase of medical insurance (as described in Section
213(d)(1)(D) of the Code) for the Contract Owner and his or her spouse and
dependents if the Contract Owner has received unemployment compensation for at
least 12 weeks. This exception no longer applies after the Contract Owner has
been re-employed for at least 60 days. The exceptions stated in items (d) and
(f) above do not apply in the case of an Individual Retirement Annuity. The
exception stated in item (c) applies to an Individual Retirement Annuity
without the requirement that there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59 ;
(2) separates from service; (3) dies; (4) becomes disabled (within the meaning
of Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Contract Owner's
Contract Value which represents contributions by the Contract Owner and does
not include any investment results. The limitations on withdrawals became
effective on January 1, 1989 and apply only to salary reduction contributions
made after December 31, 1988, and to income attributable to such contributions
and to income attributable to amounts held as of December 31, 1988. The
limitations on withdrawals do not affect rollovers and transfers between
certain Qualified Plans. Contract Owners should consult their own tax counsel
or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
FIXED ANNUITY PAYOUT
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Insurance Company and do not vary with the investment experience
of the Fund. The Fixed Account value on the day immediately preceding the
Income Date will be used to determine the Fixed Annuity monthly payment. The
monthly Annuity Payment will be based upon the Contract Value at the time of
annuitization, the Annuity Option selected, the age of the annuitant and any
joint annuitant and the sex of the annuitant and joint annuitant where
allowed.
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 Fund(s).
ANNUITY UNIT VALUE:
On the Income Date, a fixed number of Annuity Units will be purchased as
follows:
The first Annuity Payment is equal to the Adjusted Contract Value, 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 Fund the
fixed number of Annuity Units is determined by dividing the amount of the
initial Annuity Payment determined for each Fund by the Annuity Unit value on
the Income Date. Thereafter, the number of Annuity Units in each Fund remains
unchanged unless the Contract Owner elects to transfer between Funds. 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 for each Fund. The Annuity Payment in each Fund is
determined by multiplying the number of Annuity Units then allocated to such
Fund by the Annuity Unit value for that Fund.
On each subsequent Valuation Date, the value of an Annuity Unit is determined
in the following way:
First: The Net Investment Factor is determined as described in the Prospectus
under "Purchase - Accumulation Units."
Second: The value of an Annuity Unit for a Valuation Period is equal to:
a. the value of the Annuity Unit for the immediately preceding Valuation
Period.
b. multiplied by the Net Investment Factor for the current Valuation
Period;
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. The Assumed Investment
Return that the Insurance Company will use is 5%. However, the Insurance
Company may agree to use a different value.
MORTALITY AND EXPENSE RISK GUARANTEE
The Insurance Company guarantees that the dollar amount of each annuity
payment after the first annuity payment will not be affected by variations in
mortality and expense experience.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Insurance Company as of
and for the year ended December 31, 1995, included herein should be considered
only as bearing upon the ability of the Insurance Company to meet its
obligations under the Contracts. The audited financial statements of the
Separate Account as of and for the year ended December 31, 1995 are also
included herein. In addition, unaudited financial statements of the Separate
Account as of and for the six-month period ended September 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
September 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, 384,726 shares,
cost $384,726.......................................... $384,726 - - - - -
Growth and Income Fund,
56,037 shares, cost $795,302........................... - 911,161 - - - -
Precious Metals Fund,
7,345 shares, cost $107,715............................ - - 105,181 - - -
High Income Fund, 28,027
shares, cost $358,603.................................. - - - 380,601 - -
Real Estate Securities Fund,
12,625 shares, cost $195,907........................... - - - - 242,017 -
U.S. Government Securities Fund,
37,983 shares, cost $491,321........................... - - - - - 496,440
-------- ------- ------- ------- ------- -------
Total assets......................................... 384,726 911,161 105,181 380,601 242,017 496,440
-------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges............... 76 88 15 44 30 56
Accrued administrative charges........................... 9 11 2 5 4 7
-------- ------- ------- ------- ------- -------
Total liabilities.................................... 85 99 17 49 34 63
-------- ------- ------- ------- ------- -------
Net assets........................................... $384,641 911,062 105,164 380,552 241,983 496,377
======== ======= ======= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)................ $384,494 909,226 105,164 380,527 241,945 496,374
Contracts in annuity payment period (note 2)............. 147 1,836 - 25 38 3
-------- ------- ------- ------- ------- -------
Total contract owners' equity........................ $384,641 911,062 105,164 380,552 241,983 496,377
======== ======= ======= ======= ======= =======
Accumulation units outstanding........................... 29,044 50,176 7,228 20,407 11,770 30,616
======== ======= ======= ======= ======= =======
Accumulation unit value per unit......................... $13.238 18.121 14.549 18.647 20.556 16.213
======== ======= ======= ======= ======= =======
<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.)
September 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,
64,843 shares, cost $1,018,812................ $1,119,185 - - - - -
Zero Coupon Fund - 2000,
7,189 shares, cost $100,581................... - 106,256 - - - -
Zero Coupon Fund - 2005,
4,565 shares, cost $66,999.................... - - 71,254 - - -
Zero Coupon Fund - 2010,
4,712 shares, cost $71,127.................... - - - 71,573 - -
Templeton Global Income Securities
Fund, 15,390 shares, cost $195,628............ - - - - 199,913 -
Investment Grade Intermediate Bond
Fund, 10,083 shares, cost $133,589............ - - - - - 137,027
---------- ------- ------ ------ ------- -------
Total assets............................... 1,119,185 106,256 71,254 71,573 199,913 137,027
---------- ------- ------ ------ ------- -------
Liabilities:
Accrued mortality and expense risk charges...... 118 16 12 13 25 19
Accrued administrative charges.................. 14 2 1 1 3 2
---------- ------- ------ ------ ------- -------
Total liabilities.......................... 132 18 13 14 28 21
---------- ------- ------ ------ ------- -------
Net assets................................. $1,119,053 106,238 71,241 71,559 199,885 137,006
========== ======= ====== ====== ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)....... $1,117,882 106,238 71,241 71,559 199,885 136,997
Contracts in annuity payment period (note 2).... 1,171 - - - - 9
---------- ------- ------ ------ ------- -------
Total contract owners' equity.............. $1,119,053 106,238 71,241 71,559 199,885 137,006
Accumulation units outstanding.................. 56,807 5,889 3,624 3,553 12,445 8,761
========== ======= ====== ====== ======= =======
Accumulation unit value per unit................ $19.679 18.040 19.657 20.140 16.061 15.638
========== ======= ====== ====== ======= =======
<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.)
September 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, 74,728
shares, cost $1,110,537......................... $1,222,546 - - - - -
Adjustable U.S. Government Fund,
14,034 shares, cost $151,255.................... - 145,392 - - - -
Templeton Pacific Growth Fund,
23,962 shares, cost $328,062.................... - - 351,046 - - -
Rising Dividends Fund, 34,496
shares, cost $377,287........................... - - - 477,765 - -
Templeton International Equity Fund,
67,163 shares, cost $851,471.................... - - - - 955,733 -
Templeton Developing Markets Equity
Fund, 21,764 shares, cost $224,775.............. - - - - - 236,353
---------- ------- ------- ------- ------- -------
Total assets................................. 1,222,546 145,392 351,046 477,765 955,733 236,353
---------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges........ 114 20 25 48 129 28
Accrued administrative charges.................... 14 2 3 6 15 3
---------- ------- ------- ------- ------- -------
Total liabilities............................ 128 22 28 54 144 31
---------- ------- ------- ------- ------- -------
Net assets................................... $1,222,418 145,370 351,018 477,711 955,589 236,322
========== ======= ======= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)......... $1,219,705 145,365 350,432 477,086 954,531 234,916
Contracts in annuity payment period (note 2)...... 2,713 5 586 625 1,058 1,406
---------- ------- ------- ------- ------- -------
Total contract owners' equity................ $1,222,418 145,370 351,018 477,711 955,589 236,322
========== ======= ======= ======= ======= =======
Accumulation units outstanding.................... 58,897 11,794 23,562 34,543 64,218 21,748
========== ======= ======= ======= ======= =======
Accumulation unit value per unit.................. $20.709 12.326 14.873 13.811 14.864 10.802
========== ======= ======= ======= ======= =======
<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.)
September 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,
37,938 shares, cost $428,552............................ $482,189 - - - -
Templeton Global Asset Allocation
Fund, 3,363 shares, cost $36,478........................ - 39,386 - - -
Small Cap Fund, 10,862 shares,
cost $125,977........................................... - - 137,400 - -
Capital Growth Fund, 1,819 shares,
cost $18,806............................................ - - - 19,844 -
Templeton International Smaller Companies
Fund, 900 shares, cost $9,190........................... - - - - 9,366
-------- ------ ------- ------ ------
Total assets......................................... 482,189 39,386 137,400 19,844 9,366 8,302,354
-------- ------ ------- ------ ------ ---------
Liabilities:
Accrued mortality and expense risk charges................. 57 9 20 60 36 1,058
Accrued administrative charges............................. 7 1 2 7 4 125
------- ------ ------- ------ ------ ---------
Total liabilities.................................... 64 10 22 67 40 1,183
------- ------ ------- ------ ------ ---------
Net assets.. ........................................ $482,125 39,376 137,378 19,777 9,326 8,301,171
======== ====== ======= ====== ====== =========
Contract owners' equity:
Contracts in accumulation period (note 6).................. $479,586 38,980 137,020 19,622 9,320 8,288,095
Contracts in annuity payment period (note 2)............... 2,539 396 358 155 6 13,076
-------- ------ ------- ------ ------ ---------
Total contract owners' equity........................ $482,125 39,376 137,378 19,777 9,326 8,301,171
======== ====== ======= ====== ====== =========
Accumulation units outstanding............................ 38,267 3,337 11,034 1,809 901 510,430
======== ====== ======= ====== ====== =========
Accumulation unit value per unit.......................... $12.533 11.681 12.418 10.847 10.349
======== ====== ======= ====== ======
<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 September 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.................... $ 15,374 20,139 1,477 27,936 9,054 36,122
-------- ------ ------ ------ ------ ------
Expenses:
Mortality and expense risk charges..................... 3,863 8,131 1,132 3,172 1,993 4,930
Administrative charges................................. 464 976 136 381 239 592
-------- ------ ------ ------ ------ ------
Total expenses.................................... 4,327 9,107 1,268 3,553 2,232 5,522
-------- ------ ------ ------ ------ ------
Investment income (loss), net..................... 11,047 11,032 209 24,383 6,822 30,600
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.................................. 335,551 62,579 57,368 63,617 13,313 70,295
Cost of investments sold............................. (335,551) (51,786) (52,908) (58,166) (11,333) (67,961)
-------- ------ ------ ------ ------ ------
Total realized gains (losses) on
sales of investments, net........................ - 10,793 4,460 5,451 1,980 2,334
-------- ------ ------ ------ ------ -------
Realized gains (losses) on investments, net....... - 82,122 5,814 6,934 1,980 2,334
Net change in unrealized appreciation
(depreciation) on investments........................ - (54,823) (5,112) (4,282) 19,279 (36,715)
-------- ------ ------ ------ ------ -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.. - 27,299 702 2,652 21,259 (34,381)
-------- ------ ------ ------ ------ ------
Net increase (decrease) in net assets from operations... $ 11,047 38,331 911 27,035 28,081 (3,781)
======== ====== ====== ====== ====== ======
<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 September 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.............. 11,428 1,014 665 661 1,947 1,382
Administrative charges......................... 1,371 122 80 79 234 166
-------- ------ ----- ------ ------ ------
Total expenses.............................. 12,799 1,136 745 740 2,181 1,548
-------- ------ ----- ------ ------ ------
Investment income (loss), net............... 47,164 4,779 2,989 2,947 13,144 6,245
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........................... 218,254 13,592 6,459 23,193 34,744 23,668
Cost of investments sold...................... (194,545) (12,495) (5,904) (21,389) (33,691) (22,851)
-------- ------ ----- ------ ------ ------
Total realized gains (losses) on sales
of investments, net....................... 23,709 1,097 555 1,804 1,053 817
-------- ------ ----- ------ ------ ------
Realized gains (losses) on investments, net 23,709 1,155 555 2,803 1,053 817
Net change in unrealized appreciation
(depreciation) on investments................. (65,744) (7,501) (7,919) (13,440) (7,571) (5,448)
-------- ------ ----- ------ ------ ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net....................... (42,035) (6,346) (7,364) (10,637) (6,518) (4,631)
-------- ------ ----- ------ ------ ------
Net increase (decrease) in net assets
from operations................................. $ 5,129 (1,567) (4,375) (7,690) 6,626 1,614
======== ====== ===== ====== ====== ======
<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 September 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................ 11,329 1,537 3,284 4,170 8,392 2,003
Administrative charges............................ 1,360 184 394 500 1,007 240
------- ------ ------ ------ ------ ------
Total expenses............................... 12,689 1,721 3,678 4,670 9,399 2,243
------- ------ ------ ------ ------ ------
Investment income (loss), net................ 49,389 10,578 6,504 4,782 14,342 (155)
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............................. 71,179 49,379 80,140 37,138 44,178 25,313
Cost of investments sold........................ (64,242) (50,307) (73,039) (30,763) (39,696) (24,333)
------- ------ ------ ------ ------ ------
Total realized gains (losses) on sales
of investments, net......................... 6,937 (928) 7,101 6,375 4,482 980
------- ------ ------ ------ ------ ------
Realized gains (losses) on investments, net.. 17,261 (928) 13,002 6,375 33,534 4,842
Net change in unrealized appreciation
(depreciation) on investments................... (11,955) (4,657) 9,400 33,282 50,075 14,816
------- ------ ------ ------ ------ ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net......................... 5,306 (5,585) 22,402 39,657 83,609 19,658
------- ------ ------ ------ ------ ------
Net increase (decrease) in net assets from operations $54,695 4,993 28,906 44,439 97,951 19,503
======= ====== ====== ====== ====== ======
<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 September 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 - - 333,391
------- ----- ------ ----- ----- ---------
Expenses:
Mortality and expense risk charges....................... 3,875 257 751 60 36 76,012
Administrative charges.................................. 465 31 90 7 4 9,122
------- ----- ------ ----- ----- ---------
Total expenses...................................... 4,340 288 841 67 40 85,134
------- ----- ------ ----- ----- ---------
Investment income (loss), net....................... 2,644 (274) (807) (67) (40) 248,257
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.................................... 11,298 2,331 36,507 2,088 2,068 1,284,252
Cost of investments sold............................... (10,384) (2,218) (36,457) (2,130) (2,040) (1,204,189)
------- ----- ------ ----- ----- ---------
Total realized gains (losses) on sales
of investments, net................................ 914 113 50 (42) 28 80,063
------- ----- ------ ----- ----- ---------
Realized gains (losses) on investments, net......... 7,898 140 53 (42) 28 211,439
Net change in unrealized appreciation (depreciation)
on investments......................................... 26,852 2,585 11,240 1,039 175 (56,424)
------- ----- ------ ----- ----- ---------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.... 34,750 2,725 11,293 997 203 155,015
------- ----- ------ ----- ----- ---------
Net increase (decrease) in net assets from operations..... $37,394 2,451 10,486 930 163 403,272
======= ===== ====== ===== ===== =========
<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 September 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....... $ 11,047 17,718 11,032 (1,279) 209 52 24,383 15,167
Realized gains (losses) on
investments, net................... - - 82,122 21,076 5,814 2,150 6,934 3,298
Net change in unrealized appreciation
(depreciation) on investments...... - - (54,823) 147,406 (5,112) (2,147) (4,282) 27,669
-------- ------- ------- ------- ------- ------ ------- -------
Net increase (decrease) in
net assets from operations..... 11,047 17,718 38,331 167,203 911 55 27,035 46,134
-------- ------- ------- ------- ------- ------ ------- -------
Contract transactions (note 6):
Purchase payments................... 130,546 190,018 108,174 98,725 19,165 11,049 38,662 47,086
Transfers between funds............. (67,884) (169,358) 32,137 150,088 (4,175) (17,212) 21,744 46,491
Surrenders and terminations......... (86,762) (120,722) (78,028) (73,514) (8,107) (11,728) (30,002) (43,591)
Rescissions......................... (2,174) (5,198) (2,759) (1,783) (309) (326) (515) (1,643)
Other transactions (note 2)......... (67) 238 475 240 49 (36) 48 77
-------- ------- ------- ------- ------- ------ ------- -------
Net increase (decrease)
in net assets resulting from
contract transactions.......... (26,341) (105,022) 59,999 173,756 6,623 (18,253) 29,937 48,420
-------- ------- ------- ------- ------- ------ ------- -------
Increase (decrease) in net assets..... (15,294) 87,304) 98,330 340,959 7,534 (18,198) 56,972 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........... $384,641 399,935 911,062 812,732 105,164 97,630 380,552 323,580
======== ======= ======= ======= ======= ====== ======= =======
<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 September 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....... $ 6,822 3,361 30,600 30,379 47,164 48,876 - 2,395
Realized gains (losses) on
investments, net................... 1,980 1,477 2,334 2,695 23,709 1,589 - 600
Net change in unrealized appreciation
(depreciation) on investments...... 19,279 22,517 (36,715) 54,968 (65,744) 255,500 - (597)
-------- ------- ------- ------- --------- --------- --- -------
Net increase (decrease) in
net assets from operations..... 28,081 27,355 (3,781) 88,042 5,129 305,965 - 2,398
-------- ------- ------- ------- --------- --------- --- -------
Contract transactions (note 6):
Purchase payments................... 20,616 19,829 30,654 47,766 47,586 73,558 - 1,557
Transfers between funds............. 10,018 (12,435) (37,143) (5,307) (111,925) 10,721 - (36,522)
Surrenders and terminations......... (15,316) (17,397) (52,362) (74,423) (126,645) (141,926) - (13,413)
Rescissions......................... (184) (277) (616) (1,813) (704) (1,891) - (49)
Other transactions (note 2)......... (5) 99 391 132 117 537 - 88
-------- ------- ------- ------- --------- --------- --- -------
Net increase (decrease)
in net assets resulting from
contract transactions......... 15,129 (10,181) (59,076) (33,645) (191,571) (59,001) - (48,339)
-------- ------- ------- ------- --------- --------- --- -------
Increase (decrease) in net assets..... 43,210 17,174 (62,857) 54,397 (186,442) 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........... $241,983 198,773 496,377 559,234 1,119,053 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 September 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........... $ 4,779 2,895 2,989 1,752 2,947 1,068 13,144 5,291
Realized gains (losses) on
investments, net....................... 1,155 1,081 555 753 2,803 2,987 1,053 (206)
Net change in unrealized appreciation
(depreciation) on investments.......... (7,501) 12,514 (7,919) 13,063 (13,440) 15,696 (7,571) 22,286
-------- ------- ------ ------ ------ ------ ------- -------
Net increase (decrease) in
net assets from operations......... (1,567) 16,490 (4,375) 15,568 (7,690) 19,751 6,626 27,371
-------- ------- ------ ------ ------ ------ ------- -------
Contract transactions (note 6):
Purchase payments....................... 10,674 16,203 8,946 13,119 9,868 12,239 9,277 13,098
Transfers between funds................. (3,006) 13,339 (1,863) 4,711 (2,662) 9,807 (15,268) (21,421)
Surrenders and terminations............. (10,625) (10,927) (4,609) (4,654) (4,843) (5,624) (20,813) (29,898)
Rescissions............................. (210) (263) (144) (185) (244) (469) (159) (400)
Other transactions (note 2)............. 7 (17) (6) (23) (6) 177 79 25
-------- ------- ------ ------ ------ ------ ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions.............. (3,160) 18,335 2,324 12,968 2,113 16,130 (26,884) (38,596)
-------- ------- ------ ------ ------ ------ ------- -------
Increase (decrease) in net assets......... (4,727) 34,825 (2,051) 28,536 (5,577) 35,881 (20,258) (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............... $106,238 110,965 71,241 73,292 71,559 77,136 199,885 220,143
======== ======= ====== ====== ====== ====== ======= =======
<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 September 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.... $ 6,245 3,922 49,389 44,301 10,578 9,723 6,504 1,633
Realized gains (losses)
on investments, net............. 817 624 17,261 7,100 (928) (1,327) 13,002 3,150
Net change in unrealized appreciation
(depreciation) on investments... (5,448) 7,237 (11,955) 145,457 (4,657) 6,258 9,400 14,929
-------- ------- --------- --------- ------- ------- ------- -------
Net increase (decrease) in
net assets from operations.. 1,614 11,783 54,695 196,858 4,993 14,654 28,906 19,712
-------- ------- --------- --------- ------- ------- ------- -------
Contract transactions (note 6):
Purchase payments................ 10,867 15,136 123,761 145,910 26,484 43,555 27,216 27,022
Transfers between funds.......... (12,899) 364 (21,216) 33,034 (41,567) (75,287) 14,650 (52,319)
Surrenders and terminations...... (12,222) (16,323) (107,757) (125,202) (18,519) (27,666) (26,399) (35,125)
Rescissions...................... (243) (379) (2,683) (3,470) (559) (1,087) (323) (1,057)
Other transactions (note 2)...... 7 (24) 475 670 31 296 125 (45)
-------- ------- --------- --------- ------- ------- ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions....... (14,490) (1,226) (7,420) 50,942 (34,130) (60,189) 15,269 (61,524)
-------- ------- --------- --------- ------- ------- ------- -------
Increase (decrease) in net assets.. (12,876) 10,557 47,275 247,800 (29,137) (45,535) 44,175 (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........ $137,006 149,882 1,222,418 1,175,143 145,370 174,507 351,018 306,843
======== ======= ========= ========= ======= ======= ======= =======
<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 September 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....... $ 4,782 2,452 14,342 1,998 (155) (1,241) 2,644 (2,008)
Realized gains (losses))
on investments, net................ 6,375 1,323 33,534 20,155 4,842 (277) 7,898 303
Net change in unrealized appreciation
(depreciation) on investments...... 33,282 81,539 50,075 42,587 14,816 3,149 26,852 26,429
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net assets from operations..... 44,439 85,314 97,951 64,740 19,503 1,631 37,394 24,724
-------- ------- ------- ------- ------- ------- ------- -------
Contract transactions (note 6):
Purchase payments................... 39,976 42,756 82,272 99,403 44,265 42,027 108,253 119,490
Transfers between funds............. 4,268 50,303 43,384 (30,418) 34,064 22,865 36,808 46,237
Surrenders and terminations......... (33,266) (35,907) (61,709) (72,338) (11,567) (7,387) (21,325) (15,658)
Rescissions......................... (827) (750) (1,331) (2,115) (469) (1,069) (1,349) (1,966)
Other transactions (note 2)......... 129 131 352 59 45 (55) 60 64
-------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions.......... 10,280 56,533 62,968 (5,409) 66,338 56,381 122,447 148,167
-------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in net assets..... 54,719 141,847 160,919 59,331 85,841 58,012 159,841 172,891
-------- ------- ------- ------- ------- ------- ------- -------
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........... $477,711 422,992 955,589 794,670 236,322 150,481 482,125 322,284
======== ======= ======= ======= ======= ======= ======= =======
<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 September 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................ $ (274) 127 (807) (25) (67) - (40) -
Realized gains (losses) on investments, net.. 140 71 53 - (42) - 28 -
Net change in unrealized appreciation
(depreciation) on investments............... 2,585 323 11,240 183 1,039 - 175 -
------- ------ ------- ----- ------ ----- ----- ----
Net increase (decrease) in net assets
from operations......................... 2,451 521 10,486 158 930 - 163 -
------- ------ ------- ----- ------ ----- ----- ----
Contract transactions (note 6):
Purchase payments............................ 13,714 5,580 36,808 2,140 6,645 - 3,208 -
Transfers between funds...................... 10,350 9,316 83,168 11,013 12,393 - 6,128 -
Surrenders and terminations.................. (1,316) (1,163) (6,263) (36) (156) - (127) -
Rescissions.................................. (80) (27) (278) (19) (45) - (36) -
Other transactions (note 2).................. 23 7 197 4 10 - (10) -
------- ------ ------- ------ ------ ----- ----- ----
Net increase (decrease) in net assets
resulting from contract transactions.... 22,691 13,713 113,632 13,102 18,847 - 9,163 -
------- ------ ------- ------ ------ ----- ----- ----
Increase (decrease) in net assets.............. 25,142 14,234 124,118 13,260 19,777 - 9,326 -
------- ------ ------- ------ ------ ----- ----- ----
Net assets at beginning of period.............. 14,234 - 13,260 - - - - -
------- ------ ------- ------ ------ ----- ----- ----
Net assets at end of period.................... $39,376 14,234 137,378 13,260 19,777 - 9,326 -
======= ====== ======= ====== ====== ===== ===== ====
<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 September 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...................................................................... $ 248,257 188,557
Realized gains (losses) on investments, net........................................................ 211,439 68,622
Net change in unrealized appreciation (depreciation) on investments................................ (56,424) 896,966
---------- ---------
Net increase (decrease) in net assets from operations.......................................... 403,272 1,154,145
---------- ---------
Contract transactions (note 6):
Purchase payments.................................................................................. 957,637 1,087,266
Transfers between funds............................................................................ (10,496) (11,990)
Surrenders and terminations........................................................................ (738,738) (884,622)
Rescissions........................................................................................ (16,241) (26,236)
Other transactions (note 2)........................................................................ 2,526 2,644
---------- ---------
Net increase (decrease) in net assets resulting from contract transactions..................... 194,688 167,062
---------- ---------
Increase (decrease) in net assets.................................................................... 597,960 1,321,207
---------- ---------
Net assets at beginning of period.................................................................... 7,703,211 6,382,004
---------- ---------
Net assets at end of period.......................................................................... $8,301,171 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
September 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.)
September 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 September 30, 1996 (unaudited) and the year ended December 31, 1995
were $3,358,013 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%
<FN>
and (c) adding the products of each multiplication in (b) above.
</FN>
</TABLE>
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 September 30, 1996 (unaudited) and the year ended December 31, 1995 were
$7,893,373 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
September 30, 1996 (unaudited) and the year ended December 31, 1995 were $66,609
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 September 30, 1996 (unaudited) and the year ended December 31,
1995 were $10,495,680 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.)
September 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 September 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 - - $272,750
Templeton International Smaller Companies Fund... 250,000 4/30/96 - - 260,250
</TABLE>
4. Investment Transactions
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the period ended September 30, 1996
(unaudited) (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund................................. $320,036
Growth and Income Fund............................ 204,624
Precious Metals Fund.............................. 65,513
High Income Fund.................................. 119,282
Real Estate Securities Fund....................... 35,156
U.S. Government Securities Fund................... 41,577
Utility Equity Fund............................... 73,259
Zero Coupon Fund - 2000........................... 15,222
Zero Coupon Fund - 2005........................... 11,740
Zero Coupon Fund - 2010........................... 29,221
Templeton Global Income Securities Fund........... 20,909
Investment Grade Intermediate Bond Fund........... 15,348
Income Securities Fund............................ 122,983
Adjustable U.S. Government Fund................... 25,745
Templeton Pacific Growth Fund..................... 107,678
Rising Dividends Fund............................. 51,990
Templeton International Equity Fund............... 150,165
Templeton Developing Markets Equity Fund.......... 95,316
Templeton Global Growth Fund...................... 143,279
Templeton Global Asset Allocation Fund............ 24,673
Small Cap Fund.................................... 149,330
Capital Growth Fund............................... 20,935
Templeton International Smaller Companies Fund.... 11,230
</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.)
September 30, 1996 (unaudited)
6. Contract Transactions - Accumulation Unit Activity (In thousands)
Transactions in units for each fund for the period ended September 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.......................... 9,952 6,062 1,181 2,176 1,082 1,913 2,428 -
Transfers between funds.................... (5,155) 1,748 (349) 1,186 509 (2,323) (5,781) -
Surrenders and terminations................ (6,622) (4,399) (507) (1,685) (809) (3,273) (6,479) -
Rescissions................................ (166) (155) (19) (29) (10) (38) (36) -
Other transactions......................... (5) 27 3 3 - 24 6 -
------ ------ ----- ------ ------ ------ ------ -----
Net increase (decrease) in
accumulation units resulting
from contract transactions........... (1,996) 3,283 309 1,651 772 (3,697) (9,862) -
------ ------ ----- ------ ------ ------ ------ -----
Accumulation units outstanding at
September 30, 1996 (unaudited)............. 29,044 50,176 7,228 20,407 11,770 30,616 56,807 -
====== ====== ===== ====== ====== ====== ====== =====
</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................... 596 456 488 599 703 6,109 2,190 1,835
Transfers between funds............. (169) (94) (121) (987) (829) (1,064) (3,429) 1,042
Surrenders and terminations......... (592) (235) (239) (1,343) (790) (5,348) (1,524) (1,785)
Rescissions......................... (12) (7) (12) (10) (16) (133) (46) (22)
Other transactions.................. - - - 5 1 24 3 9
----- ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions.... (177) 120 116 (1,736) (931) (412) (2,806) 1,079
----- ----- ----- ------ ----- ------ ------ ------
Accumulation units outstanding at
September 30, 1996 (unaudited)...... 5,889 3,624 3,553 12,445 8,761 58,897 11,794 23,562
===== ===== ===== ====== ===== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
September 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............ 3,070 5,713 4,103 8,833 1,201 3,166 638 313 64,807
Transfers between funds...... 290 2,992 3,145 2,981 920 7,128 1,189 605 3,434
Surrenders and terminations.. (2,552) (4,302) (1,078) (1,750) (117) (555) (15) (12) (46,011)
Rescissions.................. (64) (93) (44) (111) (7) (24) (4) (4) (1,062)
Other transactions........... 10 25 4 5 2 17 1 (1) 163
------ ------ ------ ------ ----- ----- ----- --- -------
Net increase (decrease)
in accumulation units
resulting from
contract transactions.. 754 4,335 6,130 9,958 1,999 9,732 1,809 901 21,331
------ ------ ------ ------ ----- ----- ----- --- -------
Accumulation units outstanding at
September 30, 1996 (unaudited) 34,543 64,218 21,748 38,267 3,337 11,034 1,809 901 510,430
====== ====== ====== ====== ===== ===== ===== === =======
</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>
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 Separate Account are
included in Part B hereof.
1. Statements of Assets and Liabilities as of September 30, 1996
(unaudited).
2. Statements of Operations for the period ended September 30, 1996
(unaudited).
3. Statements of Changes in Net Assets for the period ended
September 30, 1996 (unaudited) and the year ended December 31,
1995.
4. Notes to Financial Statements - September 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's Agreement
4. Individual Variable Annuity Contract*
4.a. Waiver of Contingent Deferred Sales Charge Endorsement*
4.b. Enhanced Death Benefit Endorsement*
5. Application for Individual Variable Annuity Contract*
6. (i) Copy of Articles of Incorporation of the Company*
(ii) Copy of the Bylaws of the Company*
7. Not Applicable
8. Form of Fund Participation Agreement*
9. Opinion and Consent of Counsel
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Data
14. Company Organizational Chart
27. Financial Data Schedule
* Incorporated by reference to Registrant's Form N-4 electronically filed on
June 24, 1996.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Insurance Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------------------- ---------------------------------
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 Boulevard
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief
1750 Hennepin Avenue Financial Officer and Treasurer
Minneapolis, MN 55403
Alan A. Grove Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President - Individual
1750 Hennepin Avenue Division
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Rev. Dennis Dease Director
c/o University of St. Thomas
215 Summit Avenue
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Corp.
Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Insurance Company organizational chart is included as Exhibit 14.
Item 27. Number of Contract Owners
Not Applicable
Item 28. Indemnification
The Bylaws of the Insurance 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
Insurance Company pursuant to the foregoing, or otherwise, the Insurance
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
Insurance Company of expenses incurred or paid by a director, officer or
controlling person of the Insurance 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 LLC 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
LLC:
<TABLE>
<CAPTION>
<S> <C>
Positions and Offices
Business Address with Underwriter
- ---------------------- ----------------------
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis,
Minnesota, maintains physical possession of the accounts, books or documents
of the Variable Account required to be maintained by Section 31(a) of the
Investment Company Act of 1940, as amended, and the rules promulgated
thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Insurance 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 has caused this Registration Statement to be
signed on its behalf in the City of Minneapolis and State of Minnesota, on
this 9th day of December, 1996.
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By:/s/ ALAN A. GROVE
--------------------------------
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By:/s/ ALAN A. GROVE
------------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board,
Lowell C. Anderson* President 12/9/96
- ----------------------- -------
Lowell C. Anderson and Chief Executive Officer
Herbert F. Hansmeyer* Director 12/9/96
- ----------------------- -------
Herbert F. Hansmeyer
Michael P. Sullivan* Director 12/9/96
- ----------------------- -------
Michael P. Sullivan
Dr. Jerry E. Robertson* Director 12/9/96
- ----------------------- -------
Dr. Jerry E. Robertson
Dr. Gerhard Rupprecht* Director 12/9/96
- ----------------------- -------
Dr. Gerhard Rupprecht
Edward J. Bonach* Chief Financial Officer 12/9/96
- ----------------------- -------
Edward J. Bonach
Rev. Dennis Dease* Director 12/9/96
- ----------------------- -------
Rev. Dennis Dease
James R. Campbell* Director 12/9/96
- ----------------------- -------
James R. Campbell
</TABLE>
*By Power of Attorney
By: /s/ ALAN A. GROVE
--------------------------------
Alan A. Grove
Attorney-in-Fact
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
EXHIBIT PAGE
99.B3 Principal Underwriter's Agreement
99.B9 Opinion and Consent of Counsel
99.B10 Independent Auditor's Consent
99.B13 Calculation of Performance Data
99.B14 Company Organizational Chart
27 Financial Data Schedule
PRINCIPAL UNDERWRITER'S AGREEMENT
IT IS HEREBY AGREED by and between NORTH AMERICAN LIFE AND CASUALTY
COMPANY ("INSURANCE COMPANY") on behalf of NALAC VARIABLE ACCOUNT B (the
"Variable Account") and NALAC FINANCIAL PLANS, INC. ("PRINCIPAL UNDERWRITER") as
follows:
I
INSURANCE COMPANY proposes to issue and sell Individual Flexible Payment
Variable Annuity Contracts (the "Contracts") to the public through PRINCIPAL
UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to provide sales service subject
to the terms and conditions hereof. The Contracts to be sold are more fully
described in the registration statement and the prospectuses hereinafter
mentioned. Such Contracts will be issued by INSURANCE COMPANY through the
Variable Account.
II
INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive right,
during the term of this Agreement, subject to registration requirements of the
Securities Act of 1933 and the Investment Company Act of 1940 and the provisions
of the Securities Exchange Act of 1934, to be the distributor of the Contracts
issued through the Variable Account. PRINCIPAL UNDERWRITER will sell the
Contracts under such terms as set by INSURANCE COMPANY and will make such sales
to purchasers permitted to buy such Contracts as specified in the prospectus.
III
PRINCIPAL UNDERWRITER agrees that it shall undertake at its own
expense, to perform all duties and functions which are necessary and proper for
the distribution of the Contracts.
IV
PRINCIPAL UNDERWRITER shall be compensated for its distribution
services with respect to the Contracts covered hereby to the extent necessary
for PRINCIPAL UNDERWRITER to meet its obligations pursuant to selling agreements
with approved broker/dealers.
V
On behalf of the Variable Account, INSURANCE COMPANY shall furnish
PRINCIPAL UNDERWRITER with copies of all prospectuses, financial statements and
other documents which PRINCIPAL UNDERWRITER reasonably requests for use in
connection with the distribution of the Contracts. INSURANCE COMPANY shall
provide to PRINCIPAL UNDERWRITER such number of copies of the current effective
prospectus as PRINCIPAL UNDERWRITER shall request.
VI
PRINCIPAL UNDERWRITER is not authorized to give any information, or to
make any representations concerning the Contracts or the Variable Account of
INSURANCE COMPANY other than those contained in the current registration
statement or prospectus filed with the Securities and Exchange Commission or
such sales literature as may be authorized by INSURANCE COMPANY.
VII
Both parties to this Agreement agree to keep the necessary records as
indicated by applicable state and federal law and to render the necessary
assistance to one another for the accurate and timely preparation of such
records.
VIII
This Agreement shall be effective upon the execution hereof and will
remain in effect unless terminated as hereinafter provided. This Agreement shall
automatically be terminated in the event of its assignment by PRINCIPAL
UNDERWRITER.
This Agreement may at any time be terminated by either party hereto
upon 60 days written notice to the other party.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given on the date
of service if served personally on the party to whom notice is to be given, or
on the date of mailing if sent by First Class Mail, Registered or Certified,
postage prepaid and properly addressed.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed on their behalf by their respective officers thereunto duly
authorized.
EXECUTED this 14 day of September, 1988.
INSURANCE COMPANY
NORTH AMERICAN LIFE AND
CASUALTY COMPANY
/s/ Lowell C. Anderson
BY: _____________________________
Lowell C. Anderson, President
/s/Michael Westermeyer
ATTEST: _______________________
Secretary
PRINCIPAL UNDERWRITER
NALAC FINANCIAL PLANS, INC.
/s/ Thomas B. Clifford
BY: _________________________________
Thomas B. Clifford, Exec. Vice Pres.
/s/Michael Westermeyer
ATTEST: ____________________
Secretary
December 13, 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
Flexible Payment 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 Telephone 612 305 5000 Telefax 612 305 5039
4200 Norwest Center
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America and
the 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
December 13, 1996
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK IV
Allianz Life Variable Account B
Cumulative and Average Annual Total Return Calculations
Original Purchase as of September 30, 1995
Valuation Date as of September 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
9-30-95 Purchase $1,000.00 $16.06727515 62.238 62.238 $1,000.00
9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 62.183 1,119.03
9-30-96 Value before Surr Chg 17.99590776 0.000 62.183 1,119.03
9-30-96 Surrender Charge (60.00) 17.99590776 (3.334) 58.849 1,059.03
Cumulative and Average Annual Total Returns
without/with charges 12.00% A 5.90% B
High Income
9-30-95 Purchase $1,000.00 $16.74221226 59.729 59.729 $1,000.00
9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 59.675 1,105.08
9-30-96 Value before Surr Chg 18.51829760 0.000 59.675 1,105.08
9-30-96 Surrender Charge (60.00) 18.51829760 (3.240) 56.435 1,045.08
Cumulative and Average Annual Total Returns
without/with charges 10.61% A 4.51% B
Income Securities
9-30-95 Purchase $1,000.00 $18.92064395 52.852 52.852 $1,000.00
9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 52.804 1,085.97
9-30-96 Value before Surr Chg 20.56625705 0.000 52.804 1,085.97
9-30-96 Surrender Charge (60.00) 20.56625705 (2.917) 49.886 1,025.97
Cumulative and Average Annual Total Returns
without/with charges 8.70% A 2.60% B
Money Market
9-30-95 Purchase $1,000.00 $12.67862500 78.873 78.873 $1,000.00
9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 78.797 1,036.10
9-30-96 Value before Surr Chg 13.14897921 0.000 78.797 1,036.10
9-30-96 Surrender Charge (60.00) 13.14897921 (4.563) 74.234 976.10
Cumulative and Average Annual Total Returns
without/with charges 3.71% A -2.39% B
Precious Metals
9-30-95 Purchase $1,000.00 $14.30299298 69.915 69.915 $1,000.00
9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 69.846 1,009.19
9-30-96 Value before Surr Chg 14.44871469 0.000 69.846 1,009.19
9-30-96 Surrender Charge (60.00) 14.44871469 (4.153) 65.694 949.19
Cumulative and Average Annual Total Returns
without/with charges 1.02% A -5.08% B
Real Estate Securities
9-30-95 Purchase $1,000.00 $17.14662208 58.321 58.321 $1,000.00
9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 58.272 1,189.57
9-30-96 Value before Surr Chg 20.41418251 0.000 58.272 1,189.57
9-30-96 Surrender Charge (60.00) 20.41418251 (2.939) 55.332 1,129.57
Cumulative and Average Annual Total Returns
without/with charges 19.06% A 12.96% B
Rising Dividends
9-30-95 Purchase $1,000.00 $11.76021472 85.032 85.032 $1,000.00
9-30-96 Contract Fee (1.00) 13.75349501 (0.073) 84.960 1,168.49
9-30-96 Value before Surr Chg 13.75349501 0.000 84.960 1,168.49
9-30-96 Surrender Charge (60.00) 13.75349501 (4.363) 80.597 1,108.49
Cumulative and Average Annual Total Returns
without/with charges 16.95% A 10.85% B
Templeton Developing Markets Equity
9-30-95 Purchase $1,000.00 $9.86694826 101.348 101.348 $1,000.00
9-30-96 Contract Fee (1.00) 10.77702435 (0.093) 101.256 1,091.23
9-30-96 Value before Surr Chg 10.77702435 0.000 101.256 1,091.23
9-30-96 Surrender Charge (60.00) 10.77702435 (5.567) 95.688 1,031.23
Cumulative and Average Annual Total Returns
without/with charges 9.22% A 3.12% B
Templeton Global Asset Allocation
9-30-95 Purchase $1,000.00 $10.31547742 96.942 96.942 $1,000.00
9-30-96 Contract Fee (1.00) 11.66530262 (0.086) 96.856 1,129.85
9-30-96 Value before Surr Chg 11.66530262 0.000 96.856 1,129.85
9-30-96 Surrender Charge (60.00) 11.66530262 (5.143) 91.713 1,069.85
Cumulative and Average Annual Total Returns
without/with charges 13.09% A 6.99% B
Templeton Global Growth
9-30-95 Purchase $1,000.00 $11.35313989 88.081 88.081 $1,000.00
9-30-96 Contract Fee (1.00) 12.50397253 (0.080) 88.001 1,100.37
9-30-96 Value before Surr Chg 12.50397253 0.000 88.001 1,100.37
9-30-96 Surrender Charge (60.00) 12.50397253 (4.798) 83.203 1,040.37
Cumulative and Average Annual Total Returns
without/with charges 10.14% A 4.04% B
Templeton Global Income Securities
9-30-95 Purchase $1,000.00 $14.81615304 67.494 67.494 $1,000.00
9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 67.431 1,075.54
9-30-96 Value before Surr Chg 15.95015926 0.000 67.431 1,075.54
9-30-96 Surrender Charge (60.00) 15.95015926 (3.762) 63.669 1,015.54
Cumulative and Average Annual Total Returns
without/with charges 7.65% A 1.55% B
Templeton International Equity
9-30-95 Purchase $1,000.00 $13.46442393 74.270 74.270 $1,000.00
9-30-96 Contract Fee (1.00) 14.80159719 (0.068) 74.202 1,098.31
9-30-96 Value before Surr Chg 14.80159719 0.000 74.202 1,098.31
9-30-96 Surrender Charge (60.00) 14.80159719 (4.054) 70.149 1,038.31
Cumulative and Average Annual Total Returns
without/with charges 9.93% A 3.83% B
Templeton Pacific Growth
9-30-95 Purchase $1,000.00 $13.51540299 73.990 73.990 $1,000.00
9-30-96 Contract Fee (1.00) 14.81034174 (0.068) 73.922 1,094.81
9-30-96 Value before Surr Chg 14.81034174 0.000 73.922 1,094.81
9-30-96 Surrender Charge (60.00) 14.81034174 (4.051) 69.871 1,034.81
Cumulative and Average Annual Total Returns
without/with charges 9.58% A 3.48% B
U.S. Government Securities
9-30-95 Purchase $1,000.00 $15.61931137 64.023 64.023 $1,000.00
9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 63.961 1,029.93
9-30-96 Value before Surr Chg 16.10244905 0.000 63.961 1,029.93
9-30-96 Surrender Charge (60.00) 16.10244905 (3.726) 60.235 969.93
Cumulative and Average Annual Total Returns
without/with charges 3.09% A -3.01% B
Utility Equity
9-30-95 Purchase $1,000.00 $17.90165113 55.861 55.861 $1,000.00
9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 55.810 1,091.70
9-30-96 Value before Surr Chg 19.56116280 0.000 55.810 1,091.70
9-30-96 Surrender Charge (60.00) 19.56116280 (3.067) 52.742 1,031.70
Cumulative and Average Annual Total Returns
without/with charges 9.27% A 3.17% B
Zero Coupon - 2000
9-30-95 Purchase $1,000.00 $17.41377516 57.426 57.426 $1,000.00
9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 57.370 1,027.89
9-30-96 Value before Surr Chg 17.91679072 0.000 57.370 1,027.89
9-30-96 Surrender Charge (60.00) 17.91679072 (3.349) 54.021 967.89
Cumulative and Average Annual Total Returns
without/with charges 2.89% A -3.21% B
Zero Coupon - 2005
9-30-95 Purchase $1,000.00 $19.28096297 51.865 51.865 $1,000.00
9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 51.813 1,011.72
9-30-96 Value before Surr Chg 19.52625010 0.000 51.813 1,011.72
9-30-96 Surrender Charge (60.00) 19.52625010 (3.073) 48.741 951.72
Cumulative and Average Annual Total Returns
without/with charges 1.27% A -4.83% B
Zero Coupon - 2010
9-30-95 Purchase $1,000.00 $19.93315414 50.168 50.168 $1,000.00
9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 50.118 1,002.50
9-30-96 Value before Surr Chg 20.00293397 0.000 50.118 1,002.50
9-30-96 Surrender Charge (60.00) 20.00293397 (3.000) 47.118 942.50
Cumulative and Average Annual Total Returns
without/with charges 0.35% A -5.75% B
<FN>
A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
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 Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
<S> <C> <C> <C> <C> <C> <C>
Growth and Income
9-30-91 Purchase $1,000.00 $11.11307938 89.984 89.984 $1,000.00
9-30-92 Contract Fee (1.00) 11.77981877 (0.085) 89.899 1,059.00
9-30-93 Contract Fee (1.00) 12.98367595 (0.077) 89.822 1,166.22
9-30-94 Contract Fee (1.00) 13.30137398 (0.075) 89.747 1,193.76
9-30-95 Contract Fee (1.00) 16.06727515 (0.062) 89.685 1,440.99
9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 89.629 1,612.96
9-30-96 Value before Surr Chg 17.99590776 0.000 89.629 1,612.96
9-30-96 Surrender Charge (34.00) 17.99590776 (1.889) 87.740 1,578.96
Cumulative Total Returns without/with chrgs. 61.93% A 57.90% C
Avg. Annual Total Returns without/with chrgs. 10.12% B 9.57% D
High Income
9-30-91 Purchase $1,000.00 $11.09352674 90.143 90.143 $1,000.00
9-30-92 Contract Fee (1.00) 13.04375499 (0.077) 90.066 1,174.80
9-30-93 Contract Fee (1.00) 14.40649362 (0.069) 89.997 1,296.54
9-30-94 Contract Fee (1.00) 14.50024299 (0.069) 89.928 1,303.97
9-30-95 Contract Fee (1.00) 16.74221226 (0.060) 89.868 1,504.59
9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 89.814 1,663.20
9-30-96 Value before Surr Chg 18.51829760 0.000 89.814 1,663.20
9-30-96 Surrender Charge (34.00) 18.51829760 (1.836) 87.978 1,629.20
Cumulative Total Returns without/with chrgs. 66.93% A 62.92% C
Avg. Annual Total Returns without/with chrgs. 10.79% B 10.25% D
Income Securities
9-30-91 Purchase $1,000.00 $12.94854349 77.229 77.229 $1,000.00
9-30-92 Contract Fee (1.00) 15.04352509 (0.066) 77.162 1,160.79
9-30-93 Contract Fee (1.00) 17.17256419 (0.058) 77.104 1,324.07
9-30-94 Contract Fee (1.00) 16.76538096 (0.060) 77.044 1,291.68
9-30-95 Contract Fee (1.00) 18.92064395 (0.053) 76.992 1,456.73
9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 76.943 1,582.43
9-30-96 Value before Surr Chg 20.56625705 0.000 76.943 1,582.43
9-30-96 Surrender Charge (34.00) 20.56625705 (1.653) 75.290 1,548.43
Cumulative Total Returns without/with chrgs. 58.83% A 54.84% C
Avg. Annual Total Returns without/with chrgs. 9.70% B 9.14% D
Money Market
9-30-91 Purchase $1,000.00 $11.62427827 86.027 86.027 $1,000.00
9-30-92 Contract Fee (1.00) 11.85934433 (0.084) 85.943 1,019.22
9-30-93 Contract Fee (1.00) 11.98111664 (0.083) 85.859 1,028.69
9-30-94 Contract Fee (1.00) 12.18621456 (0.082) 85.777 1,045.30
9-30-95 Contract Fee (1.00) 12.67862500 (0.079) 85.698 1,086.53
9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 85.622 1,125.84
9-30-96 Value before Surr Chg 13.14897921 0.000 85.622 1,125.84
9-30-96 Surrender Charge (34.00) 13.14897921 (2.586) 83.036 1,091.84
Cumulative Total Returns without/with chrgs. 13.12% A 9.18% C
Avg. Annual Total Returns without/with chrgs. 2.50% B 1.77% D
Precious Metals
9-30-91 Purchase $1,000.00 $10.42792473 95.896 95.896 $1,000.00
9-30-92 Contract Fee (1.00) 10.41331878 (0.096) 95.800 997.60
9-30-93 Contract Fee (1.00) 11.85475192 (0.084) 95.716 1,134.69
9-30-94 Contract Fee (1.00) 15.18429112 (0.066) 95.650 1,452.38
9-30-95 Contract Fee (1.00) 14.30299298 (0.070) 95.580 1,367.08
9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 95.511 1,380.01
9-30-96 Value before Surr Chg 14.44871469 0.000 95.511 1,380.01
9-30-96 Surrender Charge (34.00) 14.44871469 (2.353) 93.158 1,346.01
Cumulative Total Returns without/with chrgs. 38.56% A 34.60% C
Avg. Annual Total Returns without/with chrgs. 6.74% B 6.12% D
Real Estate Securities
9-30-91 Purchase $1,000.00 $10.99590200 90.943 90.943 $1,000.00
9-30-92 Contract Fee (1.00) 12.26872901 (0.082) 90.861 1,114.75
9-30-93 Contract Fee (1.00) 16.07323172 (0.062) 90.799 1,459.44
9-30-94 Contract Fee (1.00) 15.29416684 (0.065) 90.734 1,387.70
9-30-95 Contract Fee (1.00) 17.14662208 (0.058) 90.676 1,554.78
9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 90.627 1,850.07
9-30-96 Value before Surr Chg 20.41418251 0.000 90.627 1,850.07
9-30-96 Surrender Charge (34.00) 20.41418251 (1.666) 88.961 1,816.07
Cumulative Total Returns without/with chrgs. 85.65% A 81.61% C
Avg. Annual Total Returns without/with chrgs. 13.17% B 12.67% D
Templeton Global Income Securities
9-30-91 Purchase $1,000.00 $12.49203165 80.051 80.051 $1,000.00
9-30-92 Contract Fee (1.00) 12.51234189 (0.080) 79.971 1,000.63
9-30-93 Contract Fee (1.00) 14.11181721 (0.071) 79.900 1,127.54
9-30-94 Contract Fee (1.00) 13.72647440 (0.073) 79.827 1,095.75
9-30-95 Contract Fee (1.00) 14.81615304 (0.067) 79.760 1,181.73
9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 79.697 1,271.18
9-30-96 Value before Surr Chg 15.95015926 0.000 79.697 1,271.18
9-30-96 Surrender Charge (34.00) 15.95015926 (2.132) 77.566 1,237.18
Cumulative Total Returns without/with chrgs. 27.68% A 23.72% C
Avg. Annual Total Returns without/with chrgs. 5.01% B 4.35% D
U.S. Government Securities
9-30-91 Purchase $1,000.00 $12.17838777 82.113 82.113 $1,000.00
9-30-92 Contract Fee (1.00) 13.53894292 (0.074) 82.039 1,110.72
9-30-93 Contract Fee (1.00) 14.66831622 (0.068) 81.971 1,202.37
9-30-94 Contract Fee (1.00) 13.70372342 (0.073) 81.898 1,122.30
9-30-95 Contract Fee (1.00) 15.61931137 (0.064) 81.834 1,278.19
9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 81.772 1,316.72
9-30-96 Value before Surr Chg 16.10244905 0.000 81.772 1,316.72
9-30-96 Surrender Charge (34.00) 16.10244905 (2.111) 79.660 1,282.72
Cumulative Total Returns without/with chrgs. 32.22% A 28.27% C
Avg. Annual Total Returns without/with chrgs. 5.75% B 5.11% D
Utility Equity
9-30-91 Purchase $1,000.00 $13.69965004 72.995 72.995 $1,000.00
9-30-92 Contract Fee (1.00) 15.56051892 (0.064) 72.930 1,134.83
9-30-93 Contract Fee (1.00) 18.00360267 (0.056) 72.875 1,312.01
9-30-94 Contract Fee (1.00) 14.77614344 (0.068) 72.807 1,075.81
9-30-95 Contract Fee (1.00) 17.90165113 (0.056) 72.751 1,302.37
9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 72.700 1,422.10
9-30-96 Value before Surr Chg 19.56116280 0.000 72.700 1,422.10
9-30-96 Surrender Charge (34.00) 19.56116280 (1.738) 70.962 1,388.10
Cumulative Total Returns without/with chrgs. 42.79% A 38.81% C
Avg. Annual Total Returns without/with chrgs. 7.38% B 6.78% D
Zero Coupon - 2000
9-30-91 Purchase $1,000.00 $12.59260278 79.412 79.412 $1,000.00
9-30-92 Contract Fee (1.00) 14.71494891 (0.068) 79.344 1,167.54
9-30-93 Contract Fee (1.00) 16.81558014 (0.059) 79.284 1,333.21
9-30-94 Contract Fee (1.00) 15.40589641 (0.065) 79.219 1,220.45
9-30-95 Contract Fee (1.00) 17.41377516 (0.057) 79.162 1,378.51
9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 79.106 1,417.33
9-30-96 Value before Surr Chg 17.91679072 0.000 79.106 1,417.33
9-30-96 Surrender Charge (34.00) 17.91679072 (1.898) 77.208 1,383.33
Cumulative Total Returns without/with chrgs. 42.28% A 38.33% C
Avg. Annual Total Returns without/with chrgs. 7.31% B 6.71% D
Zero Coupon - 2005
9-30-91 Purchase $1,000.00 $12.79857996 78.134 78.134 $1,000.00
9-30-92 Contract Fee (1.00) 14.90429381 (0.067) 78.067 1,163.53
9-30-93 Contract Fee (1.00) 18.28851943 (0.055) 78.012 1,426.72
9-30-94 Contract Fee (1.00) 15.78150738 (0.063) 77.949 1,230.15
9-30-95 Contract Fee (1.00) 19.28096297 (0.052) 77.897 1,501.92
9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 77.845 1,520.03
9-30-96 Value before Surr Chg 19.52625010 0.000 77.845 1,520.03
9-30-96 Surrender Charge (34.00) 19.52625010 (1.741) 76.104 1,486.03
Cumulative Total Returns without/with chrgs. 52.57% A 48.60% C
Avg. Annual Total Returns without/with chrgs. 8.82% B 8.24% D
Zero Coupon - 2010
9-30-91 Purchase $1,000.00 $12.57337363 79.533 79.533 $1,000.00
9-30-92 Contract Fee (1.00) 14.15737846 (0.071) 79.463 1,124.98
9-30-93 Contract Fee (1.00) 18.48051806 (0.054) 79.408 1,467.51
9-30-94 Contract Fee (1.00) 15.25790641 (0.066) 79.343 1,210.61
9-30-95 Contract Fee (1.00) 19.93315414 (0.050) 79.293 1,580.55
9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 79.243 1,585.09
9-30-96 Value before Surr Chg 20.00293397 0.000 79.243 1,585.09
9-30-96 Surrender Charge (34.00) 20.00293397 (1.700) 77.543 1,551.09
Cumulative Total Returns without/with chrgs. 59.09% A 55.11% C
Avg. Annual Total Returns without/with chrgs. 9.73% B 9.18% D
<FN>
A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = [(A+1)^(1/5 Years)]-1
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 Sub-Account Inception
Valuation Date as of September 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
9-30-96 Contract Fee (1.00) 10.84251110 (0.092) 99.908 1,083.25
9-30-96 Value before Surr Chg 10.84251110 0.000 99.908 1,083.25
9-30-96 Surrender Charge (60.00) 10.84251110 (5.534) 94.374 1,023.25
Cumulative Total Returns without/with chgs. 8.43% A 2.33% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Growth and Income
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 9.59756692 (0.104) 99.896 958.76
1-24-91 Contract Fee (1.00) 10.03104257 (0.100) 99.796 1,001.06
1-24-92 Contract Fee (1.00) 12.16171947 (0.082) 99.714 1,212.69
1-24-93 Contract Fee (1.00) 12.57661487 (0.080) 99.634 1,253.06
1-24-94 Contract Fee (1.00) 14.09886247 (0.071) 99.563 1,403.73
1-24-95 Contract Fee (1.00) 13.27759299 (0.075) 99.488 1,320.96
1-24-96 Contract Fee (1.00) 17.25393143 (0.058) 99.430 1,715.56
9-30-96 Value before Surr Chg 17.99590776 0.000 99.430 1,789.34
9-30-96 Contract Fee (1.00) 17.99590776 (0.056) 99.375 1,788.34
9-30-96 Surrender Charge 0.00 17.99590776 0.000 99.375 1,788.34
Cumulative Total Returns without/with chgs. 79.96% A 78.83% C
Avg. Annual Total Returns without/with chgs. 7.94% B 7.85% D
High Income
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 9.98265449 (0.100) 99.900 997.27
1-24-91 Contract Fee (1.00) 8.98103976 (0.111) 99.788 896.20
1-24-92 Contract Fee (1.00) 11.85616038 (0.084) 99.704 1,182.11
1-24-93 Contract Fee (1.00) 13.39874388 (0.075) 99.630 1,334.91
1-24-94 Contract Fee (1.00) 15.29126669 (0.065) 99.564 1,522.46
1-24-95 Contract Fee (1.00) 14.64571855 (0.068) 99.496 1,457.19
1-24-96 Contract Fee (1.00) 17.40215300 (0.057) 99.438 1,730.44
9-30-96 Value before Surr Chg 18.51829760 0.000 99.438 1,841.43
9-30-96 Contract Fee (1.00) 18.51829760 (0.054) 99.384 1,840.43
9-30-96 Surrender Charge 0.00 18.51829760 0.000 99.384 1,840.43
Cumulative Total Returns without/with chgs. 85.18% A 84.04% C
Avg. Annual Total Returns without/with chgs. 8.35% B 8.26% D
Income Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.70345941 (0.093) 99.907 1,069.35
1-24-91 Contract Fee (1.00) 9.93454622 (0.101) 99.806 991.53
1-24-92 Contract Fee (1.00) 13.99562082 (0.071) 99.734 1,395.85
1-24-93 Contract Fee (1.00) 15.30544228 (0.065) 99.669 1,525.48
1-24-94 Contract Fee (1.00) 17.64961404 (0.057) 99.612 1,758.12
1-24-95 Contract Fee (1.00) 16.27638185 (0.061) 99.551 1,620.33
1-24-96 Contract Fee (1.00) 20.08267334 (0.050) 99.501 1,998.25
9-30-96 Value before Surr Chg 20.56625705 0.000 99.501 2,046.37
9-30-96 Contract Fee (1.00) 20.56625705 (0.049) 99.453 2,045.37
9-30-96 Surrender Charge 0.00 20.56625705 0.000 99.453 2,045.37
Cumulative Total Returns without/with chgs. 105.66% A 104.54% C
Avg. Annual Total Returns without/with chgs. 9.83% B 9.76% D
Money Market
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.67178511 (0.094) 99.906 1,066.18
1-24-91 Contract Fee (1.00) 11.31010498 (0.088) 99.818 1,128.95
1-24-92 Contract Fee (1.00) 11.72881708 (0.085) 99.733 1,169.75
1-24-93 Contract Fee (1.00) 11.90009827 (0.084) 99.649 1,185.83
1-24-94 Contract Fee (1.00) 12.02348344 (0.083) 99.565 1,197.12
1-24-95 Contract Fee (1.00) 12.32338409 (0.081) 99.484 1,225.98
1-24-96 Contract Fee (1.00) 12.84105599 (0.078) 99.406 1,276.48
9-30-96 Value before Surr Chg 13.14897921 0.000 99.406 1,307.09
9-30-96 Contract Fee (1.00) 13.14897921 (0.076) 99.330 1,306.09
9-30-96 Surrender Charge 0.00 13.14897921 0.000 99.330 1,306.09
Cumulative Total Returns without/with chgs. 31.49% A 30.61% C
Avg. Annual Total Returns without/with chgs. 3.63% B 3.53% D
Precious Metals
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 12.88562226 (0.078) 99.922 1,287.56
1-24-91 Contract Fee (1.00) 9.76834317 (0.102) 99.820 975.08
1-24-92 Contract Fee (1.00) 10.91292825 (0.092) 99.728 1,088.33
1-24-93 Contract Fee (1.00) 9.12197464 (0.110) 99.619 908.72
1-24-94 Contract Fee (1.00) 14.41516281 (0.069) 99.549 1,435.02
1-24-95 Contract Fee (1.00) 12.96347704 (0.077) 99.472 1,289.51
1-24-96 Contract Fee (1.00) 15.88612084 (0.063) 99.409 1,579.23
9-30-96 Value before Surr Chg 14.44871469 0.000 99.409 1,436.34
9-30-96 Contract Fee (1.00) 14.44871469 (0.069) 99.340 1,435.34
9-30-96 Surrender Charge 0.00 14.44871469 0.000 99.340 1,435.34
Cumulative Total Returns without/with chgs. 44.49% A 43.53% C
Avg. Annual Total Returns without/with chgs. 4.90% B 4.81% D
Real Estate Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.13076509 (0.099) 99.901 1,012.08
1-24-91 Contract Fee (1.00) 9.36020172 (0.107) 99.794 934.10
1-24-92 Contract Fee (1.00) 12.25114822 (0.082) 99.713 1,221.60
1-24-93 Contract Fee (1.00) 13.49614031 (0.074) 99.639 1,344.74
1-24-94 Contract Fee (1.00) 15.30618064 (0.065) 99.573 1,524.09
1-24-95 Contract Fee (1.00) 14.92840438 (0.067) 99.506 1,485.47
1-24-96 Contract Fee (1.00) 18.04447622 (0.055) 99.451 1,794.54
9-30-96 Value before Surr Chg 20.41418251 0.000 99.451 2,030.21
9-30-96 Contract Fee (1.00) 20.41418251 (0.049) 99.402 2,029.21
9-30-96 Surrender Charge 0.00 20.41418251 0.000 99.402 2,029.21
Cumulative Total Returns without/with chgs. 104.14% A 102.92% C
Avg. Annual Total Returns without/with chgs. 9.73% B 9.64% D
Rising Dividends
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 10.68876950 (0.094) 99.906 1,067.88
1-27-94 Contract Fee (1.00) 10.36623339 (0.096) 99.810 1,034.65
1-27-95 Contract Fee (1.00) 9.94675745 (0.101) 99.709 991.79
1-27-96 Contract Fee (1.00) 12.48933274 (0.080) 99.629 1,244.30
9-30-96 Value before Surr Chg 13.75349501 0.000 99.629 1,370.25
9-30-96 Contract Fee (1.00) 13.75349501 (0.073) 99.557 1,369.25
9-30-96 Surrender Charge (34.00) 13.75349501 (2.472) 97.085 1,335.25
Cumulative Total Returns without/with chgs. 37.53% A 33.53% C
Avg. Annual Total Returns without/with chgs. 7.05% B 6.37% D
Small Cap
11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
9-30-96 Value before Surr Chg 12.40823708 0.000 100.000 1,240.82
9-30-96 Contract Fee (1.00) 12.40823708 (0.081) 99.919 1,239.82
9-30-96 Surrender Charge (60.00) 12.40823708 (4.835) 95.084 1,179.82
Cumulative Total Returns without/with chgs. 24.08% A 17.98% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Templeton Developing Markets Equity
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Contract Fee (1.00) 8.62058630 (0.116) 99.884 861.06
3-15-96 Contract Fee (1.00) 10.27729571 (0.097) 99.787 1,025.54
9-30-96 Value before Surr Chg 10.77702435 0.000 99.787 1,075.40
9-30-96 Contract Fee (1.00) 10.77702435 (0.093) 99.694 1,074.40
9-30-96 Surrender Charge (51.00) 10.77702435 (4.732) 94.962 1,023.40
Cumulative Total Returns without/with chgs. 7.77% A 2.34% C
Avg. Annual Total Returns without/with chgs. 2.98% B 0.91% D
Templeton Global Asset Allocation
5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
5-1-96 Contract Fee (1.00) 11.24184599 (0.089) 99.911 1,123.18
9-30-96 Value before Surr Chg 11.66530262 0.000 99.911 1,165.49
9-30-96 Contract Fee (1.00) 11.66530262 (0.086) 99.825 1,164.49
9-30-96 Surrender Charge (51.00) 11.66530262 (4.372) 95.453 1,113.49
Cumulative Total Returns without/with chgs. 16.65% A 11.35% C
Avg. Annual Total Returns without/with chgs. 11.46% B 7.87% D
Templeton Global Growth
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Contract Fee (1.00) 10.09452231 (0.099) 99.901 1,008.45
3-15-96 Contract Fee (1.00) 11.79417892 (0.085) 99.816 1,177.25
9-30-96 Value before Surr Chg 12.50397253 0.000 99.816 1,248.10
9-30-96 Contract Fee (1.00) 12.50397253 (0.080) 99.736 1,247.10
9-30-96 Surrender Charge (51.00) 12.50397253 (4.079) 95.657 1,196.10
Cumulative Total Returns without/with chgs. 25.04% A 19.61% C
Avg. Annual Total Returns without/with chgs. 9.17% B 7.28% D
Templeton Global Income Securities
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 10.85157001 (0.092) 99.908 1,084.16
1-24-91 Contract Fee (1.00) 11.76337661 (0.085) 99.823 1,174.25
1-24-92 Contract Fee (1.00) 12.92541183 (0.077) 99.745 1,289.25
1-24-93 Contract Fee (1.00) 12.75002133 (0.078) 99.667 1,270.76
1-24-94 Contract Fee (1.00) 14.76765782 (0.068) 99.599 1,470.85
1-24-95 Contract Fee (1.00) 13.50498150 (0.074) 99.525 1,344.09
1-24-96 Contract Fee (1.00) 15.35232035 (0.065) 99.460 1,526.94
9-30-96 Value before Surr Chg 15.95015926 0.000 99.460 1,586.41
9-30-96 Contract Fee (1.00) 15.95015926 (0.063) 99.397 1,585.41
9-30-96 Surrender Charge 0.00 15.95015926 0.000 99.397 1,585.41
Cumulative Total Returns without/with chgs. 59.50% A 58.54% C
Avg. Annual Total Returns without/with chgs. 6.26% B 6.18% D
Templeton International Equity
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 9.53509236 (0.105) 99.895 952.51
1-27-94 Contract Fee (1.00) 12.85431852 (0.078) 99.817 1,283.08
1-27-95 Contract Fee (1.00) 11.91221607 (0.084) 99.733 1,188.05
1-27-96 Contract Fee (1.00) 13.52801052 (0.074) 99.659 1,348.19
9-30-96 Value before Surr Chg 14.80159719 0.000 99.659 1,475.12
9-30-96 Contract Fee (1.00) 14.80159719 (0.068) 99.592 1,474.12
9-30-96 Surrender Charge (34.00) 14.80159719 (2.297) 97.295 1,440.12
Cumulative Total Returns without/with chgs. 48.02% A 44.01% C
Avg. Annual Total Returns without/with chgs. 8.74% B 8.11% D
Templeton International Smaller Companies
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
9-30-96 Value before Surr Chg 10.34560408 0.000 100.000 1,034.56
9-30-96 Contract Fee (1.00) 10.34560408 (0.097) 99.903 1,033.56
9-30-96 Surrender Charge (60.00) 10.34560408 (5.800) 94.104 973.56
Cumulative Total Returns without/with chgs. 3.46% A -2.64% C
Avg. Annual Total Returns without/with chgs. NA B NA D
Templeton Pacific Growth
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Contract Fee (1.00) 9.91965141 (0.101) 99.899 990.97
1-27-94 Contract Fee (1.00) 14.07652865 (0.071) 99.828 1,405.23
1-27-95 Contract Fee (1.00) 11.91556247 (0.084) 99.744 1,188.51
1-27-96 Contract Fee (1.00) 14.44474860 (0.069) 99.675 1,439.78
9-30-96 Value before Surr Chg 14.81034174 0.000 99.675 1,476.22
9-30-96 Contract Fee (1.00) 14.81034174 (0.068) 99.607 1,475.22
9-30-96 Surrender Charge (34.00) 14.81034174 (2.296) 97.312 1,441.22
Cumulative Total Returns without/with chgs. 48.10% A 44.12% C
Avg. Annual Total Returns without/with chgs. 8.76% B 8.12% D
U.S. Government Securities
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.29864074 (0.097) 99.903 1,028.86
3-14-91 Contract Fee (1.00) 11.44148140 (0.087) 99.815 1,142.04
3-14-92 Contract Fee (1.00) 12.36677937 (0.081) 99.735 1,233.40
3-14-93 Contract Fee (1.00) 14.05074266 (0.071) 99.663 1,400.35
3-14-94 Contract Fee (1.00) 14.20297756 (0.070) 99.593 1,414.52
3-14-95 Contract Fee (1.00) 14.59412892 (0.069) 99.525 1,452.47
3-14-96 Contract Fee (1.00) 15.82460547 (0.063) 99.461 1,573.94
9-30-96 Value before Surr Chg 16.10244905 0.000 99.461 1,601.57
9-30-96 Contract Fee (1.00) 16.10244905 (0.062) 99.399 1,600.57
9-30-96 Surrender Charge 0.00 16.10244905 0.000 99.399 1,600.57
Cumulative Total Returns without/with chgs. 61.02% A 60.06% C
Avg. Annual Total Returns without/with chgs. 6.51% B 6.43% D
Utility Equity
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Contract Fee (1.00) 11.47363453 (0.087) 99.913 1,146.36
1-24-91 Contract Fee (1.00) 11.95102656 (0.084) 99.829 1,193.06
1-24-92 Contract Fee (1.00) 14.20139407 (0.070) 99.759 1,416.71
1-24-93 Contract Fee (1.00) 15.91822229 (0.063) 99.696 1,586.98
1-24-94 Contract Fee (1.00) 16.43119760 (0.061) 99.635 1,637.12
1-24-95 Contract Fee (1.00) 15.48692698 (0.065) 99.571 1,542.04
1-24-96 Contract Fee (1.00) 19.69346882 (0.051) 99.520 1,959.89
9-30-96 Value before Surr Chg 19.56116280 0.000 99.520 1,946.72
9-30-96 Contract Fee (1.00) 19.56116280 (0.051) 99.469 1,945.72
9-30-96 Surrender Charge 0.00 19.56116280 0.000 99.469 1,945.72
Cumulative Total Returns without/with chgs. 95.61% A 94.57% C
Avg. Annual Total Returns without/with chgs. 9.12% B 9.04% D
Zero Coupon - 2000
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.37748201 (0.096) 99.904 1,036.75
3-14-91 Contract Fee (1.00) 11.49325260 (0.087) 99.817 1,147.22
3-14-92 Contract Fee (1.00) 12.63019476 (0.079) 99.737 1,259.70
3-14-93 Contract Fee (1.00) 15.48457708 (0.065) 99.673 1,543.39
3-14-94 Contract Fee (1.00) 15.97181577 (0.063) 99.610 1,590.96
3-14-95 Contract Fee (1.00) 16.16440029 (0.062) 99.548 1,609.14
3-14-96 Contract Fee (1.00) 17.74484226 (0.056) 99.492 1,765.47
9-30-96 Value before Surr Chg 17.91679072 0.000 99.492 1,782.58
9-30-96 Contract Fee (1.00) 17.91679072 (0.056) 99.436 1,781.58
9-30-96 Surrender Charge 0.00 17.91679072 0.000 99.436 1,781.58
Cumulative Total Returns without/with chgs. 79.17% A 78.16% C
Avg. Annual Total Returns without/with chgs. 8.03% B 7.95% D
Zero Coupon - 2005
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.38882453 (0.096) 99.904 1,037.88
3-14-91 Contract Fee (1.00) 11.53456820 (0.087) 99.817 1,151.35
3-14-92 Contract Fee (1.00) 12.62819047 (0.079) 99.738 1,259.51
3-14-93 Contract Fee (1.00) 16.36793990 (0.061) 99.677 1,631.50
3-14-94 Contract Fee (1.00) 16.86182251 (0.059) 99.617 1,679.73
3-14-95 Contract Fee (1.00) 17.12592868 (0.058) 99.559 1,705.04
3-14-96 Contract Fee (1.00) 19.37651757 (0.052) 99.507 1,928.11
9-30-96 Value before Surr Chg 19.52625010 0.000 99.507 1,943.01
9-30-96 Contract Fee (1.00) 19.52625010 (0.051) 99.456 1,942.01
9-30-96 Surrender Charge 0.00 19.52625010 0.000 99.456 1,942.01
Cumulative Total Returns without/with chgs. 95.26% A 94.20% C
Avg. Annual Total Returns without/with chgs. 9.26% B 9.18% D
Zero Coupon - 2010
3-14-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-14-90 Contract Fee (1.00) 10.25922011 (0.097) 99.903 1,024.92
3-14-91 Contract Fee (1.00) 11.34740047 (0.088) 99.814 1,132.63
3-14-92 Contract Fee (1.00) 12.25923536 (0.082) 99.733 1,222.65
3-14-93 Contract Fee (1.00) 16.12714811 (0.062) 99.671 1,607.41
3-14-94 Contract Fee (1.00) 16.82866376 (0.059) 99.611 1,676.33
3-14-95 Contract Fee (1.00) 17.03620553 (0.059) 99.553 1,696.00
3-14-96 Contract Fee (1.00) 19.87163939 (0.050) 99.502 1,977.28
9-30-96 Value before Surr Chg 20.00293397 0.000 99.502 1,990.34
9-30-96 Contract Fee (1.00) 20.00293397 (0.050) 99.452 1,989.34
9-30-96 Surrender Charge 0.00 20.00293397 0.000 99.452 1,989.34
Cumulative Total Returns without/with chgs. 100.03% A 98.93% C
Avg. Annual Total Returns without/with chgs. 9.61% B 9.53% D
<FN>
A = (Unit Value as of September 30, 1996 - Unit Value at Purchase)/Unit Value at Purchase
B = [(A+1)^(1/Years since Inception)]-1
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>
<CAPTION>
FRANKLIN VALUEMARK IV
ALLIANZ VARIABLE ACCOUNT B
TOTAL RETURNS FOR THE PERIOD ENDED 9/30/96
COLUMN I FUND PERFORMANCE
Original Purchase as of September 30, 1995
Valuation Date as of September 30, 1996
Lump Sum Investment of $10,000
FRANKLIN MONEY MARKET PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/95 10,000 137 137 10,137 0 10,000 0 10,000 137 10,137 10,137
09/30/96 10,000 389 526 10,527 0 10,000 0 10,000 527 10,527 10,527
Total 0
Total Return 5.27%
Average Annual Total Return 5.27%
FRANKLIN HIGH INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,278 0 10,278 0 10,278 752
09/30/96 10,000 903 903 10,903 48 10,218 51 10,269 959 11,229 829
Total 48
Total Return 12.29%
Average Annual Total Return 12.29%
TEMPLETON GLOBAL INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,450 0 10,450 0 10,450 776
09/30/96 10,000 804 804 10,804 0 10,085 0 10,085 842 10,929 841
Total 0
Total Return 9.29%
Average Annual Total Return 9.29%
FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,409 0 10,409 0 10,409 743
09/30/96 10,000 722 722 10,722 0 9,717 0 9,717 747 10,465 801
Total 0
Total Return 4.65%
Average Annual Total Return 4.65%
FRANKLIN ZERO COUPON PORTFOLIO - 2000
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,480 0 10,480 0 10,480 666
09/30/96 10,000 574 574 10,574 6 9,847 6 9,853 592 10,444 707
Total 6
Total Return 4.44%
Average Annual Total Return 4.44%
FRANKLIN ZERO COUPON PORTFOLIO - 2005
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,822 0 10,822 0 10,822 623
09/30/96 10,000 536 536 10,536 0 9,720 0 9,720 560 10,280 659
Total 0
Total Return 2.80%
Average Annual Total Return 2.80%
FRANKLIN ZERO COUPON PORTFOLIO - 2010
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 11,226 0 11,226 0 11,226 622
09/30/96 10,000 546 546 10,546 148 9,452 157 9,609 578 10,187 671
Total 148
Total Return 1.87%
Average Annual Total Return 1.87%
FRANKLIN GROWTH AND INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,746 0 10,746 0 10,746 627
09/30/96 10,000 254 254 10,254 901 10,194 916 11,111 259 11,370 699
Total 901
Total Return 13.70%
Average Annual Total Return 13.70%
FRANKLIN INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,431 0 10,431 0 10,431 633
09/30/96 10,000 553 553 10,553 92 10,361 96 10,457 577 11,035 674
Total 92
Total Return 10.35%
Average Annual Total Return 10.35%
FRANKLIN REAL ESTATE SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,514 0 10,514 0 10,514 604
09/30/96 10,000 470 470 10,470 0 11,583 0 11,583 502 12,087 630
Total 0
Total Return 20.87%
Average Annual Total Return 20.87%
FRANKLIN RISING DIVIDENDS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,630 0 10,630 0 10,630 840
09/30/96 10,000 234 234 10,234 0 11,629 0 11,629 243 11,873 857
Total 0
Total Return 18.73%
Average Annual Total Return 18.73%
FRANKLIN UTILITY EQUITY PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,901 0 10,901 0 10,901 609
09/30/96 10,000 557 557 10,557 0 10,512 0 10,512 570 11,082 642
Total 0
Total Return 10.82%
Average Annual Total Return 10.82%
FRANKLIN PRECIOUS METALS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 9,839 0 9,839 0 9,839 699
09/30/96 10,000 137 137 10,137 126 10,007 118 10,125 129 10,255 716
Total 126
Total Return 2.55%
Average Annual Total Return 2.55%
TEMPLETON DEVELOPING MARKETS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 9,731 0 9,731 0 9,731 995
09/30/96 10,000 100 100 10,100 184 10,806 183 10,989 99 11,088 1,021
Total 184
Total Return 10.88%
Average Annual Total Return 10.88%
TEMPLETON GLOBAL GROWTH PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,009 0 10,009 0 10,009 852
09/30/96 10,000 175 175 10,175 175 10,826 177 11,003 177 11,181 880
Total 175
Total Return 11.81%
Average Annual Total Return 11.81%
TEMPLETON INTERNATIONAL EQUITY PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 9,852 0 9,852 0 9,852 740
09/30/96 10,000 281 281 10,281 344 10,525 349 10,874 285 11,160 784
Total 344
Total Return 11.60%
Average Annual Total Return 11.60%
TEMPLETON PACIFIC GROWTH PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 0 0 10,000 0 10,087 0 10,087 0 10,087 725
09/30/96 10,000 319 319 10,319 185 10,624 183 10,807 316 11,124 759
Total 185
Total Return 11.24%
Average Annual Total Return 11.24%
TEMPLETON GLOBAL ASSET ALLOCATION PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/95 10,000 173 173 10,173 0 10,125 0 10,125 174 10,299 979
09/30/96 10,000 5 178 10,178 10 11,270 10 11,281 199 11,480 980
Total 10
Total Return 14.80%
Average Annual Total Return 14.80%
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of September 30, 1991
Valuation Date as of September 30, 1996
FRANKLIN MONEY MARKET PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 10,000 114 114 10,114 0 10,000 0 10,000 114 10,114 10,114
12/31/92 10,000 309 423 10,423 0 10,000 0 10,000 423 10,423 10,423
12/31/93 10,000 264 687 10,687 0 10,000 0 10,000 687 10,687 10,687
12/31/94 10,000 408 1,095 11,095 0 10,000 0 10,000 1,095 11,095 11,095
12/31/95 10,000 637 1,732 11,732 0 10,000 0 10,000 1,732 11,732 11,732
09/30/96 10,000 450 2,183 12,183 0 10,000 0 10,000 2,183 12,183 12,183
Total 0
Total Return 21.83%
Average Annual Total Return 4.03%
FRANKLIN HIGH INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,423 0 10,423 0 10,423 984
12/31/92 10,000 528 528 10,528 0 11,585 0 11,585 563 12,148 1,032
12/31/93 10,000 471 999 10,999 0 12,923 0 12,923 1,133 14,057 1,071
12/31/94 10,000 686 1,685 11,685 0 12,018 0 12,018 1,744 13,762 1,127
12/31/95 10,000 1,027 2,711 12,711 0 13,445 0 13,445 3,037 16,481 1,207
09/30/96 10,000 1,448 4,159 14,159 77 13,366 82 13,448 4,556 18,004 1,326
Total 77
Total Return 80.04%
Average Annual Total Return 12.48%
TEMPLETON GLOBAL INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,388 0 10,388 0 10,388 825
12/31/92 10,000 334 334 10,334 126 9,901 122 10,023 323 10,346 862
12/31/93 10,000 430 763 10,763 140 10,982 282 11,264 809 12,072 907
12/31/94 10,000 312 1,075 11,075 0 10,058 258 10,316 1,050 11,366 932
12/31/95 10,000 455 1,531 11,531 0 11,106 285 11,391 1,643 13,034 968
09/30/96 10,000 1,002 2,533 12,533 0 10,718 275 10,993 2,636 13,629 1,049
Total 266
Total Return 36.29%
Average Annual Total Return 6.39%
FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,463 0 10,463 0 10,463 827
12/31/92 10,000 352 352 10,352 7 10,951 8 10,959 372 11,331 856
12/31/93 10,000 438 790 10,790 67 11,514 77 11,591 841 12,431 893
12/31/94 10,000 579 1,368 11,368 0 10,397 70 10,467 1,335 11,801 939
12/31/95 10,000 903 2,271 12,271 0 11,580 77 11,657 2,440 14,098 1,007
09/30/96 10,000 978 3,249 13,249 0 10,811 72 10,883 3,291 14,174 1,084
Total 74
Total Return 41.74%
Average Annual Total Return 7.23%
FRANKLIN ZERO COUPON PORTFOLIO - 2000
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,659 0 10,659 0 10,659 814
12/31/92 10,000 428 428 10,428 0 11,294 0 11,294 471 11,765 848
12/31/93 10,000 524 952 10,952 27 12,563 28 12,591 1,074 13,665 885
12/31/94 10,000 671 1,623 11,623 0 11,082 25 11,107 1,608 12,715 934
12/31/95 10,000 624 2,247 12,247 0 12,799 28 12,828 2,515 15,343 975
09/30/96 10,000 840 3,087 13,087 8 12,026 35 12,061 3,230 15,291 1,035
Total 35
Total Return 52.91%
Average Annual Total Return 8.87%
FRANKLIN ZERO COUPON PORTFOLIO - 2005
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,581 0 10,581 0 10,581 831
12/31/92 10,000 506 506 10,506 0 11,312 0 11,312 569 11,881 872
12/31/93 10,000 455 961 10,961 5 13,355 5 13,361 1,160 14,520 903
12/31/94 10,000 608 1,569 11,569 0 11,429 5 11,433 1,593 13,026 947
12/31/95 10,000 649 2,217 12,217 0 14,435 6 14,441 2,722 17,163 987
09/30/96 10,000 850 3,068 13,068 0 12,965 5 12,970 3,333 16,303 1,044
Total 5
Total Return 63.03%
Average Annual Total Return 10.27%
FRANKLIN ZERO COUPON PORTFOLIO - 2010
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,527 0 10,527 0 10,527 836
12/31/92 10,000 607 607 10,607 0 11,162 0 11,162 680 11,843 887
12/31/93 10,000 831 1,438 11,438 34 13,110 37 13,148 1,711 14,859 948
12/31/94 10,000 621 2,058 12,058 0 10,886 31 10,917 2,041 12,958 995
12/31/95 10,000 486 2,545 12,545 0 15,084 43 15,126 3,376 18,503 1,026
09/30/96 10,000 901 3,445 13,445 244 12,701 294 12,995 3,795 16,790 1,105
Total 278
Total Return 67.90%
Average Annual Total Return 10.92%
FRANKLIN GROWTH AND INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,444 0 10,444 0 10,444 889
12/31/92 10,000 108 108 10,108 1 11,369 1 11,370 119 11,489 898
12/31/93 10,000 100 207 10,207 0 12,436 1 12,437 238 12,675 906
12/31/94 10,000 87 294 10,294 0 11,929 1 11,930 314 12,244 912
12/31/95 10,000 171 465 10,465 373 15,236 430 15,666 598 16,264 949
09/30/96 10,000 385 851 10,851 1,364 14,453 1,795 16,249 959 17,207 1,058
Total 1,738
Total Return 72.07%
Average Annual Total Return 11.47%
FRANKLIN INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,410 0 10,410 0 10,410 819
12/31/92 10,000 485 485 10,485 200 11,179 206 11,385 500 11,885 871
12/31/93 10,000 271 756 10,756 40 12,940 281 13,221 873 14,094 892
12/31/94 10,000 427 1,184 11,184 0 11,720 255 11,974 1,209 13,183 921
12/31/95 10,000 818 2,002 12,002 66 13,489 365 13,854 2,282 16,136 980
09/30/96 10,000 855 2,857 12,857 142 13,399 511 13,910 3,160 17,069 1,043
Total 447
Total Return 70.69%
Average Annual Total Return 11.29%
FRANKLIN REAL ESTATE SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,435 0 10,435 0 10,435 926
12/31/92 10,000 225 225 10,225 0 11,843 0 11,843 252 12,095 946
12/31/93 10,000 160 386 10,386 0 13,926 0 13,926 468 14,394 957
12/31/94 10,000 199 585 10,585 0 14,176 0 14,176 670 14,846 970
12/31/95 10,000 507 1,092 11,092 0 16,111 0 16,111 1,336 17,447 1,003
09/30/96 10,000 780 1,872 11,872 0 17,750 0 17,750 2,306 20,056 1,046
Total 0
Total Return 100.56%
Average Annual Total Return 14.94%
FRANKLIN UTILITY EQUITY PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 10,743 0 10,743 0 10,743 729
12/31/92 10,000 223 223 10,223 1 11,531 1 11,531 241 11,772 744
12/31/93 10,000 252 474 10,474 1 12,493 2 12,495 518 13,013 759
12/31/94 10,000 455 930 10,930 0 10,510 2 10,512 896 11,408 791
12/31/95 10,000 713 1,643 11,643 0 13,047 2 13,049 1,936 14,985 837
09/30/96 10,000 766 2,409 12,409 0 12,580 2 12,582 2,65 0 15,233 883
Total 2
Total Return 52.33%
Average Annual Total Return 8.78%
FRANKLIN PRECIOUS METALS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/91 10,000 0 0 10,000 0 9,800 0 9,800 0 9,800 953
12/31/92 10,000 295 295 10,295 0 8,923 0 8,923 253 9,176 980
12/31/93 10,000 88 383 10,383 0 13,785 0 13,785 495 14,279 988
12/31/94 10,000 88 471 10,471 0 13,432 0 13,432 572 14,004 994
12/31/95 10,000 195 666 10,666 144 13,422 144 13,566 767 14,333 1,018
09/30/96 10,000 200 866 10,866 183 13,651 319 13,970 968 14,938 1,043
Total 328
Total Return 49.38%
Average Annual Total Return 8.36%
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of Sub-Account Inception
Valuation Date as of September 30, 1996
FRANKLIN MONEY MARKET PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 10,000 750 750 10,750 0 10,000 0 10,000 750 10,750 10,750
12/31/90 10,000 818 1,567 11,567 0 10,000 0 10,000 1,567 11,567 11,567
12/31/91 10,000 633 2,200 12,200 0 10,000 0 10,000 2,200 12,200 12,200
12/31/92 10,000 373 2,573 12,573 0 10,000 0 10,000 2,573 12,573 12,573
12/31/93 10,000 319 2,892 12,892 0 10,000 0 10,000 2,892 12,892 12,892
12/31/94 10,000 493 3,385 13,385 0 10,000 0 10,000 3,385 13,385 13,385
12/31/95 10,000 768 4,153 14,153 0 10,000 0 10,000 4,153 14,153 14,153
09/30/96 10,000 543 4,696 14,696 0 10,000 0 10,000 4,696 14,696 14,696
Total 0
Total Return 46.96%
Average Annual Total Return 5.14%
TEMPLETON HIGH INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,130 0 10,130 0 10,130 1,000
12/31/90 10,000 329 329 10,329 0 8,940 0 8,940 311 9,251 1,035
12/31/91 10,000 932 1,261 11,261 0 10,590 0 10,590 1,417 12,007 1,134
12/31/92 10,000 608 1,868 11,868 0 11,770 0 11,770 2,223 13,993 1,189
12/31/93 10,000 543 2,411 12,411 0 13,130 0 13,130 3,062 16,192 1,233
12/31/94 10,000 790 3,201 13,201 0 12,210 0 12,210 3,643 15,853 1,298
12/31/95 10,000 1,183 4,384 14,384 0 13,660 0 13,660 5,325 18,985 1,390
09/30/96 10,000 1,668 6,052 16,052 89 13,580 94 13,674 7,065 20,739 1,527
Total 89
Total Return 107.39%
Average Annual Total Return 9.96%
FRANKLIN GLOBAL INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,930 0 10,930 0 10,930 1,000
12/31/90 10,000 203 203 10,203 0 11,780 0 11,780 224 12,004 1,019
12/31/91 10,000 607 811 10,811 0 12,590 0 12,590 896 13,486 1,071
12/31/92 10,000 433 1,244 11,244 164 12,000 159 12,159 1,273 13,432 1,119
12/31/93 10,000 558 1,802 11,802 181 13,310 366 13,676 1,997 15,673 1,178
12/31/94 10,000 405 2,206 12,206 0 12,190 335 12,525 2,230 14,755 1,210
12/31/95 10,000 591 2,798 12,798 0 13,460 370 13,830 3,090 16,921 1,257
09/30/96 10,000 1,301 4,099 14,099 89 12,990 357 13,347 4,347 17,694 1,362
Total 345
Total Return 76.94%
Average Annual Total Return 7.71%
FRANKLIN U.S. GOVERNMENT SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,540 0 10,540 0 10,540 1,000
12/31/90 10,000 109 109 10,109 1 11,360 1 11,361 119 11,480 1,011
12/31/91 10,000 408 517 10,517 0 12,650 1 12,651 584 13,235 1,046
12/31/92 10,000 445 962 10,962 9 13,240 11 13,251 1,082 14,332 1,082
12/31/93 10,000 554 1,516 11,516 85 13,920 98 14,018 1,706 15,724 1,130
12/31/94 10,000 732 2,247 12,247 0 12,570 89 12,659 2,269 14,928 1,188
12/31/95 10,000 1,142 3,389 13,389 0 14,000 99 14,099 3,733 17,832 1,274
09/30/96 10,000 1,237 4,627 14,627 0 13,070 92 13,162 4,766 17,928 1,372
Total 95
Total Return 79.28%
Average Annual Total Return 8.04%
FRANKLIN ZERO COUPON PORTFOLIO - 2000
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 11,080 0 11,080 0 11,080 1,000
12/31/90 10,000 130 130 10,130 170 11,400 190 11,590 145 11,734 1,029
12/31/91 10,000 387 517 10,517 0 13,100 218 13,318 616 13,933 1,064
12/31/92 10,000 560 1,077 11,077 0 13,880 231 14,111 1,268 15,379 1,108
12/31/93 10,000 685 1,762 11,762 35 15,440 293 15,733 2,130 17,863 1,157
12/31/94 10,000 877 2,639 12,639 0 13,620 259 13,879 2,742 16,621 1,220
12/31/95 10,000 816 3,455 13,455 0 15,730 299 16,029 4,027 20,056 1,275
09/30/96 10,000 1,098 4,553 14,553 11 14,780 292 15,072 4,916 19,988 1,352
Total 216
Total Return 99.88%
Average Annual Total Return 9.61%
FRANKLIN ZERO COUPON PORTFOLIO - 2005
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 11,530 0 11,530 0 11,530 1,000
12/31/90 10,000 142 142 10,142 472 11,150 530 11,680 160 11,840 1,062
12/31/91 10,000 456 598 10,598 0 12,740 606 13,346 719 14,065 1,104
12/31/92 10,000 673 1,271 11,271 0 13,620 648 14,268 1,525 15,793 1,160
12/31/93 10,000 604 1,875 11,875 7 16,080 772 16,852 2,448 19,300 1,200
12/31/94 10,000 808 2,683 12,683 0 13,760 661 14,421 2,893 17,314 1,258
12/31/95 10,000 862 3,545 13,545 0 17,380 834 18,214 4,598 22,812 1,313
09/30/96 10,000 1,130 4,675 14,675 0 15,610 749 16,359 5,311 21,670 1,388
Total 479
Total Return 116.70%
Average Annual Total Return 10.79%
FRANKLIN ZERO COUPON PORTFOLIO - 2010
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 11,610 0 11,610 0 11,610 1,000
12/31/90 10,000 131 131 10,131 249 11,250 280 11,530 147 11,676 1,038
12/31/91 10,000 576 706 10,706 0 12,590 313 12,903 846 13,749 1,092
12/31/92 10,000 793 1,499 11,499 0 13,350 332 13,682 1,785 15,467 1,159
12/31/93 10,000 1,085 2,584 12,584 44 15,680 438 16,118 3,288 19,407 1,238
12/31/94 10,000 810 3,394 13,394 0 13,020 364 13,384 3,540 16,924 1,300
12/31/95 10,000 635 4,030 14,030 0 18,040 504 18,544 5,622 24,166 1,340
09/30/96 10,000 1,176 5,206 15,206 319 15,190 762 15,952 5,977 21,928 1,444
Total 612
Total Return 119.28%
Average Annual Total Return 10.96%
FRANKLIN GROWTH AND INCOME PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,290 0 10,290 0 10,290 1,000
12/31/90 10,000 79 79 10,079 0 9,970 0 9,970 78 10,048 1,008
12/31/91 10,000 203 282 10,282 0 11,750 0 11,750 304 12,054 1,026
12/31/92 10,000 124 406 10,406 1 12,790 1 12,791 468 13,260 1,037
12/31/93 10,000 115 521 10,521 0 13,990 2 13,992 636 14,627 1,046
12/31/94 10,000 100 621 10,621 0 13,420 2 13,422 709 14,131 1,053
12/31/95 10,000 198 819 10,819 430 17,140 497 17,637 1,133 18,770 1,095
09/30/96 10,000 444 1,263 11,263 1,574 16,260 2,072 18,332 1,527 19,859 1,221
Total 2,006
Total Return 98.59%
Average Annual Total Return 9.34%
FRANKLIN INCOME SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,900 0 10,900 0 10,900 1,000
12/31/90 10,000 211 211 10,211 0 9,890 0 9,890 201 10,091 1,020
12/31/91 10,000 921 1,133 11,133 0 12,710 0 12,710 1,289 13,999 1,101
12/31/92 10,000 652 1,785 11,785 268 13,650 277 13,927 2,057 15,983 1,171
12/31/93 10,000 365 2,150 12,150 53 15,800 378 16,178 2,776 18,954 1,200
12/31/94 10,000 575 2,724 12,724 0 14,310 342 14,652 3,077 17,729 1,239
12/31/95 10,000 1,101 3,825 13,825 89 16,470 490 16,960 4,740 21,700 1,318
09/30/96 10,000 1,150 4,974 14,974 191 16,360 687 17,047 5,908 22,955 1,403
Total 601
Total Return 129.55%
Average Annual Total Return 11.42%
FRANKLIN REAL ESTATE SECURITIES PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 10,480 0 10,480 0 10,480 1,000
12/31/90 10,000 148 148 10,148 0 9,090 0 9,090 134 9,224 1,015
12/31/91 10,000 453 601 10,601 0 11,270 0 11,270 639 11,909 1,057
12/31/92 10,000 257 858 10,858 0 12,790 0 12,790 1,014 13,804 1,079
12/31/93 10,000 183 1,041 11,041 0 15,040 0 15,040 1,388 16,428 1,092
12/31/94 10,000 227 1,268 11,268 0 15,310 0 15,310 1,633 16,943 1,107
12/31/95 10,000 579 1,847 11,847 0 17,400 0 17,400 2,512 19,912 1,144
09/30/96 10,000 891 2,738 12,738 0 19,170 0 19,170 3,719 22,889 1,194
Total 0
Total Return 128.89%
Average Annual Total Return 11.38%
FRANKLIN RISING DIVIDENDS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
01/31/93 10,000 0 0 10,000 0 10,860 0 10,860 0 10,860 1,000
01/31/94 10,000 28 28 10,028 0 10,710 0 10,710 29 10,739 1,003
01/31/95 10,000 171 199 10,199 0 10,240 0 10,240 202 10,442 1,020
01/31/96 10,000 246 445 10,445 0 12,910 0 12,910 541 13,451 1,042
09/30/96 10,000 290 735 10,735 0 13,850 0 13,850 881 14,731 1,064
Total 0
Total Return 47.31%
Average Annual Total Return 8.64%
FRANKLIN UTILITY EQUITY PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 12,140 0 12,140 0 12,140 1,000
12/31/90 10,000 98 98 10,098 0 12,260 0 12,260 103 12,363 1,008
12/31/91 10,000 348 446 10,446 0 14,740 0 14,740 535 15,275 1,036
12/31/92 10,000 316 762 10,762 1 15,820 1 15,821 917 16,738 1,058
12/31/93 10,000 358 1,120 11,120 2 17,140 3 17,143 1,359 18,502 1,079
12/31/94 10,000 647 1,767 11,767 0 14,420 3 14,423 1,798 16,220 1,125
12/31/95 10,000 1,014 2,782 12,782 0 17,900 3 17,903 3,403 21,306 1,190
09/30/96 10,000 1,089 3,871 13,871 0 17,260 3 17,263 4,395 21,658 1,255
Total 3
Total Return 116.58%
Average Annual Total Return 10.58%
FRANKLIN PRECIOUS METALS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/89 10,000 0 0 10,000 0 12,430 0 12,430 0 12,430 1,000
12/31/90 10,000 84 84 10,084 68 10,520 59 10,579 72 10,651 1,012
12/31/91 10,000 202 286 10,286 13 10,280 70 10,350 267 10,617 1,033
12/31/92 10,000 320 607 10,607 0 9,360 64 9,424 517 9,941 1,062
12/31/93 10,000 95 701 10,701 0 14,460 99 14,559 912 15,471 1,070
12/31/94 10,000 95 797 10,797 0 14,090 96 14,186 986 15,172 1,077
12/31/95 10,000 211 1,008 11,008 156 14,080 252 14,332 1,196 15,529 1,103
09/30/96 10,000 217 1,225 11,225 199 14,320 443 14,763 1,420 16,184 1,130
Total 437
Total Return 61.84%
Average Annual Total Return 6.47%
TEMPLETON DEVELOPING MARKETS PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/94 10,000 0 0 10,000 0 9,560 0 9,560 0 9,560 1,000
12/31/95 10,000 37 37 10,037 9 9,780 9 9,789 37 9,825 1,005
09/30/96 10,000 100 137 10,137 186 10,860 194 11,054 140 11,194 1,031
Total 194
Total Return 11.94%
Average Annual Total Return 4.53%
TEMPLETON GLOBAL GROWTH PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
12/31/94 10,000 0 0 10,000 0 10,315 0 10,315 0 10,315 984
12/31/95 10,000 59 59 10,059 0 11,565 0 11,565 62 11,627 990
09/30/96 10,000 203 262 10,262 203 12,510 205 12,715 273 12,988 1,022
Total 203
Total Return 29.88%
Average Annual Total Return 10.81%
TEMPLETON INTERNATIONAL EQUITY PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
01/31/93 10,000 0 0 10,000 0 9,630 0 9,630 0 9,630 1,000
01/31/94 10,000 38 38 10,038 0 13,410 0 13,410 51 13,461 1,004
01/31/95 10,000 30 69 10,069 65 12,250 63 12,313 76 12,389 1,011
01/31/96 10,000 226 294 10,294 279 13,770 369 14,139 325 14,464 1,050
09/30/96 10,000 399 693 10,693 488 14,230 877 15,107 741 15,848 1,114
Total 833
Total Return 58.48%
Average Annual Total Return 10.35%
TEMPLETON PACIFIC GROWTH PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
01/31/93 10,000 0 0 10,000 0 9,980 0 9,980 0 9,980 1,000
01/31/94 10,000 0 0 10,000 0 14,720 0 14,720 0 14,720 1,000
01/31/95 10,000 28 28 10,028 59 12,280 52 12,332 24 12,356 1,006
01/31/96 10,000 259 287 10,287 108 15,040 186 15,226 326 15,552 1,034
09/30/96 10,000 455 742 10,742 264 14,650 443 15,093 769 15,862 1,083
Total 430
Total Return 58.62%
Average Annual Total Return 10.37%
TEMPLETON GLOBAL ASSET ALLOCATION PORTFOLIO
======= C O S T O F S H A R E S ======== ============= V A L U E O F S H A R E S =============
Cumulative Total From From From Inc
Cumulative Income Income Investment Cap Gain Initial Cap Gains Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Subtotal Reinvested Value Held
05/31/95 10,000 0 0 10,000 0 10,070 0 10,070 0 10,070 1,000
12/31/95 10,000 180 180 10,180 0 10,520 0 10,520 181 10,701 1,017
09/30/96 10,000 0 185 10,185 0 11,710 11 11,721 206 11,927 1,019
Total 10
Total Return 19.27%
Average Annual Total Return 13.23%
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK IV
Allianz Life Variable Account B
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 $16.99245035 58.850 58.850 $1,000.00
9-30-96 Contract Fee (1.00) 19.83270837 (0.050) 58.799 1,166.15
9-30-96 Value before Surr Chg 19.83270837 0.000 58.799 1,166.15
9-30-96 Surrender Charge (60.00) 19.83270837 (3.025) 55.774 1,106.15
Average Annual Total Returns without/with charges 16.71% B 10.61% C
Mutual Shares Securities Sub-Account
9-30-95 Purchase $1,000.00 $481.22222262 2.078 2.078 $1,000.00
9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 2.076 1,117.23
9-30-96 Value before Surr Chg 538.11504680 0.000 2.076 1,117.23
9-30-96 Surrender Charge (60.00) 538.11504680 (0.112) 1.965 1,057.23
Average Annual Total Returns without/with charges 11.82% B 5.72% C
<FN>
B = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch.
C = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of September 30, 1991
Valuation Date as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Fund
9-30-91 Purchase $1,000.00 $66.67 14.999 14.999 $1,000.00
12-31-91 Dividend Distribution ($2.73/shr) 40.95 63.27 0.647 15.646 989.95
7-6-92 Dividend Distribution ($1.00/shr) 15.65 70.18 0.223 15.869 1,113.71
12-31-92 Dividend Distribution ($3.75/shr) 59.51 72.71 0.818 16.688 1,213.37
7-12-93 Dividend Distribution ($.70/shr) 11.68 79.65 0.147 16.835 1,340.87
12-31-93 Dividend Distribution ($6.99/shr) 117.67 80.56 1.461 18.295 1,473.86
7-11-94 Dividend Distribution ($.60/shr) 10.98 80.60 0.136 18.431 1,485.57
12-29-94 Dividend Distribution ($5.30/shr) 97.69 78.31 1.247 19.679 1,541.05
7-10-95 Dividend Distribution ($2.60/shr) 51.16 88.78 0.576 20.255 1,798.25
12-29-95 Dividend Distribution ($12.14/shr) 245.90 85.63 2.872 23.127 1,980.34
6-14-96 Dividend Distribution ($3.00/shr) 69.38 91.93 0.755 23.881 2,195.42
9-30-96 Current Value 93.69 0.000 23.881 2,237.46
Cumulative Total Return 123.75% A
Average Annual Total Return 17.47% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Securities Sub-Account
9-30-91 Purchase $1,000.00 $260.24931474 3.842 3.842 $1,000.00
9-30-92 Contract Fee (1.00) 291.59722082 (0.003) 3.839 1,119.45
9-30-93 Contract Fee (1.00) 361.18312950 (0.003) 3.836 1,385.60
9-30-94 Contract Fee (1.00) 390.55841707 (0.003) 3.834 1,497.29
9-30-95 Contract Fee (1.00) 481.22222262 (0.002) 3.832 1,843.87
9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 3.830 2,060.86
9-30-96 Value before Surr Chg 538.11504680 0.000 3.830 2,060.86
9-30-96 Surrender Charge (34.00) 538.11504680 (0.063) 3.767 2,026.86
Cumulative Total Rtns. without/with chrgs. 106.77% C 102.69% E
Avg. Annual Total Rtns. without/with chrgs. 15.64% D 15.18% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch.
D = [(C+1)^(1/5 Years)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of September 30, 1986
Valuation Date as of September 30, 1996
Dollar NAV Per Shrs. This Accum. Net Asset
Date Transaction Amount Share Trans. Shrs. Value
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Fund
9-30-86 Purchase $1,000.00 $63.86 15.659 15.659 $1,000.00
1-9-87 Dividend Distribution ($5.65/shr) 88.47 60.08 1.473 17.132 1,029.28
7-17-87 Dividend Distribution ($1.35/shr) 23.13 71.24 0.325 17.457 1,243.60
12-31-87 Dividend Distribution ($5.26/shr) 91.82 58.12 1.580 19.036 1,106.39
7-15-88 Dividend Distribution ($1.75/shr) 33.31 70.00 0.476 19.512 1,365.86
12-29-88 Dividend Distribution ($5.93/shr) 115.71 67.38 1.717 21.230 1,430.45
6-23-89 Dividend Distribution ($1.85/shr) 39.27 74.45 0.528 21.757 1,619.81
12-29-89 Dividend Distribution ($8.79/shr) 191.24 66.80 2.863 24.620 1,644.62
6-18-90 Dividend Distribution ($.75/shr) 18.47 66.20 0.279 24.899 1,648.31
12-31-90 Dividend Distribution ($3.48/shr) 86.65 56.16 1.543 26.442 1,484.97
7-8-91 Dividend Distribution ($.90/shr) 23.80 63.59 0.374 26.816 1,705.23
12-31-91 Dividend Distribution ($2.73/shr) 73.21 63.27 1.157 27.973 1,769.86
7-6-92 Dividend Distribution ($1.00/shr) 27.97 70.18 0.399 28.372 1,991.13
12-31-92 Dividend Distribution ($3.75/shr) 106.39 72.71 1.463 29.835 2,169.30
7-12-93 Dividend Distribution ($.70/shr) 20.88 79.65 0.262 30.097 2,397.24
12-31-93 Dividend Distribution ($6.99/shr) 210.38 80.56 2.611 32.709 2,635.01
7-11-94 Dividend Distribution ($.60/shr) 19.63 80.60 0.243 32.952 2,655.94
12-29-94 Dividend Distribution ($5.30/shr) 174.65 78.31 2.230 35.182 2,755.13
7-10-95 Dividend Distribution ($2.60/shr) 91.47 88.78 1.030 36.213 3,214.96
12-29-95 Dividend Distribution ($12.14/shr) 439.62 85.63 5.134 41.347 3,540.51
6-14-96 Dividend Distribution ($3.00/shr) 124.04 91.93 1.349 42.696 3,925.04
9-30-96 Current Value 93.69 0.000 42.696 4,000.18
Cumulative Total Return 300.02% A
Average Annual Total Return 14.87% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/10 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
<S> <C> <C> <C> <C> <C> <C>
Mutual Shares Securities Sub-Account
9-30-86 Purchase $1,000.00 $157.21256263 6.361 6.361 $1,000.00
9-30-87 Contract Fee (1.00) 203.12088734 (0.005) 6.356 1,291.01
9-30-88 Contract Fee (1.00) 214.21878130 (0.005) 6.351 1,360.55
9-30-89 Contract Fee (1.00) 256.05239699 (0.004) 6.347 1,625.25
9-30-90 Contract Fee (1.00) 213.33172521 (0.005) 6.343 1,353.08
9-30-91 Contract Fee (1.00) 260.24931474 (0.004) 6.339 1,649.67
9-30-92 Contract Fee (1.00) 291.59722082 (0.003) 6.335 1,847.37
9-30-93 Contract Fee (1.00) 361.18312950 (0.003) 6.333 2,287.22
9-30-94 Contract Fee (1.00) 390.55841707 (0.003) 6.349 2,479.52
9-30-95 Contract Fee (1.00) 481.22222262 (0.002) 6.347 3,054.12
9-30-96 Contract Fee (1.00) 538.11504680 (0.002) 6.345 3,414.19
9-30-96 Value before Surr Chg 538.11504680 0.000 6.345 3,414.19
9-30-96 Surrender Charge 0.00 538.11504680 0.000 6.345 3,414.19
Cumulative Total Rtns. without/with chrgs. 242.29% C 241.42% E
Avg. Annual Total Rtns. without/with chrgs. 13.09% D 13.07% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch.
D = [(C+1)^(1/10 Years)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/10 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Original Purchase as of Inception
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
12-31-92 Purchase $1,000.00 $10.00 100.000 100.000 $1,000.00
12-31-93 Dividend Distribution ($.53/shr) 53.00 12.93 4.099 104.099 1,346.00
7-11-94 Dividend Distribution ($.20/shr) 20.82 13.28 1.568 105.667 1,403.25
12-29-94 Dividend Distribution ($.77/shr) 81.36 12.52 6.499 112.165 1,404.31
7-10-95 Dividend Distribution ($.13/shr) 14.58 14.49 1.006 113.172 1,639.86
12-29-95 Dividend Distribution ($.83/shr) 93.93 14.99 6.266 119.438 1,790.38
6-14-96 Dividend Distribution ($.35/shr) 41.80 16.89 2.475 121.913 2,059.11
9-30-96 Current Value 17.23 0.000 121.913 2,100.56
Cumulative Total Return 110.06% A
Average Annual Total Return 21.90% B
<FN>
A = (Net Asset Value as of September 30, 1996 - Net Asset Value at Purch.)/Net Asset Value at Purch.
B = [(A+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
Dollar Units This Accum. Accum.
Date Transaction Amount Unit Value Trans. Units Value
<S> <C> <C> <C> <C> <C> <C>
Mutual Discovery Securities Sub-Account
12-31-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-93 Contract Fee (1.00) 13.37903402 (0.075) 99.925 1,336.90
12-31-94 Contract Fee (1.00) 13.65174819 (0.073) 99.852 1,363.15
12-31-95 Contract Fee (1.00) 17.28544840 (0.058) 99.794 1,724.99
9-30-96 Contract Fee (1.00) 19.83270837 (0.050) 99.744 1,978.19
9-30-96 Value before Surr Chg 19.83270837 0.000 99.925 1,981.79
9-30-96 Surrender Charge (42.50) 19.83270837 (2.143) 97.782 1,939.29
Cumulative Total Rtns. without/with chgs. 98.33% C 93.93% E
Avg. Annual Total Rtns. without/with chgs. 20.03% D 19.31% F
<FN>
C = (Unit Value as of September 30, 1996 - Unit Value at Purch.)/Unit Value at Purch.
D = [(C+1)^(1/Years since Inception)]-1
E = (Accumulated Value as of September 30, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
F = [(E+1)^(1/Years since Inception)]-1
</FN>
</TABLE>
Organizational Chart
Allianz Aktiengesellschaft Holding (abbreviated as Allianz AG Holding), of
Munich, Germany, is the controlling owner of Allianz of America, Inc.
Allianz of America, Inc. is sole owner of Allianz Life Insurance Company
of North America.
Allianz Life is controlling owner of NALAC Financial Plans, LLC.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000836346
<NAME> Allianz Life Variable Account B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 7,582,700
<INVESTMENTS-AT-VALUE> 8,302,354
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,302,354
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,183
<TOTAL-LIABILITIES> 1,183
<SENIOR-EQUITY> 6,655,144
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 510,430
<SHARES-COMMON-PRIOR> 489,099
<ACCUMULATED-NII-CURRENT> 579,273
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 347,022
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 719,732
<NET-ASSETS> 8,301,171
<DIVIDEND-INCOME> 333,391
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 85,134
<NET-INVESTMENT-INCOME> 248,257
<REALIZED-GAINS-CURRENT> 211,439
<APPREC-INCREASE-CURRENT> (56,424)
<NET-CHANGE-FROM-OPS> 403,272
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47,073
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 579,960
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<EXPENSE-RATIO> .011
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</TABLE>
