File Nos. 33-76190
811-05618
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 5 (X)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 32 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
------------------------------------- ---------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
-------------------------------------
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1997 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities in accordance with Rule 24f-2 under the Investment Company Act of
1940. Registrant filed its Rule 24f-2 Notice for the most recent fiscal year on
or about February 24, 1997.
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART A
Item 1. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . . . Definitions
Item 3. Synopsis or Highlights. . . . . . . . . . . . . Highlights
Item 4. Condensed Financial Information . . . . . . . . Condensed Financial
Information
Item 6. Deductions. . . . . . . . . . . . . . . . . . . Charges and
Deductions
Item 7. General Description of Variable Annuity
Contracts . . . . . . . . . . . . . . . . . . . The Contracts
Item 8. Annuity Period. . . . . . . . . . . . . . . . . Annuity Provisions
Item 9. Death Benefit. . . . . . . . . . . . . . . . . The Contracts;
Annuity Provisions
Item 10. Purchases and Contract Value. . . . . . . . . . Purchase Payments
and Contract Value
Item 11. Redemptions . . . . . . . . . . . . . . . . . . Surrenders
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . Tax Status
Item 13. Legal Proceedings . . . . . . . . . . . . . . . Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . . . Table of Contents of
the Statement of Ad-
ditional Information
</TABLE>
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
<S> <C> <C>
PART B
Item 15. Cover Page. . . . . . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . . . The Company
Item 18. Services. . . . . . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data . . . . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . . . . Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
HOME OFFICE: VIP SERVICE CENTER:
1750 Hennepin Avenue P.O. Box 30343
Minneapolis, MN 55403-2195 Tampa, FL 33630-3343
(800) 542-5427 (800) 774-5001
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
MAY 1, 1997
The Individual Immediate Variable Annuity Contracts (the "Contracts") described
in this Prospectus provide lifetime income to the Annuitant and Joint Annuitant,
if any, under the Annuity Option selected. The Annuitant is the Contract Owner.
The Contract Owner selects the Annuity Option and the frequency of payment
(e.g., monthly, quarterly, semi-annual, annual).
The Contracts are available for retirement plans which do not qualify for the
special federal tax advantages available under the Internal Revenue Code
("Non-Qualified Contracts"). They can also be purchased as a "Qualified
Contract" that is an Individual Retirement Annuity with contributions
rolled-over from tax-qualified plans such as 403(b) plans, 401 plans, or IRAs.
The Contracts are acquired by the payment of a single purchase payment. Some
states assess premium taxes (see "Charges and Deductions - Premium Taxes"). The
Single Purchase Payment less the premium tax is referred to as the Net Purchase
Payment. The Single Purchase Payment for the Contracts will be allocated to a
segregated investment account of Allianz Life Insurance Company of North America
(the "Company") which account has been designated Allianz Life Variable Account
B (the "Variable Account") or to the Company's Fixed Account. THE FIXED ACCOUNT
IS NOT AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE
DEPARTMENTS. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY). Any portion of the
Net Purchase Payment selected to be allocated to the Fixed Account will
temporarily be allocated to the Money Market Sub-Account on the Effective Date
and will be allocated to the Fixed Account on the Annuity Calculation Date.
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). The Trust is a series fund with twenty-three Funds, sixteen of which
are currently available in connection with the Contracts offered under this
Prospectus: the Money Market Fund, the Growth and Income Fund, the Income
Securities Fund, the Mutual Shares Securities Fund, the Real Estate Securities
Fund, the Rising Dividends Fund, the Templeton Global Asset Allocation Fund, the
Utility Equity Fund, the Capital Growth Fund, the Mutual Discovery Securities
Fund, the Small Cap Fund, the Templeton Developing Markets Equity Fund, the
Templeton Global Growth Fund, the Templeton International Equity Fund, the
Templeton International Smaller Companies Fund and the Templeton Pacific Growth
Fund. See "Highlights" and "Tax Status" for a discussion of owner control of the
underlying investments in a variable annuity contract.
Under certain circumstances, Contract Owners may make withdrawals after the
Income Date other than the Annuity Payments they will receive under the
Contract. See "Annuity Provisions - Contract Withdrawals (Liquidations)" for
more information regarding the ability to make withdrawals under the Contract.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACT IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
CONTRACT OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE RETURNED
WITHIN THE FREE LOOK PERIOD, THE REFUND MAY BE HIGHER OR LOWER THAN THE PURCHASE
PAYMENT.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the "Statement of Additional Information," which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information can be found on the
last page of this Prospectus. For the Statement of Additional Information, call
or write the VIP Service Center address shown above.
INQUIRIES: Any inquiries can be made by telephone or in writing to the Company
at the VIP Service Center phone number or address listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, COUNTRY, OR JURISDICTION IN WHICH THE OFFERING IS UNAUTHORIZED. NO SALES
REPRESENTATIVE, DEALER OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY A CURRENT PROSPECTUS FOR
FRANKLIN VALUEMARK FUNDS.
This Prospectus and the Statement of Additional Information are dated May 1,
1997, and may be amended from time to time.
This Prospectus should be kept for future reference.
In the State of Oregon, all references to "Franklin Templeton Valuemark Income
Plus" refer to "Valuemark Income Plus."
TABLE OF CONTENTS PAGE
DEFINITIONS ...................................... 3
HIGHLIGHTS ....................................... 3
FEE TABLE ........................................ 5
CONDENSED FINANCIAL
INFORMATION ..................................... 6
THE COMPANY ...................................... 8
THE VARIABLE ACCOUNT ............................. 8
FRANKLIN VALUEMARK FUNDS ......................... 8
General ......................................... 9
Substitution of Securities ...................... 9
Voting Privileges ............................... 9
CHARGES AND DEDUCTIONS ........................... 10
Deduction for Mortality and
Expense Risk Charge ............................ 10
Deduction for Administrative
Expense Charge ................................. 10
Deduction for Premium Taxes ..................... 10
Deduction for Income Taxes ...................... 10
Deduction for Trust Expenses .................... 10
ANNUITY PROVISIONS ............................... 10
Income Date ..................................... 10
Annuity Options ................................. 10
Contract Withdrawals (Liquidations) ............. 12
Determination of Variable
Annuity Payments ............................... 12
Determination of Fixed
Annuity Payments ............................... 13
THE CONTRACTS .................................... 13
Ownership ....................................... 13
Assignment ...................................... 14
Beneficiary ..................................... 14
Change of Beneficiary ........................... 14
Death of Beneficiary ............................ 14
Annuitant ....................................... 14
PROCEEDS PAYABLE AT DEATH ........................ 14
PURCHASE PAYMENTS AND
CONTRACT VALUE .................................. 14
Single Purchase Payment ......................... 14
Net Purchase Payment ............................ 14
Allocation of Net Purchase Payment .............. 14
Contract Value .................................. 15
VIP Unit ........................................ 15
Transfers ....................................... 15
DISTRIBUTOR ...................................... 16
Delay of Payments ............................... 16
ADMINISTRATION OF THE CONTRACTS .................. 16
PERFORMANCE DATA ................................. 17
Money Market Sub-Account ........................ 17
Other Sub-Accounts .............................. 17
Performance Ranking ............................. 17
TAX STATUS ....................................... 17
General ......................................... 18
Diversification ................................. 18
Multiple Contracts .............................. 19
Tax Treatment of Distributions -
Non-Qualified Contracts ........................ 19
Qualified Plans ................................. 20
Tax Treatment of Distributions -
IRA Contracts .................................. 20
Tax Treatment of Assignments .................... 21
Income Tax Withholding .......................... 21
FINANCIAL STATEMENTS ............................. 21
LEGAL PROCEEDINGS ................................ 21
APPENDIX - ILLUSTRATION
OF VALUES ....................................... 21
TABLE OF CONTENTS
OF THE STATEMENT OF
ADDITIONAL INFORMATION .......................... 26
DEFINITIONS
- --------------------------------------------------------------------------------
Age - Age to the nearest month unless otherwise specified.
Annuitant - The primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. See also, Joint Annuitant.
Annuity Calculation Date - The date on which the first annuity payment is
calculated which will be no more than 10 business days prior to the Income Date.
Annuity Option - An arrangement under which annuity payments are made under the
Contract.
Annuity Unit - An accounting unit of measure used to calculate annuity payments
after the Annuity Calculation Date.
Assumed Investment Return - The investment return upon which the annuity
payments in the Contract are based.
Company - Allianz Life Insurance Company of North America at its VIP Service
Center shown on the cover page of this Prospectus.
Contract Anniversary - An anniversary of the Effective Date of the Contract.
Contract Owner - The person or entity who own the Contract as named in the
Company's records. The Annuitant is the Contract Owner.
Contract Value - The dollar value as of any Valuation Date prior to the Annuity
Calculation Date of all amounts accumulated under the Contract.
Effective Date - The date on which the Net Purchase Payment is allocated to the
Variable Account.
Eligible Investment(s) - An investment entity which can be selected by the
Contract Owner to be the underlying investment of the Contract.
Fixed Account - The Company's general investment account which contains all the
assets of the Company with the exception of the Variable Account and other
segregated asset accounts.
Fund - A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment.
Income Date - The date on which annuity payments are to begin.
Joint Annuitant - A person other than the Annuitant on whose life annuity
payments may also be based.
Joint Owner - If there is more than one Contract Owner, each Contract Owner
shall be a Joint Owner of the Contract. Joint Owners have equal ownership rights
and must both authorize any exercising of those ownership rights unless
otherwise allowed by the Company. Each Joint Owner must be either an Annuitant
or Joint Annuitant.
Net Asset Value - The total value of the shares of the Eligible Investment or
Fund less the liabilities of the Eligible Investment or Fund held by the
Sub-Account, as of the close of trading on a Valuation Date.
Non-Qualified Contracts - As used herein, Contracts issued under Non-Qualified
Plans which do not receive favorable tax treatment under Section 408 of the
Internal Revenue Code of 1986, as amended (the "Code").
Qualified Contracts - As used herein, Contracts issued under Qualified Plans
which receive favorable tax treatment under Section 408 of the Code.
Sub-Account - A segment of the Variable Account. Each Sub-Account is invested in
shares of a Fund of an Eligible Investment.
Valuation Date - The Variable Account will be valued each day that the New York
Stock Exchange is open for trading, which is Monday through Friday, except for
normal business holidays.
Valuation Period - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.
Variable Account - A separate investment account of the Company, designated as
Allianz Life Variable Account B, in which a portion of the Company's assets has
been allocated for the Contracts and certain other contracts.
VIP Unit - An accounting unit of measure used to calculate the Contract Value
prior to the Annuity Calculation Date.
HIGHLIGHTS
- --------------------------------------------------------------------------------
Net Purchase Payments for the Contracts will be allocated to a segregated
investment account of Allianz Life Insurance Company of North America (the
"Company") which has been designated Allianz Life Variable Account B (the
"Variable Account") or to the Company's Fixed Account. Any portion of the Net
Purchase Payment to be allocated to the Fixed Account will temporarily be
allocated to the Money Market Sub-Account on the Effective Date and then will be
allocated to the Fixed Account on the Annuity Calculation Date. THE FIXED
ACCOUNT IS NOT AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE
DEPARTMENTS. (CHECK WITH YOUR AGENT REGARDING AVAILABILITY).
The Variable Account invests in shares of Franklin Valuemark Funds (the
"Trust"). (See "Franklin Valuemark Funds.") CONTRACT OWNERS BEAR THE INVESTMENT
RISK FOR ALL AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNT.
The Contract may be returned within 10 days (or longer in states where required)
after it is received (the "Free-Look Period"). It can be mailed or delivered to
either the Company or the agent who sold it. Return of the Contract by mail is
effective on being postmarked, properly addressed and postage prepaid. The
returned Contract will be treated as if the Company had never issued it. The
Company will promptly refund the net amount allocated to the Variable Account
modified for investment experience plus any taxes deducted less any benefits
paid in states where permitted. This may be more or less than the Single
Purchase Payment. Once the Free-Look Period expires, under certain
circumstances, Contract Owners may make withdrawals after the Income Date other
than the Annuity Payments they will receive under the Contract. See "Annuity
Provisions - Contract Withdrawals (Liquidations)" for more information regarding
the ability to make withdrawals under the Contract. The Company has the right to
allocate the Single Purchase Payment to the Money Market Sub-Account until the
expiration of the Free-Look Period. If the Company does so allocate the purchase
payment, it will refund the Single Purchase Payment, less any benefits paid. It
is the Company's current practice to directly allocate the Single Purchase
Payment to the Sub-Account(s) (see "Purchase Payments and Contract Value -
Allocation of Net Purchase Payment") designated by the Contract Owner.
There is a Mortality and Expense Risk Charge which is equal, on an annual basis,
to 1.25% of the average daily net assets of the Variable Account. This charge
compensates the Company for assuming the mortality and expense risks under the
Contracts. (See "Charges and Deductions - Deduction for Mortality and Expense
Risk Charge.")
There is an Administrative Expense Charge which is equal, on an annual basis, to
0.15% of the average daily net assets of the Variable Account. This charge
compensates the Company for costs associated with the administration of the
Contracts and the Variable Account. (See "Charges and Deductions - Deduction for
Administrative Expense Charge.")
Under certain circumstances, there is a ten percent (10%) federal income tax
penalty that may be applied to the income portion of any distribution from the
Contracts. (See "Tax Status - Tax Treatment of Distributions - Non-Qualified
Contracts" and "Tax Status - Tax Treatment of Distributions - IRA Contracts.")
For a further discussion of the taxation of the Contracts, see "Tax Status."
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract for
tax purposes if the owner of the contract has excessive control over the
investments underlying the contract. The issuance of such guidelines may require
the Company to impose limitations on a Contract Owner's right to control the
investments. It is not known whether any such guidelines would have a
retroactive effect (see "Tax Status - Diversification").
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Single Purchase Payment. (See "Charges and
Deductions - Deduction for Premium Taxes.")
The Company offers deferred variable annuity contracts but does not permit
exchange of those contracts for the Contracts offered by this Prospectus.
Because of certain exemptive and exclusionary provisions, interests in the Fixed
Account are not registered under the Securities Act of 1933 and the Fixed
Account is not registered as an investment company under the Investment Company
Act of 1940, as amended. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these Acts, and the Company
has been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in the Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B FEE TABLE
CONTRACT OWNER TRANSACTION FEES
NONE
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge......... 1.25%
Administrative Expense Charge............. .15%
----------
Total Variable Account Annual Expenses.... 1.40%
The effects of the charges shown above are reflected in the illustrations of
annuity income contained in the Appendix on Page 21. The illustrations are
intended to assist the purchaser in assessing the effects of these charges and
the effect of investment performance on the amount of variable annuity income.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES
(as a percentage of Franklin Valuemark Funds' average net assets).
The Management and Fund Administration Fees for each Fund are based on a
percentage of that Fund's net assets. See "Franklin Valuemark Funds" in this
Prospectus and "Management" in the Trust prospectus.
The "Management and Fund Administration Fees" below include investment advisory
and other management and administrative fees not included as "Other Expenses"
that were paid to the Managers and Fund Administrators by each Fund for the 1996
calendar year except for Funds with fee waivers/expense reductions or newer
Funds without a full year of operations as of December 31, 1996 (see explanatory
footnotes below). The purpose of the Table is to assist the Contract Owner in
understanding the various costs and expenses of investing, directly or
indirectly, in the Contract.
MANAGEMENT TOTAL
AND FUND OTHER ANNUAL
ADMINISTRATION FEES1 EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund2............................................................. .51% .02% .53%
Growth and Income Fund......................................................... .48% .02% .50%
Real Estate Securities Fund.................................................... .55% .02% .57%
Utility Equity Fund............................................................ .47% .03% .50%
Income Securities Fund......................................................... .47% .03% .50%
Rising Dividends Fund.......................................................... .75% .01% .76%
Templeton International Equity Fund............................................ .81% .08% .89%
Templeton Pacific Growth Fund.................................................. .89% .10% .99%
Templeton Global Growth Fund................................................... .88% .05% .93%
Templeton Developing Markets Equity Fund....................................... 1.25% .24% 1.49%
Templeton Global Asset Allocation Fund......................................... .80% .06% .86%
Small Cap Fund................................................................. .75% .02% .77%
Templeton International Smaller Companies Fund3................................ 1.00% .16% 1.16%
Capital Growth Fund3........................................................... .75% .02% .77%
Mutual Discovery Securities Fund4.............................................. .95% .10% 1.05%
Mutual Shares Securities Fund4................................................. .75% .10% .85%
<FN>
1 The Fund Administration Fee is a direct expense for the Templeton Global Asset
Allocation Fund, the Templeton International Smaller Companies Fund, the Mutual
Discovery Securities Fund and the Mutual Shares Securities Fund; other Funds pay
for similar services indirectly through the Management Fee. See "Management" in
the Trust Prospectus for further information regarding Management and Fund
Administration Fees.
2 Franklin Advisers, Inc. agreed in advance to waive a portion of its Management
Fee and to make certain payments to reduce expenses of the Money Market Fund
during 1996 and is currently continuing this arrangement in 1997. This
arrangement may be terminated at any time. With this reduction, Management Fees
and Total Annual Expenses of the Money Market Fund for 1996 were 0.41% and
0.43%, respectively of the average daily net assets of the Fund.
3 The Templeton International Smaller Companies Fund and the Capital Growth Fund
commenced operations May 1, 1996. The expenses shown are estimated expenses for
the Funds for 1997.
4 The Mutual Discovery Securities Fund and the Mutual Shares Securities Fund
commenced operations November 8, 1996. The expenses shown are estimated expenses
for the Funds for 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
The consolidated financial statements of Allianz Life Insurance Company of North
America and the financial statements of Allianz Life Variable Account B may be
found in the Statement of Additional Information.
The table below gives per accumulation unit information about the financial
history of each Sub-Account from the inception of each to December 31, 1996.
This information should be read in conjunction with the financial statements and
related notes to the Variable Account included in the Statement of Additional
Information.
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD FROM
(NUMBER OF UNITS IN THOUSANDS) ENDED ENDED ENDED ENDED ENDED ENDED ENDED INCEPTION* TO
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNTS: 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET
Unit value at beginning of period.. $12.883 $12.354 $12.066 $11.932 $11.742 $11.288 $10.637 $10.000
Unit value at end of period........ $13.359 $12.883 $12.354 $12.066 $11.932 $11.742 $11.288 $10.637
Number of units outstanding at
end of period..................... 28,060 31,040 39,437 10,247 6,951 5,682 5,768 1,199
GROWTH AND INCOME
Unit value at beginning of period.. $17.310 $13.215 $13.677 $12.574 $11.949 $9.803 $10.180 $10.000
Unit value at end of period........ $19.490 $17.310 $13.215 $13.677 $12.574 $11.949 $9.803 $10.180
Number of units outstanding at
end of period..................... 50,027 46,893 35,695 24,719 17,144 9,671 5,356 1,662
REAL ESTATE SECURITIES
Unit value at beginning of period.. $18.073 $15.594 $15.369 $13.095 $11.848 $9.000 $10.368 $10.000
Unit value at end of period........ $23.668 $18.073 $15.594 $15.369 $13.095 $11.848 $9.000 $10.368
Number of units outstanding at
end of period..................... 12,757 10,998 11,645 5,589 1,052 394 200 57
UTILITY EQUITY
Unit value at beginning of period.. $19.565 $15.104 $17.319 $15.889 $14.821 $12.062 $12.010 $10.000
Unit value at end of period........ $20.654 $19.565 $15.104 $17.319 $15.889 $14.821 $12.062 $12.010
Number of units outstanding at
end of period..................... 53,086 66,669 70,082 84,217 39,387 16,188 6,300 1,173
INCOME SECURITIES
Unit value at beginning of period.. $19.785 $16.392 $17.734 $15.163 $13.580 $9.842 $10.783 $10.000
Unit value at end of period........ $21.708 $19.785 $16.392 $17.734 $15.163 $13.580 $9.842 $10.783
Number of units outstanding at
end of period..................... 57,504 59,309 56,569 38,967 11,397 4,472 3,011 1,508
TEMPLETON PACIFIC GROWTH
Unit value at beginning of period.. $13.630 $12.802 $14.233 $9.761 $10.000* NA NA NA
Unit value at end of period........ $14.932 $13.630 $12.802 $14.233 $9.761 NA NA NA
Number of units outstanding at
end of period..................... 22,061 22,483 27,231 14,240 534 NA NA NA
RISING DIVIDENDS
Unit value at beginning of period.. $12.498 $9.769 $10.327 $10.848 $10.000* NA NA NA
Unit value at end of period........ $15.303 $12.498 $9.769 $10.327 $10.848 NA NA NA
Number of units outstanding at
end of period..................... 35,569 33,789 28,778 26,256 8,388 NA NA NA
TEMPLETON INTERNATIONAL EQUITY
Unit value at beginning of period.. $13.263 $12.161 $12.226 $9.642 $10.000* NA NA NA
Unit value at end of period........ $16.081 $13.263 $12.161 $12.226 $9.642 NA NA NA
Number of units outstanding at
end of period..................... 64,375 59,883 60,464 24,026 1,329 NA NA NA
TEMPLETON DEVELOPING MARKETS EQUITY
Unit value at beginning of period.. $9.582 $9.454 $10.000* NA NA NA NA NA
Unit value at end of period........ $11.487 $9.582 $9.454 NA NA NA NA NA
Number of units outstanding at
end of period..................... 22,423 15,618 9,774 NA NA NA NA NA
TEMPLETON GLOBAL GROWTH
Unit value at beginning of period.. $11.339 $10.201 $10.000* NA NA NA NA NA
Unit value at end of period........ $13.560 $11.339 $10.201 NA NA NA NA NA
Number of units outstanding at
end of period..................... 40,327 28,309 14,637 NA NA NA NA NA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD FROM
(NUMBER OF UNITS IN THOUSANDS) ENDED ENDED ENDED ENDED ENDED ENDED ENDED INCEPTION* TO
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNTS: 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TEMPLETON GLOBAL ASSET ALLOCATION
Unit value at beginning of period.. $10.591 $10.000* NA NA NA NA NA NA
Unit value at end of period........ $12.514 $10.591 NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 4,104 1,338 NA NA NA NA NA NA
SMALL CAP
Unit value at beginning of period.. $10.146 $10.000* NA NA NA NA NA NA
Unit value at end of period........ $12.913 $10.146 NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 12,784 1,302 NA NA NA NA NA NA
TEMPLETON INTERNATIONAL
SMALLER COMPANIES
Unit value at beginning of period.. $10.000* NA NA NA NA NA NA NA
Unit value at end of period........ $11.145 NA NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 1,388 NA NA NA NA NA NA NA
CAPITAL GROWTH
Unit value at beginning of period.. $10.000* NA NA NA NA NA NA NA
Unit value at end of period........ $11.254 NA NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 3,722 NA NA NA NA NA NA NA
MUTUAL DISCOVERY SECURITIES
Unit value at beginning of period.. $10.000* NA NA NA NA NA NA NA
Unit value at end of period........ $10.180 NA NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 1,471 NA NA NA NA NA NA NA
MUTUAL SHARES SECURITIES
Unit value at beginning of period.. $10.000* NA NA NA NA NA NA NA
Unit value at end of period........ $10.330 NA NA NA NA NA NA NA
Number of units outstanding at
end of period..................... 2,613 NA NA NA NA NA NA NA
<FN>
*Unit Value at inception was $10.00.
</FN>
</TABLE>
<PAGE>
The Accumulation Unit Value at inception was $10.00 for each Sub-Account.
Inception was 1/24/89 for the Growth and Income, Income Securities, Real Estate
Securities, Utility Equity and Money Market Sub-Accounts; 1/27/92 for the Rising
Dividends, Templeton International Equity and Templeton Pacific Growth
Sub-Accounts; 3/15/94 for the Templeton Global Growth and Templeton Developing
Markets Equity Sub-Accounts; 5/1/95 for the Templeton Global Asset Allocation
Sub-Account; 11/1/95 for the Small Cap Sub-Account; 5/1/96 for the Templeton
International Smaller Companies and Capital Growth Sub-Accounts; and 11/8/96 for
the Mutual Shares Securities and Mutual Discovery Securities Sub-Accounts.
THE COMPANY
- --------------------------------------------------------------------------------
Allianz Life Insurance Company of North America (the "Company") is a stock life
insurance company organized under the laws of the state of Minnesota in 1896.
The Company is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has sales outlets
throughout the world. The Company offers fixed and variable life insurance and
annuities, and group life, accident and health insurance.
NALAC Financial Plans, LLC is a wholly-owned subsidiary of the Company. It
provides marketing services for the Company and is the principal underwriter of
the Contracts. NALAC Financial Plans, LLC is reimbursed for expenses incurred in
the distribution of the Contracts.
Administration for the Contract is provided at the Company's VIP Service Center:
P.O. Box 30343, Tampa, FL 33630-3343, (800) 774-5001.
THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
The Variable Account was established pursuant to a resolution of the Board of
Directors on May 31, 1985. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act").
The assets of the Variable Account are the property of the Company. However, the
assets of the Variable Account equal to the reserves, and other contract
liabilities with respect to the Variable Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. The Company's obligations arising
under the Contracts are general corporate obligations.
The Variable Account meets the definition of a "separate account" under the
federal securities laws.
The Variable Account is divided into Sub-Accounts with the assets of each
Sub-Account invested in one of the Funds of Franklin Valuemark Funds.
FRANKLIN VALUEMARK FUNDS
- --------------------------------------------------------------------------------
SIXTEEN OF THE TWENTY-THREE FUNDS CURRENTLY AVAILABLE CONSTITUTING THE FRANKLIN
VALUEMARK FUNDS ARE AVAILABLE UNDER THE CONTRACTS DESCRIBED IN THIS PROSPECTUS.
Franklin Valuemark Funds (the "Trust") is an open-end management investment
company registered under the 1940 Act. The investment objectives of each Fund
and a discussion of potential risks are found in the accompanying prospectus for
the Trust, which is included with this Prospectus.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS FOR THE
TRUST CAREFULLY BEFORE INVESTING.
Franklin Advisers, Inc., serves as each Fund's (except the Rising Dividends
Fund, the Templeton Global Growth Fund, the Templeton Developing Markets Equity
Fund, the Templeton Global Asset Allocation Fund, the Templeton International
Smaller Companies Fund, the Mutual Shares Securities Fund and the Mutual
Discovery Securities Fund) investment manager. The investment manager for the
Templeton Global Growth Fund and the Templeton Global Asset Allocation Fund is
Templeton Global Advisors Limited. The investment manager for the Templeton
Developing Markets Equity Fund is Templeton Asset Management Ltd. The investment
manager for the Templeton International Smaller Companies Fund is Templeton
Investment Counsel, Inc. The investment manager for the Mutual Shares Securities
Fund and the Mutual Discovery Securities Fund is Franklin Mutual Advisers, Inc.
Franklin Advisory Services, Inc. is the investment manager for the Rising
Dividends Fund.All investment managers, and subadvisers are referred to
collectively as "Managers."
The Managers are direct or indirect wholly-owned subsidiaries of Franklin
Resources, Inc., a publicly-owned holding company. The Managers, subject to the
overall policies, control, direction, and review of the Board of Trustees of the
Trust, are responsible for recommending and providing advice with respect to
each Fund's investments, and for determining which securities will be purchased,
retained or sold as well as for execution of portfolio transactions. Certain
Managers have retained one or more subadvisers.
Franklin Templeton Services, Inc. ("Fund Administrator"), provides certain
administrative facilities and services for the Funds.
Franklin Templeton Investor Services, Inc., also a wholly-owned subsidiary of
Franklin Resources, Inc., maintains the records of the Trust's shareholder
accounts, processes purchases and redemptions of shares, and serves as each
Fund's dividend paying agent.
The following Funds are available:
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
FUNDS SEEKING CAPITAL GROWTH
Capital Growth Fund
Mutual Discovery Securities Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
GENERAL
There is no assurance that the investment objectives of any of the Funds will be
met. Contract Owners bear the complete investment risk.
Additional Funds and/or additional Eligible Investments may, from time to time,
be made available as investments to underlie the Contract. However, the right to
make such selections will be limited by the terms and conditions imposed on such
transactions by the Company. (See "Purchase Payments and Contract Value -
Allocation of Net Purchase Payment.")
SUBSTITUTION OF SECURITIES
If the shares of any Fund of the Trust should no longer be available for
investment by the Variable Account or if, in the judgment of the Company, the
substitution of shares of any Fund for another would be in the best interests of
Contract Owners in view of the purpose of the Contract, the Company may
substitute shares of another Eligible Investment (or Fund within the Trust). No
substitution of securities in any Sub-Account may take place without prior
approval of the Securities and Exchange Commission and under such requirements
as it may impose.
VOTING PRIVILEGES
In accordance with its view of present applicable law, the Company will vote the
shares of the Trust held in the Variable Account at special meetings of the
shareholders of the Trust in accordance with instructions received from persons
having the voting interest in the Variable Account. The Company will vote shares
for which it has not received instructions, as well as shares attributable to
it, in the same proportion as it votes shares for which it has received
instructions. The Trust does not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by the Company not more than sixty (60) days prior to the
meeting of the Trust. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to the meeting.
Trust shares are issued and redeemed only in connection with variable annuity
contracts and variable life insurance policies issued through separate accounts
of the Company and its affiliates. The Trust does not foresee any disadvantage
to Contract Owners arising out of the fact that the Trust may be made available
to separate accounts which are used in connection with both variable annuity and
variable life insurance products. Nevertheless, the Trust's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one of the
separate accounts might withdraw its investment in the Trust. This might force
the Trust to sell portfolio securities at disadvantageous prices.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Various charges and deductions are made from the Single Purchase Payment and the
Variable Account. These charges and deductions are:
DEDUCTION FOR MORTALITY AND
EXPENSE RISK CHARGE
The Company deducts on each Valuation Date a Mortality and Expense Risk Charge
which is equal, on an annual basis, to 1.25% of the average daily net assets of
the Variable Account. The mortality risks assumed by the Company arise from its
contractual obligation to make annuity payments for the life of the Annuitant in
accordance with annuity rates guaranteed in the Contracts. The expense risk
assumed by the Company is that all actual expenses involved in administering the
Contracts, including Contract maintenance costs, administrative costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, and the
costs of other services may exceed the amount recovered from the Administrative
Expense Charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and cannot be
increased.
The Mortality and Expense Risk Charge is assessed both before and after the
Income Date. The Company will continue to assess the Mortality and Expense Risk
Charge during payment of an Annuity Option that does not involve a life
contingency even though it no longer bears any mortality risk on such payment
obligation.
DEDUCTION FOR ADMINISTRATIVE EXPENSE CHARGE
The Company deducts on each Valuation Date an Administrative Expense Charge
which is equal, on an annual basis, to 0.15% of the average daily net assets of
the Variable Account. This charge is to reimburse the Company for the expenses
it incurs in the establishment and maintenance of the Contracts and the Variable
Account. These expenses include, but are not limited to: preparation of the
Contracts, confirmations, annual reports and statements, maintenance of Contract
records, maintenance of Variable Account records, administrative personnel
costs, mailing costs, data processing costs, legal fees, accounting fees, filing
fees, the costs of other services necessary for Contract servicing, and all
accounting, valuation, regulatory and reporting requirements.
DEDUCTION FOR PREMIUM TAXES
Premium taxes or other taxes payable to a state, municipality or other
governmental entity will be charged against the Single Purchase Payment. Premium
taxes currently imposed by certain states on the Contracts range from 0% to 3.5%
of premiums paid. For information regarding a particular state's premium tax a
purchaser should contact his or her agent or the Company's VIP Service Center.
DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal income
taxes, the Company has reserved the right to establish a provision for income
taxes if it determines, in its sole discretion, that it will incur a tax as a
result of the operation of the Variable Account. The Company will deduct for any
income taxes incurred by it as a result of the operation of the Variable Account
whether or not there was a provision for taxes and whether or not it was
sufficient.
DEDUCTION FOR TRUST EXPENSES
There are other deductions from the assets of Franklin Valuemark Funds for
operating expenses (including management fees), which are described in the
accompanying Trust Prospectus.
ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
INCOME DATE
The Income Date is the date on which annuity payments begin. The Contract Owner
selects an Income Date at the time of issue. The Income Date must be the first
or fifteenth day of a calendar month and not later than 60 days from the
Effective Date.
ANNUITY OPTIONS
The Contract provides for an Annuity under any of the Annuity Options described
below, provided the Annuitant or any Joint Annuitant is alive on the Income
Date. Except for Annuity Option 6, once selected the Option is irrevocable. The
amount of each payment depends upon the Annuity Option chosen and for Annuity
Options 1-5, the Annuitant's and any Joint Annuitant's Age on the Annuity
Calculation Date. Annuity payments from the Variable Account will vary with the
investment experience of the Sub-Accounts and may be higher or lower than the
first payment. Annuity payments from the Fixed Account will be equal payments
unless otherwise specified by the Annuity Option selected. Annuity payments may
come from the Fixed and/or the Variable Account under all Annuity Options
(except annuity payments under Option 6 may only come from the Variable
Account).
The Annuity Options currently available are:
Option 1 - Life Annuity. Monthly annuity payments are paid during the life of
the Annuitant ceasing with the last annuity payment due prior to the Annuitant's
death.
Option 2 - Life Annuity with 60, 120, 180, or 240 Monthly Payments Guaranteed.
Monthly annuity payments are paid during the life of an Annuitant with a
guarantee that if, at the Annuitant's death, annuity payments have been made for
less than a 60, 120, 180 or 240 month period as elected, then annuity payments
will be continued thereafter to the Beneficiary for the remainder of the
guaranteed period. The Beneficiary may elect to have the present value
(determined as set forth in the Contract) of the guaranteed annuity payments
remaining commuted and paid in a lump sum, less the applicable commutation fee
of 5% of the proceeds in Contract Years 1 and 2 reducing by 1% per year until it
is 1% for Contract Year 6 and thereafter (subject to applicable state law and
regulation). Variable payments will be commuted at the Assumed Investment
Return. Fixed payments will be commuted using an indexed rate. The Company will
require the return of the Contract and proof of death prior to the payment of
any commuted values.
Option 3 - Joint and Last Survivor Annuity. Monthly annuity payments are paid
during the joint lifetime of the Annuitant and the Joint Annuitant. Upon the
death of the Annuitant, if the Joint Annuitant is then living, payments will be
paid thereafter during the remaining lifetime of the Joint Annuitant at a level
of 100%, 75% or 50% of the original level as elected. Monthly payments cease
with the final annuity payment due prior to the survivor's death.
Option 4 - Joint and Last Survivor Annuity with 60, 120, 180 or 240 Monthly
Payments Guaranteed. Monthly annuity payments are paid during the joint lifetime
of the Annuitant and the Joint Annuitant. Monthly payments are paid thereafter
during the remaining lifetime of the Joint Annuitant at 100% of the original
level. If, after the death of both the Annuitant and the Joint Annuitant,
annuity payments have been made for less than a 60, 120, 180 or 240 month period
as elected, then annuity payments will be continued thereafter to the
Beneficiary for the remainder of the guaranteed period. The Beneficiary may
elect to have the present value (determined as set forth in the Contract) of the
guaranteed annuity payments remaining commuted and paid in a lump sum, less the
applicable commutation fee of 5% of the proceeds in Contract Years 1 and 2
reducing by 1% per year until it is 1% for Contract Year 6 and thereafter
(subject to applicable state law and regulation). Variable payments will be
commuted at the Assumed Investment Return. Fixed payments will be commuted using
an indexed rate. The Company will require the return of the Contract and proof
of death prior to the payment of any commuted values.
Option 5 - Refund Life Annuity. Monthly annuity payments are paid during the
life of the Annuitant ceasing with the last annuity payment due prior to the
Annuitant's death with a guarantee that at the Annuitant's death, the
Beneficiary will receive a single cash payment (refund) equal to the sum of (a)
and (b) (if positive), where (a) is the dollar value of the number of Annuity
Units equal to the total Annuity Units purchased in the Variable Account on the
Effective Date, minus the total number of Annuity Units which have been
transferred to the Fixed Account or paid as annuity payments; and (b) is the
dollar value of the portion of the Net Purchase Payment allocated to the Fixed
Account, plus the amounts transferred from the Variable Account to the Fixed
Account, minus the sum of the annuity payments made from the Fixed Account. This
calculation assumes that the allocation of Annuity Units actually in force at
the time of the Annuitant's death had been the allocation of Annuity Units at
issue and at all times thereafter.
Option 6 - Specified Period Certain Annuity. Monthly annuity payments are paid
for a specified period of time. The Specified Period Certain is elected by the
Contract Owner and must be specified as a whole number of years from 5 to 30. If
at the time of the death of the last Annuitant and any Joint Annuitant, the
annuity payments actually made have been for less than the Specified Period
Certain, then annuity payments will be continued thereafter to the Beneficiary
for the remainder of the Specified Period Certain. OPTION 6 MAY NOT BE AVAILABLE
IN ALL STATES. Option 6 is only available when the entire annuity payment is
allocated to the Variable Account.
After the first Contract Anniversary, an Option 6 payout can be exchanged for a
life contingent payout (Options 1-5) if the Total Withdrawal Value is at least
$25,000 and in the case of a Non-Qualified Contract the Contract Owner has
attained age 591/2 and in the case of a Qualified Contract the exchange is made
after the later of the Contract Owner attaining age 591/2 or 5 years from the
date of the first annuity payment, and prior to the year in which the Contract
Owner reaches age 701/2. The annuity purchase rates used will be those that were
in effect as of the original Effective Date of the Option 6 Contract. A new
Contract will be exchanged for the existing Contract which must be returned to
the Company. The Contract Owner/Annuitant and Joint Annuitant, if any, must be
the same under both Contracts.
CONTRACT WITHDRAWALS (LIQUIDATIONS)
Annuity Options 2 and 4
If the Contract Owner has selected Annuity Option 2 or 4 and has a portion of
the annuity payments coming from the Variable Account, partial withdrawals from
the Contract may be made after the first Contract Year as follows. During the
lifetime of the Annuitant(s) and while the number of annuity payments made is
less than the guaranteed number of payments elected, the Contract Owner may once
each Contract Year request a withdrawal representing a partial liquidation of
the Total Withdrawal Value. The Total Withdrawal Value is equal to the present
value of the remaining guaranteed annuity payments from the Variable Account, to
the end of the period certain, commuted at the Assumed Investment Return less a
commutation fee of 5% of the amount withdrawn in Contract Year 2 and reducing by
1% per year until it is 1% for Contract Year 6 and thereafter. The commutation
fee is a charge collected by the Company equal to a percentage of the Total
Withdrawal Value liquidated. Partial liquidations will be processed on the next
Annuity Calculation Date following the Contract Owner's written request. After a
partial liquidation, the subsequent monthly annuity payment during the
guaranteed period certain originating from the Variable Account will be reduced
by the percentage of the variable portion of the Total Withdrawal Value
liquidated, including the commutation fee. After the guaranteed number of
payments has been paid, the number of Annuity Units used in calculating the
monthly payments will be restored to their original value as if no liquidations
had taken place. The total amount allowed to be liquidated as a cumulative
percentage of the Total Withdrawal Value cannot exceed 25% of the Total
Withdrawal Value. The minimum allowable partial liquidation is the lesser of
$2,500 or the remaining portion of the Total Withdrawal Value available to be
liquidated. PARTIAL WITHDRAWALS MAY NOT BE AVAILABLE IN ALL STATES.
Annuity Option 6
If the Contract Owner has selected Annuity Option 6, withdrawals from the
Contract may be made as follows. A withdrawal may be made at least once per
Contract Year up to the Total Withdrawal Value in the Contract. The Total
Withdrawal Value is equal to the present value of the remaining annuity
payments, to the end of the Specified Period Certain, commuted at the Assumed
Investment Return, less a commutation fee of 1% of the amount withdrawn in the
first Contract Year. The Company reserves the right to restrict the amount of a
partial withdrawal to a minimum of $2,500. The Company may require a complete
withdrawal if the remaining Total Withdrawal Value after a requested partial
withdrawal would be less than $35,000. Partial withdrawals will be processed on
the next Annuity Calculation Date following the Contract Owner's written
request. The Company will require the return of the Contract prior to the
payment of the entire commuted value.
See "Tax Status - Tax Treatment of Distributions - Non-Qualified Contracts" and
"Tax Status - Tax Treatment of Distributions - IRA Contracts" for a discussion
of the tax treatment of withdrawals from the Contracts.
DETERMINATION OF VARIABLE ANNUITY PAYMENTS
On the Annuity Calculation Date, a fixed number of Annuity Units will be
purchased, determined as follows:
The first annuity payment is equal to the Contract Value allocated to the
Variable Account divided first by $1,000 and then multiplied by the appropriate
annuity payment amount for each $1,000 of value for the Annuity Option selected.
In each Sub-Account, the fixed number of Annuity Units is determined by dividing
the amount of the initial annuity payment determined for each Sub-Account by the
Annuity Unit value on the Annuity Calculation Date. Thereafter, the number of
Annuity Units in each Sub-Account remains unchanged unless the Contract Owner
elects to transfer between Sub-Accounts. All calculations will appropriately
reflect the annuity payment frequency selected.
On each subsequent annuity payment date, the total annuity payment is the sum of
the annuity payments determined for each Sub-Account. The annuity payment in
each Sub-Account is determined by multiplying the number of Annuity Units then
allocated to such Sub-Account by the Annuity Unit value for that Sub-Account.
For each Sub-Account, the value of an Annuity Unit was initially established at
$1.00. On each subsequent Valuation Date the value of an Annuity Unit is
determined in the following way:
FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
a. is the net increase or decrease in the Net Asset Value per share of the
Fund (or other Eligible Investment) plus the per share amount of any dividend or
capital gain distribution paid by the Fund (or Eligible Investment) during the
Valuation Period, plus or minus a per share charge or credit for any taxes
incurred by or reserved for in the Sub-Account as of the end of the current
Valuation Period which the Company determines to have resulted from maintenance
of the Sub-Account; and
b. is the Net Asset Value per share of the Fund (or other Eligible Investment)
at the beginning of the Valuation Period, plus or minus a per share charge or
credit for any taxes incurred by or reserved for in the Sub-Account as of the
end of the immediately preceding Valuation Period which the Company determines
to have resulted from maintenance of the Sub-Account; and
c. is the net result of 1.000 less the Valuation Period deduction for the
charges to the Sub-Account.
The Net Investment Factor may be more or less than one.
SECOND: The value of an Annuity Unit for a Valuation Date is equal to:
a. the value of the Annuity Unit on the immediately preceding Valuation
Date;
b. multiplied by the Net Investment Factor for the Valuation Period ending
on the current Valuation Date;
c. divided by the Assumed Net Investment Factor (see below) for the
Valuation Period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. For example, with a 5%
Assumed Investment Return, the Assumed Net Investment Factor for a one-year
Valuation Period would be 1.05. For a one-day Valuation Period, the Assumed Net
Investment Factor would be 1.00013368062.
The Assumed Investment Return is the investment return upon which annuity
payments are based. Income will increase from one annuity Income Date to the
next if the annualized Net Rate of Return during that time is greater than the
Assumed Investment Return and will decrease if the annualized Net Rate of Return
is less than the Assumed Investment Return.
A Contract Owner may choose either a 5% or a 3% Assumed Investment Return. If
the Contract Owner does not choose one, the 5% Assumed Investment Return
automatically applies. Choosing the 5% Assumed Investment Return instead of the
3% Assumed Investment Return will result in a higher initial amount of income,
but income will increase more slowly during periods of good investment
performance of the Trust and decrease more rapidly during periods of poor
investment performance.
The variable annuity benefits provided for under the Contract are based upon:
(a) the 1983(a) Blended Unisex Mortality Table with 50% female content,
projected to the year 2000 with Projection Scale G; (b) the Assumed Investment
Return, and (c) any applicable taxes.
Determination of Fixed Annuity Payments
On the Annuity Calculation Date, a stream of annuity payments is purchased. The
amount of the fixed annuity payment will be the value in the Contract allocated
to the Fixed Account, divided by $1,000, then multiplied by the appropriate
factor for the Annuity Option selected.
THE CONTRACTS
- --------------------------------------------------------------------------------
OWNERSHIP
The Annuitant is the Contract Owner. The Contract Owner exercises all the rights
of the Contract, subject to the rights of (1) any assignee under an assignment
filed with the Company's VIP Service Center, and (2) any irrevocably named
Beneficiary.
Upon the death of the Contract Owner, the Joint Annuitant, if not already a
Joint Owner, will become the Contract Owner. On or after the Income Date, if
there is no Joint Annuitant or upon the death of the Joint Annuitant, the
Beneficiary(ies) become the Owner(s) of their respective shares.
If the Contract Owner dies before the Income Date and there is no Joint
Annuitant, the Contract will be treated as if it had never been issued and the
Company will return the Single Purchase Payment to the Contract Owner's estate.
ASSIGNMENT
The Contract Owner may assign the Contract. A copy of any assignment must be
filed with the Company's VIP Service Center. The Company is not responsible for
the validity of any assignment. If the Contract is assigned, the Contract
Owner's rights and those of any revocably-named person will be subject to the
assignment. An assignment will not affect any payments the Company may make or
actions it may take before such assignment has been recorded at its VIP Service
Center. If the Contract is issued pursuant to a qualified plan, it may not be
assigned, pledged or otherwise transferred except as may be allowed under
applicable law.
BENEFICIARY
One or more Beneficiaries and/or Contingent Beneficiaries are named by the
Contract Owner and are entitled to receive any death benefits to be paid.
CHANGE OF BENEFICIARY
The Contract Owner may change a Beneficiary or Contingent Beneficiary by filing
a written request with the Company at its VIP Service Center unless an
irrevocable Beneficiary designation was previously filed. After the change is
recorded, it will take effect as of the date the request was signed. If the
request reaches the VIP Service Center after the Contract Owner dies but before
any payment to a Beneficiary is made, the change will be valid. The Company will
not be liable for any payment made or action taken before it records the change.
DEATH OF BENEFICIARY
Unless the Contract Owner provided otherwise, any amount payable after his/her
death and that of any Joint Annuitant will be payable:
(1) in equal shares to such Beneficiaries as are then living;
(2) if no Beneficiary is then living, payment will be made in equal shares to
such Contingent Beneficiaries as are then living;
(3) if no Beneficiary or Contingent Beneficiary is then living, payment will
be made to the Contract Owner's estate.
ANNUITANT
The Annuitant is the primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. A Joint Annuitant is a person other than the Annuitant on whose life
annuity payments may also be based. The Annuitant, and any Joint Annuitant, must
be a natural person.
PROCEEDS PAYABLE AT DEATH
- --------------------------------------------------------------------------------
If the Contract Owner dies before the Income Date and there is no Joint
Annuitant, the Contract will be treated as if it had never been issued and the
Company will return the Single Purchase Payment to the Contract Owner's estate.
If the Contract Owner has chosen either Option 3, Option 4 or Option 6 with a
Joint Annuitant and
either the Contract Owner or the Joint Annuitant dies before the Income Date,
the Annuity Option will be changed to Option 2 with 120 monthly payments
guaranteed. If the life expectancy of the survivor is less than 120 months, the
period of guaranteed payments will be 60 months.
If the Contract Owner or Joint Annuitant die on or after the Income Date, the
death benefit, if any, will be payable under the selected Annuity Option. The
Company will require proof of death.
PURCHASE PAYMENTS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
SINGLE PURCHASE PAYMENT
The Single Purchase Payment is paid to the Company at its VIP Service Center.
The minimum purchase payment the Company will accept is $35,000. Contract Owners
can acquire more than one Contract and the Single Purchase Payment for each need
not be $35,000 if the average purchase payment for each Contract is $35,000 or
more.
NET PURCHASE PAYMENT
The Net Purchase Payment is equal to the Single Purchase Payment less any taxes
levied on the purchase payment.
ALLOCATION OF NET PURCHASE PAYMENT
The Net Purchase Payment is allocated to one or more of the Sub-Accounts of the
Variable Account on the Effective Date. Any portion of the Net Purchase Payment
selected to be allocated to the Fixed Account will temporarily be allocated to
the Money Market Sub-Account on the Effective Date and will be allocated to the
Fixed Account on the Annuity Calculation Date. THE FIXED ACCOUNT IS NOT
AVAILABLE IN ALL STATES UNTIL APPROVED BY THE STATE INSURANCE DEPARTMENTS.
(CHECK WITH YOUR AGENT REGARDING AVAILABILITY). The requested allocation to each
Sub-Account and the Fixed Account is made in percentages of the Net Purchase
Payment. Whole percentages must be used and each must be at least 10%. The
Company has the right to allocate the Net Purchase Payment to the Money Market
Sub-Account until the expiration of the Free-Look Period. Thereafter, the
allocations will be made to one or more of the Sub-Accounts as selected by the
Contract Owner. The Company reserves the right to limit the number of
Sub-Accounts that a Contract Owner may invest in at any one time (except in
Texas). Currently, the Contract Owner may initially select up to nine
Sub-Accounts, and may only be invested in a maximum of ten Sub-Accounts at any
one time throughout the life of the Contract.
When all forms required to issue the Contract are received and in good order,
the Company will apply the Net Purchase Payment to the Variable Account and
credit the Contract with VIP Units within two business days of receipt.
In addition to the underwriting requirements of the Company, good order means
that the Company has received federal funds (monies credited to a bank's account
with its regional Federal Reserve Bank). The Company requires proof,
satisfactory to it, of the Age of the Annuitant and any Joint Annuitant. The
Company will not issue a Contract if either the Annuitant or the Joint Annuitant
are over Age 90. If the required forms for the Contract are not in good order,
the Company will attempt to get them in good order or the Company will return
the form(s) and the purchase payment within five business days. The Company will
not retain the Net Purchase Payment for more than five business days while
processing incomplete forms unless it has been so authorized by the purchaser.
CONTRACT VALUE
The Net Purchase Payment is allocated among the various Sub-Accounts within the
Variable Account. For each Sub-Account, the Net Purchase Payment is converted
into VIP Units. The Contract Value on or before the Annuity Calculation Date is
the sum of the values for the Contract within each Sub-Account. The value within
each Sub-Account is determined by multiplying the number of VIP Units
attributable to the Contract in the Sub-Account by the VIP Unit value for the
Sub-Account. On the Annuity Calculation Date, the Contract Value is converted to
annuity payments.
VIP UNIT
When the Net Purchase Payment is allocated to the Variable Account, the amount
allocated to each Sub-Account is converted to VIP Units. The number of VIP Units
credited to each Sub-Account is determined by dividing the portion of the Net
Purchase Payment that is allocated to the Sub-Account by the value of the VIP
Unit for the Sub-Account as of the Effective Date. The VIP Unit value for each
Sub-Account was arbitrarily set initially. The VIP Unit value for any later
Valuation Period on or before the Annuity Calculation Date is determined by
subtracting (b) from (a) and dividing the result by (c) where:
a. is the net result of
1) the assets of the Sub-Account attributable to VIP Units (i.e., the
aggregate value of the underlying Eligible Investments held at he end of such
Valuation Period); plus or minus
2) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation of the Sub-
Account;
b. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Expense Charge (See "Charges and Deductions"); and
c. is the number of VIP Units outstanding at the end of such Valuation
Period.
The VIP Unit value may increase or decrease from Valuation Period to Valuation
Period.
TRANSFERS
The Contract Owner may transfer all or part of the Contract Owner's interest in
a Sub-Account to another Sub-Account without the imposition of any fee or
charge. No transfers may take place from the Fixed Account to the Variable
Account.
Neither the Variable Account nor the Trust is designed for professional market
timing organizations, other entities, or persons using programmed, large, or
frequent transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Fund and may be refused. Accounts under common
ownership or control may be aggregated for purposes of transfer limits. In
coordination with the Trust, the Company reserves the right to restrict the
transfer privilege or reject any specific purchase payment allocation request
for any person whose transactions seem to follow a timing pattern.
All transfers are subject to the following:
a. no partial transfer will be made if it would result in any selected Sub-
Account or the Fixed Account providing less than 10% of the benefits under the
Contract.
b. transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer request (or by telephone, if
authorized) containing all required information. No transfers may occur until
the end of the Free-Look Period. (See "Highlights.")
c. any transfer direction must clearly specify the new allocation
percentage(s) and the Sub-Accounts and/or the Fixed Account which are to be re-
allocated.
d. at least one allocation to the Fixed Account is permitted. Both the
initial allocation to the Fixed Account and each transfer to the Fixed Account
will be treated as an allocation.
e. the Company reserves the right to limit the number of transfers among
Sub-Accounts to not fewer than 6 transfers per calendar year. The Company also
reserves the right at any time and without prior notice to any party to modify
the transfer provisions described above, subject to applicable state law and
regulation.
A Contract Owner may elect to make transfers by telephone. To elect this option
the Contract Owner must do so in writing to the Company. If there are Joint
Owners, unless the Company is informed to the contrary, instructions will be
accepted from either one of the Joint Owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The Company tape records all telephone instructions.
DISTRIBUTOR
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NALAC Financial Plans, LLC ("NFP"), 1750 Hennepin Avenue, Minneapolis,
Minnesota, acts as the distributor of the Contracts. NFP is a wholly-owned
subsidiary of the Company. The Contracts are offered on a continuous basis. NFP
has subcontracted with Franklin Advisers, Inc. ("Advisers") for it and/or
certain of its affiliates to provide certain marketing support services and NFP
compensates these entities for their services.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions at the time of purchase up to 4% of the
Single Purchase Payment. Broker-dealers are also paid a trail commission of up
to 40 basis points on the net single premium reserve for the Contract. The
Company, by agreement with the broker-dealer, pays commissions as a combination
of a certain percentage amount at the time of sale and a trail commission (which
when combined could exceed 4% of the Single Purchase Payment). In addition,
under certain circumstances, the Company and/or Advisers or certain of its
affiliates, under a marketing support agreement with NFP, may pay certain
sellers for other services not directly related to the sale of the Contracts
such as special marketing support allowances.
DELAY OF PAYMENTS
The Company reserves the right to suspend or postpone payments for any period
when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of securities held
in the Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Contract Owners.
The applicable rules and regulations of the Securities and Exchange Commission
will govern as to whether the conditions described in 2 and 3 exist.
The Company reserves the right to postpone withdrawals from the Fixed Account
for a period of up to six months.
ADMINISTRATION OF THE CONTRACTS
- --------------------------------------------------------------------------------
While the Company has primary responsibility for all administration of the
Contracts, it has retained the services of Templeton Funds Annuity Company
("TFAC" or "VIP Service Center") (in California d.b.a. Templeton Funds Life &
Annuity Insurance Company) pursuant to an Administration Agreement. Such
administrative services include issuance of the Contracts and maintenance of
Contract Owners' records. The Company pays all fees and charges of TFAC. TFAC is
an indirect wholly-owned subsidiary of Franklin Resources, Inc. which is also
the ultimate parent of all Managers to the Trust. TFAC has also entered into a
reinsurance agreement with the Company with respect to certain risks under the
Contracts.
PERFORMANCE DATA
- --------------------------------------------------------------------------------
MONEY MARKET SUB-ACCOUNT
From time to time, the Company or NFP may advertise the "yield" and "effective
yield" of the Money Market Sub-Account. Both yield figures will be based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Money Market Sub-Account refers to the income generated by
Contract Values in the Money Market Sub-Account over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the Contract Values in the Money Market Sub-Account. The
"effective yield" is calculated similarly but, when annualized, the income
earned by Contract Values in the Money Market Sub-Account is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The computation
of the yield calculation includes a deduction for the Mortality and Expense Risk
Charge and Administrative Expense Charge.
OTHER SUB-ACCOUNTS
From time to time, the Company or NFP may publish the current yields and total
returns of the other Sub-Accounts in sales literature, advertisements and
communications to Contract Owners. The current yield for each Sub-Account will
be calculated by dividing the annualization of the interest income earned by the
underlying Fund during a recent 30-day period by the maximum VIP Unit value at
the end of such period. Total return information will include the Sub-Account's
average annual total return over the most recent four calendar quarters, the
period from the Sub-Account's inception of operations, and, for Sub-Accounts in
existence for five years or more, for five years. The average annual total
return is based upon the value of the VIP Units acquired through a hypothetical
$1,000 investment of the VIP Unit value at the beginning of the specified period
and the value of the VIP Unit at the end of such period, assuming reinvestment
of all distributions and the deduction of the Mortality and Expense Risk Charge
and the Administrative Expense Charge. Each Sub-Account may also advertise
cumulative and total return information over different periods of time. The
performance of the Sub-Accounts reflects results achieved prior to the date the
Contracts first invested in the Sub-Accounts.
The Company or NFP may, in addition, advertise or present yield or total return
performance information computed on a different basis, or for the Funds.
Contract Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of a Sub-Account's current yield or
total return for any prior period should not be considered as a representation
of what an investment may earn or what a Contract Owner's yield or total return
may be in any future period.
Hypothetical performance illustrations for a hypothetical contract may be
prepared for sales literature or advertisements. See "Calculation of Performance
Data" in the Statement of Additional Information.
PERFORMANCE RANKING
The performance of each or all of the Sub-Accounts of the Variable Account may
be compared in its advertising and sales literature to the performance of other
variable annuity issuers in general or to the performance of particular types of
variable annuities investing in mutual funds, or series of mutual funds with
investment objectives similar to each of the Sub-Accounts of the Variable
Account or indices. Lipper Analytical Services, Inc. ("Lipper") and the Variable
Annuity Research and Data Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS rank such issuers on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level into
consideration. In addition, VARDS prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. This type of
ranking may address the question as to which funds provide the highest total
return with the least amount of risk. Other ranking services may be used as
sources of performance comparison, such as CDA/Weisenberger and Morningstar.
TAX STATUS
- --------------------------------------------------------------------------------
NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to annuities in general. The Company
cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. The Company does not guarantee the tax status of the Contracts.
Purchasers bear the complete risk that the Contracts may not be treated as
"annuity contracts" under federal income tax laws. It should be further
understood that the following discussion is not exhaustive and that special
rules not described in this Prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Annuity Option elected.
For annuity payments, the portion of a payment includable in income equals the
excess of the payment over the exclusion amount. The exclusion amount for
payments based on a variable annuity option is determined by dividing the
investment in the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid (determined
by Treasury Regulations). 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 guarantee)
bears to the expected return under the Contract. Payments received after the
investment in the Contract has been recovered (i.e. the total of the excludable
amounts equal the investment in the Contract) are fully taxable. The taxable
portion of an annuity payment is taxed at ordinary income rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Funds of the Trust underlying the Contracts will be
managed by the Managers for the Trust in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Variable Account will cause the Contract Owner to be
treated as the owner of the assets of the Variable Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Variable Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Variable Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year period to the same contract
owner by one company or its affiliates are treated as one annuity contract for
purposes of determining the tax consequences of any distribution. Such treatment
may result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. The legislative history
of Section 72(e)(11) indicates that it was not intended to apply to immediate
annuities. However, the legislative history also states that no inference is
intended as to whether the Treasury Department, under its authority to prescribe
rules to enforce the tax laws, may treat the combination purchase of a deferred
annuity contract with an immediate annuity contract as a single contract for
purposes of determining the tax consequences of any distribution.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 591/2; (b) after the death of the Contract Owner;
(c) if the taxpayer is totally disabled (for this purpose disability is as
defined in Section 72(m)(7) of the Code); (d) in a series of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer and his Beneficiary; (e) as an annuity payment under
an immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Distributions -IRA Contracts.")
The availability of total or partial withdrawals from an immediate annuity is
not expressly provided for in the Code or Treasury Regulations. The only tax
guidance currently available for such issue is a Private Letter Ruling holding
that the right to make withdrawals does not prevent a contract from qualifying
as an immediate annuity. However, the Private Letter Ruling does not address the
issue of whether the making of a withdrawal would adversely affect the favorable
tax treatment of annuity payments made before or after such partial withdrawal
because of the requirement that all immediate annuity payments must be
"substantially equal". The loss of favorable tax treatment would mean that the
income portion of each annuity payment received prior to the taxpayer's
attaining age 591/2 would be subject to a 10% penalty tax unless another
exception to the penalty tax applies. While the Company currently believes that
such withdrawals will not adversely affect the favorable tax treatment of
annuity payments received before or after a withdrawal and the Company intends
to perform its tax reporting functions accordingly, there can be no assurance
that the Internal Revenue Service will not take a contrary position. Contract
Owners should obtain competent tax advice prior to making a partial or total
withdrawal.
QUALIFIED PLANS
The Contracts offered by this Prospectus may also be used with a plan qualified
under Section 408(b) of the Code ("IRA Contracts"). Contract Owners, Annuitants
and Beneficiaries are cautioned that benefits under an IRA Contract may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. The following
discussion of IRA Contracts is not exhaustive and is for general informational
purposes only. The tax rules regarding IRA Contracts are very complex and will
have differing applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to purchasing IRA
Contracts.
IRA Contracts include special provisions restricting Contract provisions that
may otherwise be available as described in this Prospectus. Generally, IRA
Contracts are not transferable except upon surrender or annuitization.
Various penalty and excise taxes may apply to contributions or distributions
made in violation of applicable limitations. Furthermore, certain withdrawal
penalties and restrictions may apply to distributions from IRA Contracts. (See
"Tax Treatment of Distributions - IRA Contracts".)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. IRA Contracts will utilize annuity tables which do
not differentiate on the basis of sex because of the use of the IRA Contracts in
a Simplified Employee Pension. Such annuity tables will also be available for
use in connection with certain non-qualified deferred compensation plans.
Under applicable limitations, certain amounts may be contributed to an IRA
Contract which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Distributions - IRA Contracts".) Under
certain conditions, distributions from other IRAs and other qualified plans may
be rolled over or transferred on a tax-deferred basis into an IRA Contract.
Sales of Contracts for use as IRA Contracts are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Contracts to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF DISTRIBUTIONS - IRA CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract.
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including IRA Contracts. To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible qualified plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Annuitant reaches age
591/2; (b) distributions following the death or disability of the Annuitant (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant and
his or her designated Beneficiary; (d) distributions made to the Annuitant to
the extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Annuitant for amounts paid during the taxable year
for medical care; and (e) distributions from an IRA Contract for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Annuitant and his or her spouse and dependents if the Annuitant has received
unemployment compensation for at least 12 weeks. This exception will no longer
apply after the Annuitant has been re-employed for at least 60 days. With
respect to (c) above, if the series of substantially equal periodic payments is
modified before the later of the Annuitant attaining age 591/2 or 5 years from
the date of the first annuity payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used. A partial withdrawal may result in the
modification of the series of annuity payments made after such withdrawal and
therefore could result in the imposition of the 10% penalty tax and interest for
the period as described above. Competent tax advice should be obtained prior to
making any withdrawals from an IRA Contract. Any amounts distributed will only
be paid to the Annuitant, Joint Annuitant or Beneficiary. The Company will not
transfer or pay such amounts to another IRA or tax qualified plan.
Generally, distributions from an IRA Contract must commence no later than April
1 of the calendar year, following the year in which the employee attains age
701/2. Generally, required distributions must be over a period not exceeding the
life or life expectancy of the individual or the joint lives or life
expectancies of the individual and his or her designated beneficiary. If the
required minimum distributions are not made, a 50% penalty tax is imposed as to
the amount not distributed.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign their
Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Contract Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Contract Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Audited consolidated financial statements of the Company and audited financial
statements of the Variable Account as of and for the year ended December 31,
1996 are included in the Statement of Additional Information.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Variable Account or the Distributor
is a party or to which the assets of the Variable Account are subject. The
Company is not involved in any litigation that is of material importance in
relation to its total assets or that relates to the Variable Account.
APPENDIX
- --------------------------------------------------------------------------------
ILLUSTRATION OF VALUES
The following tables have been prepared to show how investment performance
affects variable annuity income over time. The variable annuity income amounts
reflect three different assumptions for a constant investment return before all
expenses: 0%, 6% and 12%. These are hypothetical rates of return and, of course,
the Company does not guarantee that the Contract will earn these returns for any
one year or any sustained period of time. The tables are for illustrative
purposes only and do not represent past or future investment returns.
The variable annuity income may be more or less than the income shown if the
actual returns of the Eligible Investments are different than those illustrated.
Since it is very likely that investment returns will fluctuate over time, the
amount of variable annuity income will also fluctuate. The total amount of
annuity income ultimately received will depend on cumulative investment returns
and how long the Annuitant lives and the option chosen.
Another factor which determines the amount of variable annuity income is the
Assumed Investment Return. Income will increase from one annuity Income Date to
the next if the annualized Net Rate of Return during that time is greater than
the Assumed Investment Return, and will decrease if the annualized Net Rate of
Return is less than the Assumed Investment Return.
Two illustrations follow. The first is based on a 3% Assumed Investment Return,
and the second is based on a 5% Assumed Investment Return.
The income amounts shown reflect the deduction of all fees and expenses. Actual
Trust fees and expenses will vary from year to year and from Fund to Fund and
may thus be higher or lower than the assumed rate. The illustrations assume that
each Fund of the Trust will incur expenses at an annual rate of 0.76% of the
average daily net assets of the Fund. This is the average in 1996, weighted by
Fund net assets as of 12/31/96. The Mortality and Expense Risk Charge and
Administrative Expense Charge are calculated, in the aggregate, at an annual
rate of 1.40% of the average daily net assets of the Variable Account. After
taking these expenses and charges into consideration, the illustrated gross
investment returns of 0%, 6% and 12% are approximately equal to net rates of
- -2.17%, 3.70% and 9.57%, respectively.
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/28 EFFECTIVE DATE: 12/1/97
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/98
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 3%
The amount of monthly variable annuity income shown in the table below and the
graph that follows assumes a constant annual investment return. The amount of
variable annuity income that is actually received will depend on the investment
performance of the underlying Fund(s) selected. The variable annuity income can
go up or down and no minimum dollar amount of variable annuity income is
guaranteed. The amounts shown are based on a 3% Assumed Investment Return.
Income will remain constant at $625 per month when the annualized net rate of
return after expenses is 3%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.17% 3.70% 9.57%
- -------------------- ---- ------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1998 70 $622 $625 $ 628
January 1, 1999 71 591 629 668
January 1, 2000 72 561 634 711
January 1, 2001 73 533 638 756
January 1, 2002 74 506 642 804
January 1, 2007 79 391 664 1,096
January 1, 2012 84 303 688 1,494
January 1, 2017 89 234 711 2,035
January 1, 2022 94 181 736 2,773
</TABLE>
<PAGE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 3%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
------------------------------------------------------------
-2.17% 3.70% 9.57%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
Year After Expenses After Expenses After Expenses
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 622 $ 625 $ 628
2 591 629 668
3 561 634 711
4 533 638 756
5 506 642 804
6 481 647 856
7 457 651 910
8 434 655 969
9 412 660 1,030
10 391 664 1,096
11 372 669 1,166
12 353 674 1,241
13 335 678 1,320
14 319 683 1,404
15 303 688 1,494
16 287 692 1,589
17 273 697 1,690
18 259 702 1,798
19 246 706 1,913
20 234 711 2,035
21 222 716 2,165
22 211 721 2,303
23 200 726 2,450
24 190 731 2,607
25 181 736 2,773
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALUEMARK INCOME PLUS ILLUSTRATION
ANNUITANT: John Doe ANNUITY PURCHASE AMOUNT: $100,000
DATE OF BIRTH: 1/1/28 EFFECTIVE DATE: 12/1/97
ANNUITY INCOME OPTION: Single Life Annuity FIRST ANNUITY INCOME DATE: 1/1/98
PREMIUM TAX: 0% FREQUENCY OF ANNUITY INCOME: Monthly
ASSUMED INVESTMENT RETURN: 5%
The amount of monthly variable annuity income shown in the table below and the
graph that follows assumes a constant annual investment return. The amount of
variable annuity income that is actually received will depend on the investment
performance of the underlying Fund(s) selected. The variable annuity income can
go up or down and no minimum dollar amount of variable annuity income is
guaranteed. The amounts shown are based on a 5% Assumed Investment Return.
Income will remain constant at $742 per month when the annual rate of return
after expenses is 5%.
MONTHLY ANNUITY PAYMENTS
Annual rate of return before expenses: 0% 6% 12%
Annuity Income Date Age Annual rate of return after expenses: -2.17% 3.70% 9.57%
- -------------------- ---- ------------------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
January 1, 1998 70 $738 $741 $ 745
January 1, 1999 71 687 732 777
January 1, 2000 72 640 723 811
January 1, 2001 73 597 714 847
January 1, 2002 74 556 705 884
January 1, 2007 79 390 663 1,094
January 1, 2012 84 274 623 1,353
January 1, 2017 89 193 586 1,675
January 1, 2022 94 135 550 2,073
</TABLE>
<PAGE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
<TABLE>
<CAPTION>
The following table summarizes Annuity Income with an Assumed Investment Return
of 5%. This table is presented graphically in the printed prospectus.
Monthly Payment Amount
------------------------------------------------------------
-2.17% 3.70% 9.57%
Annual Rate Annual Rate Annual Rate
of Return of Return of Return
Year After Expenses After Expenses After Expenses
- ---------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 738 $ 741 $ 745
2 687 732 777
3 640 723 811
4 597 714 847
5 556 705 884
6 518 697 922
7 483 688 962
8 450 680 1,004
9 419 671 1,048
10 390 663 1,094
11 364 655 1,141
12 339 647 1,191
13 316 639 1,243
14 294 631 1,297
15 274 623 1,353
16 255 615 1,412
17 238 608 1,474
18 222 600 1,538
19 207 593 1,605
20 193 586 1,675
21 179 578 1,748
22 167 571 1,824
23 156 564 1,904
24 145 557 1,987
25 135 550 2,073
</TABLE>
<PAGE>
Table of Contents of the
Statement of Additional Information
- -------------------------------------------------------
ITEM PAGE
Company........................................... 2
Experts .......................................... 2
Legal Opinions ................................... 2
Distributor....................................... 2
Calculation of Performance Data .................. 2
Total Return .................................... 2
Yield ........................................... 2
Performance Ranking ............................. 3
Performance Information ......................... 3
Annuity Income .................................. 4
Annuity Provisions ............................... 4
Variable Annuity Payout ......................... 4
Fixed Annuity Payout ............................ 5
Financial Statements ............................. 5
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL IMMEDIATE
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
May 1, 1997
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL IMMEDIATE VARIABLE
ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800) 542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED MAY 1,
1997 , AND AS MAY BE AMENDED FROM TIME TO TIME.
<TABLE>
<CAPTION>
Table of Contents
- -------------------------------------------------------
<S> <C>
Contents Page
Company.......................................... 2
Experts.......................................... 2
Legal Opinions................................... 2
Distributor...................................... 2
Calculation of Performance Data.................. 2
Total Return.................................... 2
Yield........................................... 2
Performance Ranking............................. 3
Performance Information......................... 3
Annuity Income.................................. 4
Annuity Provisions............................... 4
Variable Annuity Payout......................... 4
Fixed Annuity Payout............................ 5
Financial Statements............................. 5
</TABLE>
VIP SAI 05/97
<PAGE>
Company
- --------------------------------------------------------------------------------
Information regarding Allianz Life Insurance Company of North America (the
"Company") and its ownership is contained in the Prospectus. On April 1, 1993,
the Company changed its name from North American Life and Casualty Company to
its present name. The Company is rated A+ (Superior) by A.M. BEST, an
independent analyst of the insurance industry. The financial strength of an
insurance company may be relevant insofar as the ability of a company to make
fixed annuity payments from its general account.
Experts
- --------------------------------------------------------------------------------
The financial statements of Allianz Life Variable Account B and the consolidated
financial statements of the Company as of and for the year ended December 31,
1996 , 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 subsidiary of the Company, acts as the
distributor. The offering is on a continuous basis.
Calculation of Performance Data
- --------------------------------------------------------------------------------
Total Return
From time to time, the Company may advertise the performance data for the
Sub-Accounts in sales literature, advertisements, personalized hypothetical
illustrations, and Contract Owner communications. Such data will show the
percentage change in the value of a VIP Unit based on the performance of a
Sub-Account over a stated period of time which is determined by dividing the
increase (or decrease) in value for that unit by the VIP Unit Value at the
beginning of the period.
Any such performance data will include total return figures for the one, five,
and ten year (or since inception) time periods indicated. Such total return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a 0.15% Administrative Expense Charge and the operating expenses of the
underlying Funds.
The hypothetical value of a Contract purchased for the time periods described
will be determined by using the actual VIP Unit Values for an initial $1,000
purchase payment. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years;
ERV = ending redeemable value of a hypothetical $1,000 purchase payment made at
the beginning of the period at the end of the period.
The Company may also advertise cumulative and total return information over
different periods of time. Cumulative total return is calculated in a similar
manner as described above except that the results are not annualized.
Yield
The Money Market Sub-Account. The Company may advertise yield information for
the Money Market Sub-Account. The Money Market Sub-Account's current yield may
vary each day, depending upon, among other things, the average maturity of the
underlying Fund's investment securities and changes in interest rates, operating
expenses, the deduction of the Mortality and Expense Risk Charge, the
Administrative Expense Charge and, in certain instances, the value of the
underlying Fund's investment securities. The fact that the Sub-Account's current
yield will fluctuate and that the principal is not guaranteed should be taken
into consideration when using the Sub-Account's current yield as a basis for
comparison with savings accounts or other fixed-yield investments. The yield at
any particular time is not indicative of what the yield may be at any other
time.
The Money Market Sub-Account's current yield is computed on a base period return
of a hypothetical Contract having a beginning balance of one VIP Unit for a
particular period of time (generally seven days). The return is determined by
dividing the net change (exclusive of any capital changes) in such VIP Unit by
its beginning value, and then multiplying it by 365/7 to get the annualized
current yield. The calculation of net change reflects the value of additional
shares purchased with the dividends paid by the Fund, and the deduction of the
Mortality and Expense Risk Charge and the Administrative Expense Charge.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. (Effective
yield = [(Base Period Return + 1)365/7]-1.)
For the seven-day period ending on 12/31/96, the Money Market Sub-Account had a
current yield of 3.64% and an effective yield of 3.70%.
Other Sub-Accounts. The Company may also quote yield in sales literature,
advertisements, personalized hypothetical illustrations, and Contract Owner
communications for the other Sub-Accounts. Each Sub-Account (other than the
Money Market Sub-Account) will publish standardized total return information
with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
VIP Unit earned during the period (minus the deduction for the Mortality and
Expense Risk Charge and Administrative Expense Charge) by the VIP Unit Value on
the last day of the period and annualizing the resulting figure, according to
the following formula:
Yield = 2 [((a-b) + 1)6 - 1]
-----
cd
where:
a = net investment income earned during the period by the Fund attributable to
shares owned by the Sub-Account;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of VIP Units outstanding during the period;
d = the maximum offering price per VIP Unit on the last day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. The Company does not currently advertise yield
information for any Sub-Account (other than the Money Market Sub-Account).
Performance Ranking
Total return information for the Sub-Accounts and the Funds may be compared to
relevant indices, including U.S. domestic and international 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.
Performance Information
Total returns reflect all aspects of a Sub-Account's return, including the
automatic reinvestment by Allianz Life Variable Account B of all distributions
and any change in a Sub-Account's value over the period. The performance of the
Sub-Accounts for certain periods reflects results achieved prior to the date the
Contracts first invested in the Sub-Accounts.
The returns reflect the deduction of the Mortality and Expense Risk Charge,
Administrative Expense Charge and the operating expenses of each Fund. Past
performance does not guarantee future results.
<TABLE>
<CAPTION>
Standardized Total Return
Average Annual Total Return for the periods ended December 31, 1996
Inception One Five Since
Sub-Account Date Year Years Inception
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth......................................................... 5/1/96 NA NA NA
Growth and Income...................................................... 1/24/89 12.59% 10.28% 8.77%
Income Securities...................................................... 1/24/89 9.72% 9.84% 10.25%
Money Market+.......................................................... 1/24/89 3.69% 2.61% 3.72%
Mutual Discovery Securities............................................ 11/8/96 NA NA NA
Mutual Shares Securities............................................... 11/8/96 NA NA NA
Real Estate Securities................................................. 1/24/89 30.96% 14.84% 11.46%
Rising Dividends....................................................... 1/27/92 22.44% NA 9.01%
Small Cap.............................................................. 11/1/95 27.26% NA 24.49%
Templeton Developing Markets Equity.................................... 3/15/94 19.89% NA 5.08%
Templeton Global Asset Allocation...................................... 5/1/95 18.16% NA 14.36%
Templeton Global Growth................................................ 3/15/94 19.58% NA 11.49%
Templeton International Equity......................................... 1/27/92 21.25% NA 10.11%
Templeton International Smaller Companies.............................. 5/1/96 NA NA NA
Templeton Pacific Growth............................................... 1/27/92 9.55% NA 8.47%
Utility Equity......................................................... 1/24/89 5.57% 6.86% 9.57%
<FN>
+Calculated with waiver of fees and reimbursement of expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Non-Standardized Total Return
Total Return for the periods ended December 31, 1996
Annual Total Return Cumulative Total Return
-------------------------------------- -----------------------------
Inception One Three Five Since Three Five Since
Sub-Account Date Year Years Years Inception Years Years Inception
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth...................... 5/1/96 NA NA NA NA NA NA 12.54%
Growth and Income................... 1/24/89 12.59% 12.53% 10.28% 8.77% 42.50% 63.10% 94.90%
Income Securities................... 1/24/89 9.72% 6.97% 9.84% 10.25% 22.41% 59.85% 117.08%
Money Market+....................... 1/24/89 3.69% 3.45% 2.61% 3.72% 10.72% 13.78% 33.59%
Mutual Discovery Securities......... 11/8/96 NA NA NA NA NA NA 1.80%
Mutual Shares Securities............ 11/8/96 NA NA NA NA NA NA 3.30%
Real Estate Securities.............. 1/24/89 30.96% 15.48% 14.84% 11.46% 54.00% 99.76% 136.68%
Rising Dividends.................... 1/27/92 22.44% 14.01% NA 9.01% 48.18% NA 53.03%
Small Cap........................... 11/1/95 27.26% NA NA 24.49% NA NA 29.13%
Templeton Developing
Markets Equity..................... 3/15/94 19.89% NA NA 5.08% NA NA 14.87%
Templeton Global
Asset Allocation................... 5/1/95 18.16% NA NA 14.36% NA NA 25.14%
Templeton Global Growth............. 3/15/94 19.58% NA NA 11.49% NA NA 35.60%
Templeton International Equity...... 1/27/92 21.25% 9.57% NA 10.11% 31.54% NA 60.81%
Templeton International
Smaller Companies.................. 5/1/96 NA NA NA NA NA NA 11.45%
Templeton Pacific Growth............ 1/27/92 9.55% 1.61% NA 8.47% 4.91% NA 49.32%
Utility Equity...................... 1/24/89 5.57% 6.05% 6.86% 9.57% 19.26% 39.35% 106.54%
<FN>
+Calculated with waiver of fees and reimbursement of expenses.
</FN>
</TABLE>
The Company may also present performance information computed on a different
basis.
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.
<PAGE>
Annuity Income
Periodic annuity income amounts may be illustrated using the historical
performance of the Sub-Accounts, the Standard & Poor's 500 Composite Stock Price
Index or other recognized investment benchmark portfolios. All illustrations
will reflect the 1.25% annual Mortality and Expense Risk Charge and the 0.15%
Administrative Expense Charge and actual or assumed Fund expenses.
Annuity Provisions
- --------------------------------------------------------------------------------
Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Sub-Account(s) of the Variable Account. Annuity payments also
depend upon the Age of the Annuitant and any Joint Annuitant and the Assumed Net
Investment Factor utilized. On the Annuity Calculation Date, the Contract Value
in each Sub-Account will be applied to the applicable Annuity Tables. The
Annuity Table used will depend upon the Annuity Option chosen. Unisex Annuity
Tables are utilized by the Company. The dollar amount of annuity payments after
the first is determined as follows:
1. The dollar amount of the first annuity payment is divided by the value of an
Annuity Unit as of the Annuity Calculation Date. This establishes the number
of Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the annuity payment period.
2. For each Sub-Account, the fixed number of Annuity Units is multiplied by the
Annuity Unit value on each subsequent annuity payment date. This result is
the dollar amount of the payment for each Sub-Account.
3. The total dollar amount of each Variable Annuity variable payout is the sum
of all Sub-Account Variable Annuity payments.
Fixed Annuity Payout
Annuity payments from the Fixed Account will be equal payments unless otherwise
specified by the Annuity Option selected.
Financial Statements
- --------------------------------------------------------------------------------
The audited consolidated financial statements of the Company as of and for the
year ended December 31, 1996 included herein should be considered only as
bearing upon the ability of the Company to meet its obligations under the
Contracts. The audited financial statements of the Variable Account as of and
for the year ended December 31, 1996 are also included herein.
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, 1996, 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, 1996, 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 24, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
====================================================================================================================================
Financial Statements
Statements of Assets and Liabilities
December 31, 1996
(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, 375,683 shares, cost $375,683........ $375,683 - - - - -
Growth and Income Fund, 55,678 shares, cost $793,252.... - 977,147 - - - -
Precious Metals Fund, 7,086 shares, cost $103,815....... - - 101,257 - - -
High Income Fund, 28,418 shares, cost $367,146.......... - - - 402,400 - -
Real Estate Securities Fund, 13,634 shares,
cost $217,032.......................................... - - - - 301,991 -
U.S. Government Securities Fund, 55,160 shares,
cost $719,883......................................... - - - - - 743,008
------- ------- ------- ------- ------- -------
Total assets......................................... 375,683 977,147 101,257 402,400 301,991 743,008
------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges............... 48 33 8 19 15 31
Accrued administrative charges........................... 6 4 1 2 2 4
------- ------- ------- ------- ------- -------
Total liabilities.................................... 54 37 9 21 17 35
------- ------- ------- ------- ------- -------
Net assets........................................... $375,629 977,110 101,248 402,379 301,974 742,973
======= ======= ======= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)................ $374,865 975,004 101,248 401,759 301,930 742,567
Contracts in annuity payment period (note 2)............. 764 2,106 - 620 44 406
------- ------- ------- ------- ------- -------
Total contract owners' equity........................ $375,629 977,110 101,248 402,379 301,974 742,973
======= ======= ======= ======= ======= =======
Accumulation units outstanding........................... 28,060 50,027 6,998 20,736 12,757 44,598
======= ======= ======= ======= ======= =======
Accumulation unit value per unit......................... $13.359 19.490 14.467 19.375 23.668 16.650
======= ======= ======= ======= ======= =======
<FN>
See accompanying notes to 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.)
December 31, 1996
(In thousands except per unit data)
Templeton
Utility Zero Zero Zero Global Income Income
Equity Coupon Coupon Coupon Securities Securities
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Fund
-------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 60,392 shares, cost $948,947 $1,097,920 - - - - -
Zero Coupon Fund - 2000, 6,855 shares,
cost $95,941.................................... - 104,135 - - - -
Zero Coupon Fund - 2005, 4,492 shares,
cost $66,082.................................... - - 73,443 - - -
Zero Coupon Fund - 2010, 4,357 shares,
cost $66,131.................................... - - - 70,977 - -
Templeton Global Income Securities Fund,
14,609 shares, cost $185,728.................... - - - - 198,981 -
Income Securities Fund,
72,742 shares, cost $1,082,408.................. - - - - - 1,251,888
--------- ------- ------- ------- ------- ---------
Total assets................................... 1,097,920 104,135 73,443 70,977 198,981 1,251,888
--------- ------- ------- ------- ------- ---------
Liabilities:
Accrued mortality and expense risk charges........ 42 9 8 7 12 39
Accrued administrative charges.................... 5 1 1 1 1 5
--------- ------- ------- ------- ------- --------
Total liabilities.............................. 47 10 9 8 13 44
--------- ------- ------- ------- ------- ---------
Net assets..................................... $1,097,873 104,125 73,434 70,969 198,968 1,251,844
========= ======= ======= ======= ======= =========
Contract owners' equity:
Contracts in accumulation period (note 6)......... $1,096,456 104,125 73,434 70,969 198,968 1,248,321
Contracts in annuity payment period (note 2)...... 1,417 - - - - 3,523
--------- ------- ------- ------- ------- ---------
Total contract owners' equity.................. $1,097,873 104,125 73,434 70,969 198,968 1,251,844
========= ======= ======= ======= ======= =========
Accumulation units outstanding.................... 53,086 5,636 3,579 3,297 11,857 57,504
========= ======= ======= ======= ======== ========
Accumulation unit value per unit.................. $20.654 18.475 20.517 21.522 16.781 21.708
========= ======= ======= ======= ======== ========
<FN>
See accompanying notes to 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.)
December 31, 1996
(In thousands except per unit data)
Templeton Templeton Templeton Templeton Templeton
Pacific Rising International Developing Global Global Asset
Growth Dividends Equity Markets Equity Growth Allocation
Fund Fund Fund Fund Fund Fund
------- ------- ------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Pacific Growth Fund,
22,370 shares, cost $307,615.................... $330,175 - - - - -
Rising Dividends Fund,
35,399 shares, cost $393,224.................... - 545,147 - - - -
Templeton International Equity Fund,
67,098 shares, cost $853,455.................... - - 1,036,664 - - -
Templeton Developing Markets Equity Fund,
22,377 shares, cost $231,910.................... - - - 259,352 - -
Templeton Global Growth Fund,
39,862 shares, cost $454,602.................... - - - - 550,097 -
Templeton Global Asset Allocation Fund,
4,140 shares, cost $45,904...................... - - - - - 52,122
------- ------- --------- ------- ------- ------
Total assets................................. 330,175 545,147 1,036,664 259,352 550,097 52,122
------- ------- --------- ------- ------- ------
Liabilities:
Accrued mortality and expense risk charges........ 14 18 72 5 28 4
Accrued administrative charges.................... 2 2 9 1 3 1
------- ------- --------- ------- ------- -------
Total liabilities............................ 16 20 81 6 31 5
------- ------- --------- ------- ------- -------
Net assets................................... $330,159 545,127 1,036,583 259,346 550,066 52,117
======= ======= ========= ======= ======= =======
Contract owners' equity:
Contracts in accumulation period (note 6)......... $329,409 544,315 1,035,240 257,584 546,814 51,362
Contracts in annuity payment period (note 2)...... 750 812 1,343 1,762 3,252 755
------- ------- --------- ------- ------- -------
Total contract owners' equity................ $330,159 545,127 1,036,583 259,346 550,066 52,117
======= ======= ========= ======= ======= =======
Accumulation units outstanding.................... 22,061 35,569 64,375 22,423 40,327 4,104
======= ======= ========= ======= ======= =======
Accumulation unit value per unit.................. $14.932 15.303 16.081 11.487 13.560 12.514
======= ======= ========= ======= ======= =======
<FN>
See accompanying notes to 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.)
December 31, 1996
(In thousands except per unit data)
Templeton
International Mutual Mutual
Small Capital Smaller Discovery Shares Total
Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Funds
------- ----- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Small Cap Fund, 12,545 shares, cost $148,931............ $165,591 - - - -
Capital Growth Fund, 3,708 shares, cost $40,307......... - 42,118 - - -
Templeton International Smaller Companies Fund,
1,381 shares, cost $14,403............................. - - 15,534 - -
Mutual Discovery Securities Fund,
1,478 shares, cost $14,879............................. - - - 15,079 -
Mutual Shares Securities Fund,
2,623 shares, cost $26,543............................. - - - - 27,147
------- ------ ------ ------ ------
Total assets........................................ 165,591 42,118 15,534 15,079 27,147 8,737,856
------- ------ ------ ------ ------ ---------
Liabilities:
Accrued mortality and expense risk charges............... 12 7 6 4 5 446
Accrued administrative charges........................... 1 1 1 1 1 56
------- ------ ------ ------ ------ ---------
Total liabilities................................... 13 8 7 5 6 502
------- ------ ------ ------ ------ ---------
Net assets.......................................... $165,578 42,110 15,527 15,074 27,141 8,737,354
======= ====== ====== ====== ====== =========
Contract owners' equity:
Contracts in accumulation period (note 6)................ $165,073 41,883 15,467 14,976 26,991 8,718,760
Contracts in annuity payment period (note 2)............. 505 227 60 98 150 18,594
------- ------ ------ ------ ------ ---------
Total contract owners' equity....................... $165,578 42,110 15,527 15,074 27,141 8,737,354
======= ====== ====== ====== ====== =========
Accumulation units outstanding.......................... 12,784 3,722 1,388 1,471 2,613 508,972
======= ====== ====== ====== ====== =========
Accumulation unit value per unit......................... $12.913 11.254 11.145 10.180 10.330
======= ====== ====== ====== ======
<FN>
See accompanying notes to 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 year ended December 31, 1996
(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..................... $ 20,371 20,139 1,477 27,936 9,054 36,122
-------- ------- ------ ------- ------ -------
Expenses:
Mortality and expense risk charges...................... 5,107 11,169 1,463 4,365 2,832 7,067
Administrative charges.................................. 613 1,340 176 524 340 848
-------- ------- ------ ------- ------ -------
Total expenses..................................... 5,720 12,509 1,639 4,889 3,172 7,915
-------- ------- ------ ------- ------ -------
Investment income (loss), net...................... 14,651 7,630 (162) 23,047 5,882 28,207
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................................... 451,939 87,838 70,163 101,305 16,530 114,831
Cost of investments sold.............................. (451,939) (72,627) (66,041) (93,324) (13,792) (111,215)
-------- ------- ------ ------- ------ -------
Total realized gains (losses) on sales of
investments, net.................................. - 15,211 4,122 7,981 2,738 3,616
-------- ------- ------ ------- ------ -------
Realized gains (losses) on investments, net........ - 86,540 5,476 9,464 2,738 3,616
Net change in unrealized appreciation (depreciation)
on investments.......................................... - 13,214 (5,135) 8,973 58,128 (18,709)
-------- ------- ------ ------- ------ -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net... - 99,754 341 18,437 60,866 (15,093)
-------- ------- ------ ------- ------ -------
Net increase (decrease) in net assets from operations.... $ 14,651 107,384 179 41,484 66,748 13,114
======== ======= ====== ======= ====== =======
<FN>
See accompanying notes to 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 year ended December 31, 1996
(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............... 14,961 1,350 898 890 2,579 1,516
Administrative charges........................... 1,795 162 108 107 310 182
-------- ------ ------- ------ ------ -----
Total expenses.............................. 16,756 1,512 1,006 997 2,889 1,698
-------- ------ ------- ------ ------ -----
Investment income (loss), net............... 43,207 4,403 2,728 2,690 12,436 6,095
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............................ 298,295 19,016 9,028 33,589 45,486 161,712
Cost of investments sold....................... (264,853) (17,510) (8,221) (31,159) (43,916) (156,449)
-------- ------ ------- ------ ------ -------
Total realized gains (losses) on sales of
investments, net........................... 33,442 1,506 807 2,430 1,570 5,263
-------- ------ ------- ------ ------ --------
Realized gains (losses) on investments, net. 33,442 1,564 807 3,429 1,570 5,263
Net change in unrealized appreciation (depreciation)
on investments.................................. (17,145) (4,982) (4,814) (9,041) 1,397 (8,886)
-------- ------ ------- ------ ------ --------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net........................ 16,297 (3,418) (4,007) (5,612) 2,967 (3,623)
-------- ------ ------- ------ ------ --------
Net increase (decrease) in net assets
from operations.................................. $ 59,504 985 (1,279) (2,922) 15,403 2,472
======== ====== ======= ====== ====== ========
<FN>
See accompanying notes to 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 year ended December 31, 1996
(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............... 15,271 1,678 4,369 5,805 11,564 2,769
Administrative charges........................... 1,833 201 524 697 1,388 332
-------- -------- ------- ------ ------- ------
Total expenses............................... 17,104 1,879 4,893 6,502 12,952 3,101
-------- -------- ------- ------ ------- ------
Investment income (loss), net................ 44,974 10,420 5,289 2,950 10,789 (1,013)
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........................... 116,053 195,626 125,924 48,263 65,043 29,440
Cost of investments sold...................... (103,909) (201,593) (115,808) (39,102) (57,533) (28,163)
-------- -------- ------- ------ ------- ------
Total realized gains (losses) on sales of
investments, net........................... 12,144 (5,967) 10,116 9,161 7,510 1,277
-------- -------- ------- ------ ------- ------
Realized gains (losses) on investments, net 22,468 (5,967) 16,017 9,161 36,562 5,139
Net change in unrealized appreciation (depreciation)
on investments................................... 45,516 1,206 8,976 84,727 129,022 30,681
-------- -------- ------- ------ ------- ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net...................... 67,984 (4,761) 24,993 93,888 165,584 35,820
-------- -------- ------- ------ ------- ------
Net increase (decrease) in net assets
from operations.................................. $112,958 5,659 30,282 96,838 176,373 34,807
======== ======== ======= ====== ======= ======
<FN>
See accompanying notes to 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 year ended December 31, 1996
(In thousands)
Templeton Templeton
Templeton Global International Mutual
Global Asset Small Capital Smaller Discovery
Growth Allocation Cap Growth Companies Securities
Fund Fund Fund Fund Fund Fund
------- ---------- ------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares......................... $ 6,984 14 34 - - -
------- ------ ------ ----- ----- ----
Expenses:
Mortality and expense risk charges.......................... 5,483 397 1,212 167 85 16
Administrative charges...................................... 658 48 145 20 10 2
------- ------ ------ ----- ----- ----
Total expenses......................................... 6,141 445 1,357 187 95 18
------- ------ ------ ----- ----- ----
Investment income (loss), net.......................... 843 (431) (1,323) (187) (95) (18)
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds........ 6,984 27 3 - - -
------- ------ ------ ----- ----- ----
Realized gains (losses) on sales of investments:
Proceeds from sales....................................... 16,063 2,629 50,761 3,099 3,111 -
Cost of investments sold.................................. (14,521) (2,488) (49,958) (3,075) (3,051) -
------- ------ ------ ----- ----- ----
Total realized gains (losses) on sales of
investments, net...................................... 1,542 141 803 24 60 -
------- ------ ------ ----- ----- ----
Realized gains (losses) on investments, net............ 8,526 168 806 24 60 -
Net change in unrealized appreciation (depreciation)
on investments.............................................. 68,710 5,895 16,477 1,811 1,131 200
------- ------ ------ ----- ----- ----
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net...... 77,236 6,063 17,283 1,835 1,191 200
------- ------ ------ ----- ----- ----
Net increase (decrease) in net assets from operations........ $78,079 5,632 15,960 1,648 1,096 182
======= ====== ====== ===== ===== ====
<FN>
See accompanying notes to 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 year ended December 31, 1996
(In thousands)
Mutual
Shares Total
Securities All
Fund Funds
---------- --------
<S> <C> <C>
Investment income:
Dividends reinvested in fund shares................................................................... $ - 338,388
------ ---------
Expenses:
Mortality and expense risk charges.................................................................... 30 103,043
Administrative charges................................................................................ 4 12,367
------ ---------
Total expenses.................................................................................. 34 115,410
------ ---------
Investment income (loss), net................................................................... (34) 222,978
Realized gains (losses) and unrealized appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds................................................... - 131,376
------ ---------
Realized gains (losses) on sales of investments:
Proceeds from sales.................................................................................. - 2,065,744
Cost of investments sold............................................................................. - (1,950,247)
------ ---------
Total realized gains (losses) on sales of investments, net...................................... - 115,497
------ ---------
Realized gains (losses) on investments, net..................................................... - 246,873
Net change in unrealized appreciation (depreciation) on investments.................................... 604 407,956
------ ---------
Total realized gains (losses) and unrealized appreciation (depreciation) on investments, net.... 604 654,829
------ ---------
Net increase (decrease) in net assets from operations.................................................. $570 877,807
====== =========
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Money Market Fund Growth and 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...... $ 14,651 17,718 7,630 (1,279) (162) 52 23,047 15,167
Realized gains (losses) on
investments, net.................. - - 86,540 21,076 5,476 2,150 9,464 3,298
Net change in unrealized
appreciation (depreciation)
on investments.................... - - 13,214 147,406 (5,135) (2,147) 8,973 27,669
------- ------- ------- ------- ------- ------- ------ ------
Net increase (decrease) in
net assets from operations.... 14,651 17,718 107,384 167,203 179 55 41,484 46,134
------- ------- ------- ------- ------- ------- ------ ------
Contract transactions (note 6):
Purchase payments................... 175,341 190,018 134,960 98,725 20,879 11,049 51,687 47,086
Transfers between funds............. (91,126) (169,358) 35,764 150,088 (5,980) (17,212) 30,106 46,491
Surrenders and terminations......... (120,353) (120,722) (111,266) (73,514) (11,177) (11,728) (43,860) (43,591)
Rescissions......................... (2,971) (5,198) (2,911) (1,783) (321) (326) (691) (1,643)
Other transactions (note 2)......... 152 238 447 240 38 (36) 73 77
------- ------- ------- ------- ------- ------- ------ ------
Net increase (decrease) in
net assets resulting from
contract transactions......... (38,957) (105,022) 56,994 173,756 3,439 (18,253) 37,315 48,420
------- ------- ------- ------- ------- ------- ------ ------
Increase (decrease) in net assets.... (24,306) (87,304) 164,378 340,959 3,618 (18,198) 78,799 94,554
Net assets at beginning of year...... 399,935 487,239 812,732 471,773 97,630 115,828 323,580 229,026
------- ------- ------- ------- ------- ------- ------- ------
Net assets at end of year............ $375,629 399,935 977,110 812,732 101,248 97,630 402,379 323,580
======= ======= ======= ======= ======= ======= ======= =======
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Real Estate U.S. Government Zero Coupon Fund -
Securities Fund Securities Fund Utility Equity 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....... $ 5,882 3,361 28,207 30,379 43,207 48,876 - 2,395
Realized gains (losses) on
investments, net................... 2,738 1,477 3,616 2,695 33,442 1,589 - 600
Net change in unrealized
appreciation (depreciation)
on investments..................... 58,128 22,517 (18,709) 54,968 (17,145) 255,500 - (597)
------- ------- ------- ------ ------ ------- ---- -------
Net increase (decrease) in
net assets from operations.... 66,748 27,355 13,114 88,042 59,504 305,965 - 2,398
------- ------- ------- ------ ------ ------- ---- -------
Contract transactions (note 6):
Purchase payments.................... 30,999 19,829 42,193 47,766 56,194 73,558 - 1,557
Transfers between funds.............. 27,778 (12,435) 211,454 (5,307) (148,616) 10,721 - (36,522)
Surrenders and terminations.......... (22,133) (17,397) (82,684) (74,423) (174,285) (141,926) - (13,413)
Rescissions.......................... (204) (277) (717) (1,813) (734) (1,891) - (49)
Other transactions (note 2).......... 13 99 379 132 315 537 - 88
------- ------- ------- ------ ------- ------- ---- -------
Net increase (decrease) in
net assets resulting from
contract transactions......... 36,453 (10,181) 170,625 (33,645) (267,126) (59,001) - (48,339)
------- ------- ------- ------ --------- ------- ---- -------
Increase (decrease) in net assets..... 103,201 17,174 183,739 54,397 (207,622) 246,964 - (45,941)
Net assets at beginning of year....... 198,773 181,599 559,234 504,837 1,305,495 1,058,531 - 45,941
------- ------- ------- ------- --------- --------- ---- -------
Net assets at end of year............. $301,974 198,773 742,973 559,234 1,097,873 1,305,495 - -
======= ======= ======= ======= ========= ========= ==== =======
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Zero Coupon Fund - Zero Coupon Fund - Zero Coupon Fund - Templeton Global
2000 2005 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............. $ 4,403 2,895 2,728 1,752 2,690 1,068 12,436 5,291
Realized gains (losses) on
investments, net......................... 1,564 1,081 807 753 3,429 2,987 1,570 (206)
Net change in unrealized appreciation
(depreciation) on investments............ (4,982) 12,514 (4,814) 13,063 (9,041) 15,696 1,397 22,286
------- ------- ----- ------ ----- ------ ------- ------
Net increase (decrease) in net assets
from operations...................... 985 16,490 (1,279) 15,568 (2,922) 19,751 15,403 27,371
------- ------- ------ ------ ----- ------ ------- ------
Contract transactions (note 6):
Purchase payments.......................... 12,076 16,203 10,095 13,119 12,642 12,239 11,615 13,098
Transfers between funds.................... (5,558) 13,339 (2,776) 4,711 (8,596) 9,807 (19,697) (21,421)
Surrenders and terminations................ (14,126) (10,927) (5,726) (4,654) (7,034) (5,624) (28,371) (29,898)
Rescissions................................ (214) (263) (158) (185) (244) (469) (174) (400)
Other transactions (note 2)................ (3) (17) (14) (23) (13) 177 49 25
------- ------- ------ ------ ----- ------ ------- ------
Net increase (decrease) in net assets
resulting from contract transactions. (7,825) 18,335 1,421 12,968 (3,245) 16,130 (36,578) (38,596)
------- ------- ------ ------ ----- ------ ------- ------
Increase (decrease) in net assets........... (6,840) 34,825 142 28,536 (6,167) 35,881 (21,175) (11,225)
Net assets at beginning of year............. 110,965 76,140 73,292 44,756 77,136 41,255 220,143 231,368
------- ------- ------ ------ ------ ------ ------- -------
Net assets at end of year................... $104,125 110,965 73,434 73,292 70,969 77,136 198,968 220,143
======= ======= ====== ====== ====== ====== ======= =======
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 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.... $ 6,095 3,922 44,974 44,301 10,420 9,723 5,289 1,633
Realized gains (losses) on
investments, net................ 5,263 624 22,468 7,100 (5,967) (1,327) 16,017 3,150
Net change in unrealized
appreciation (depreciation)
on investments.................. (8,886) 7,237 45,516 145,457 1,206 6,258 8,976 14,929
-------- ------ -------- ------- ------- ------- ------- ------
Net increase (decrease) in
net assets from operations.. 2,472 11,783 112,958 196,858 5,659 14,654 30,282 19,712
-------- ------ -------- ------- ------- ------- ------- ------
Contract transactions (note 6):
Purchase payments................. 11,116 15,136 152,823 145,910 26,642 43,555 32,634 27,022
Transfers between funds........... (149,196) 364 (37,286) 33,034 (185,683) (75,287) (1,902) (52,319)
Surrenders and terminations....... (14,036) (16,323) (149,073) (125,202) (20,600) (27,666) (37,424) (35,125)
Rescissions....................... (275) (379) (3,237) (3,470) (559) (1,087) (382) (1,057)
Other transactions (note 2)....... 37 (24) 516 670 34 296 108 (45)
-------- ------ -------- -------- ------- ------- ------- ------
Net increase (decrease) in
net assets resulting from
contract transactions....... (152,354) (1,226) (36,257) 50,942 (180,166) (60,189) (6,966) (61,524)
-------- ------ --------- --------- ------- ------- ------- ------
Increase (decrease) in net assets.. (149,882) 10,557 76,701 247,800 (174,507) (45,535) 23,316 (41,812)
Net assets at beginning of year.... 149,882 139,325 1,175,143 927,343 174,507 220,042 306,843 348,655
-------- ------- --------- --------- ------- ------- ------- -------
Net assets at end of year.......... $ - 149,882 1,251,844 1,175,143 - 174,507 330,159 306,843
======== ======= ========= ========= ======= ======= ======= =======
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Templeton Templeton Developing Templeton
Rising Dividends Fund International Equity Fund Markets 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........ $ 2,950 2,452 10,789 1,998 (1,013) (1,241) 843 (2,008)
Realized gains (losses) on
investments, net.................... 9,161 1,323 36,562 20,155 5,139 (277) 8,526 303
Net change in unrealized
appreciation (depreciation)
on investments...................... 84,727 81,539 129,022 42,587 30,681 3,149 68,710 26,429
------- ------ ------- ------ ------- ------ ------- ------
Net increase (decrease) in
net assets from operations...... 96,838 85,314 176,373 64,740 34,807 1,631 78,079 24,724
------- ------ ------- ------ ------- ------ ------- ------
Contract transactions (note 6):
Purchase payments..................... 51,514 42,756 106,669 99,403 54,987 42,027 139,155 119,490
Transfers between funds............... 24,084 50,303 50,892 (30,418) 36,529 22,865 46,194 46,237
Surrenders and terminations........... (49,247) (35,907) (90,832) (72,338) (16,917) (7,387) (33,945) (15,658)
Rescissions........................... (1,165) (750) (1,605) (2,115) (568) (1,069) (1,728) (1,966)
Other transactions (note 2)........... 111 131 416 59 27 (55) 27 64
------- ------ ------- ------ ------- ------ ------- -------
Net increase (decrease) in
net assets resulting from
contract transactions........... 25,297 56,533 65,540 (5,409) 74,058 56,381 149,703 148,167
------- ------- ------- ------ ------- ------- ------- -------
Increase (decrease) in net assets...... 122,135 141,847 241,913 59,331 108,865 58,012 227,782 172,891
Net assets at beginning of year........ 422,992 281,145 794,670 735,339 150,481 92,469 322,284 149,393
------- ------- --------- ------- ------- ------- ------- -------
Net assets at end of year.............. $545,127 422,992 1,036,583 794,670 259,346 150,481 550,066 322,284
======= ======= ========= ======= ======= ======= ======= =======
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Templeton Global Templeton International
Asset Allocation Fund Small Cap Fund Capital Growth Fund Smaller 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........... $ (431) 127 (1,323) (25) (187) - (95) -
Realized gains (losses) on
investments, net....................... 168 71 806 - 24 - 60 -
Net change in unrealized appreciation
(depreciation) on investments.......... 5,895 323 16,477 183 1,811 - 1,131 -
------ ------ ------ ----- ------ ---- ------ ---
Net increase (decrease) in
net assets from operations.......... 5,632 521 15,960 158 1,648 - 1,096 -
------ ------ ------ ----- ------ ---- ------ ---
Contract transactions (note 6):
Purchase payments........................ 19,536 5,580 51,827 2,140 13,726 - 5,995 -
Transfers between funds.................. 14,964 9,316 93,997 11,013 28,227 - 9,255 -
Surrenders and terminations.............. (2,138) (1,163) (9,173) (36) (1,326) - (763) -
Rescissions.............................. (139) (27) (459) (19) (185) - (46) -
Other transactions (note 2).............. 28 7 166 4 20 - (10) -
------ ------ ------ ----- ------ ---- ------ ---
Net increase (decrease) in net assets
resulting from contract transactions 32,251 13,713 136,358 13,102 40,462 - 14,431 -
------ ------ ------ ------ ------ ---- ------ ---
Increase (decrease) in net assets......... 37,883 14,234 152,318 13,260 42,110 - 15,527 -
Net assets at beginning of year........... 14,234 - 13,260 - - - - -
------ ------ ------- ------ ------ ---- ------ ---
Net assets at end of year................. $52,117 14,234 165,578 13,260 42,110 - 15,527 -
====== ====== ======= ====== ====== ==== ====== ====
<FN>
See accompanying notes to 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 years ended December 31, 1996 and 1995
(In thousands)
Mutual Discovery Mutual Shares
Securities Fund Securities Fund Total All Funds
---------------- --------------- ---------------
1996 1995 1996 1995 1996 1995
------ ---- ---- ---- ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.................................... $ (18) - (34) - 222,978 188,557
Realized gains (losses) on investments, net...................... - - - - 246,873 68,622
Net change in unrealized appreciation (depreciation)
on investments.................................................. 200 - 604 - 407,956 896,966
------- --- ---- --- --------- ---------
Net increase (decrease) in net assets from operations........ 182 - 570 - 877,807 1,154,145
------- --- ---- --- --------- ---------
Contract transactions (note 6):
Purchase payments................................................. 3,317 - 8,157 - 1,236,779 1,087,266
Transfers between funds........................................... 12,081 - 18,952 - (16,139) (11,990)
Surrenders and terminations....................................... (506) - (537) - (1,047,532) (884,622)
Rescissions....................................................... - - - - (19,687) (26,236)
Other transactions (note 2)....................................... - - (1) - 2,915 2,644
------- --- ---- --- --------- ---------
Net increase (decrease) in net assets resulting
from contract transactions.................................. 14,892 - 26,571 - 156,336 167,062
------- --- ------ --- --------- ---------
Increase (decrease) in net assets.................................. 15,074 - 27,141 - 1,034,143 1,321,207
Net assets at beginning of year.................................... - - - - 7,703,211 6,382,004
------- --- ------ --- --------- ---------
Net assets at end of year.......................................... $15,074 - 27,141 - 8,737,354 7,703,211
======= === ====== === ========= =========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements
December 31, 1996
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. or other of its affiliated adviser entities, 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. The Mutual Discovery Securities Fund and Mutual Shares Securities Fund
were added as available investment options on November 8, 1996.
The Investment Grade Intermediate Bond Fund and Adjustable U.S. Government Fund
were closed on October 25, 1996 when shares of the U.S. Government Securities
Fund were substituted for all shares of both funds.
On May 1, 1995, the Equity Growth Fund name was changed to Growth and Income
Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996.
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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
2. Significant Accounting Policies (cont.)
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, 1996 and 1995 were $4,491,487 and $4,294,361,
respectively. These contract charges are reflected in the Statements of Changes
in Net Assets as other transactions.
A contingent deferred sales charge is deducted from the contract value at the
time of a surrender. This charge applies only to a surrender of purchase
payments received within five years of the date of surrender. For this purpose,
purchase payments are allocated on a first-in, first-out basis. The amount of
the contingent deferred sales charge is calculated by: (a) allocating purchase
payments to the amount surrendered; and (b) multiplying each allocated purchase
payment that has been held under the contract for the period shown below by the
charge shown below:
<TABLE>
<CAPTION>
Valuemark II Valuemark III
--------------------------- ----------------------------
Years Since Payment Charge Years Since Payment Charge
------------------- ------ ------------------- ------
<S> <C> <C>
0-1 5% 0-1 6%
1-2 5% 1-2 5%
2-3 4% 2-3 4%
3-4 3% 3-4 3%
4-5 1.5% 4-5 1.5%
5+ 0% 5+ 0%
</TABLE>
and (c) adding the products of each multiplication in (b) above.
A deferred annuity contract owner may, not more frequently than once annually on
a cumulative basis, make a surrender each contract year of fifteen percent (15%)
of purchase payments paid, less any prior surrenders, without incurring a
contingent deferred sales charge. For a partial surrender, the contingent
deferred sales charge will be deducted from the remaining contract value, if
sufficient; otherwise it will be deducted from the amount surrendered. Total
contingent deferred sales charges paid by the contract owners for the years
ended December 31, 1996 and 1995 were $10,529,337 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 years ended
December 31, 1996 and 1995 were $93,255 and $119,180, respectively. Transfer
charges are reflected in the Statements of Changes in Net Assets as other
transactions. Net transfers to the Fixed Account for the years ended December
31, 1996 and 1995 were $16,138,672 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.)
December 31, 1996
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 years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Capitalization Date of Market Value Date of
Fund Amount Capitalization at Withdrawal Withdrawal
- ------------------------------------------------- -------------- -------------- ------------- ----------
<S> <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 $281,250 11/7/96
Templeton International Smaller Companies Fund... $250,000 4/30/96 $269,250 11/7/96
Mutual Discovery Securities Fund................. $250,000 11/8/96 $252,250 12/23/96
Mutual Shares Securities Fund.................... $250,000 11/8/96 $255,750 12/23/96
</TABLE>
4. Investment Transactions
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1996 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund................................. $ 427,380
Growth and Income Fund............................ 223,414
Precious Metals Fund.............................. 74,746
High Income Fund.................................. 162,983
Real Estate Securities Fund....................... 58,740
U.S. Government Securities Fund................... 313,392
Utility Equity Fund............................... 73,703
Zero Coupon Fund - 2000........................... 15,596
Zero Coupon Fund - 2005........................... 13,140
Zero Coupon Fund - 2010........................... 33,995
Templeton Global Income Securities Fund........... 21,233
Investment Grade Intermediate Bond Fund........... 15,348
Income Securities Fund............................ 134,521
Adjustable U.S. Government Fund................... 25,745
Templeton Pacific Growth Fund..................... 130,000
Rising Dividends Fund............................. 76,266
Templeton International Equity Fund............... 169,986
Templeton Developing Markets Equity Fund.......... 106,281
Templeton Global Growth Fund...................... 173,466
Templeton Global Asset Allocation Fund............ 34,368
Small Cap Fund.................................... 185,786
Capital Growth Fund............................... 43,381
Templeton International Smaller Companies Fund.... 17,454
Mutual Discovery Securities Fund.................. 14,879
Mutual Shares Securities Fund..................... 26,453
</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.)
December 31, 1996
6. Contract Transactions - Accumulation Unit Activity (In thousands)
Transactions in units for each fund for the years ended December 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
Growth U.S. Zero Zero
Money and Precious High Real Estate Government Utility Coupon Coupon
Market Income Metals Income Securities Securities Equity Fund - Fund -
Fund Fund Fund Fund Fund Fund Fund 1995 2000
------ ------ ----- ----- ----------- ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding
at December 31, 1994............ 39,437 35,695 8,285 15,679 11,645 36,490 70,082 3,195 4,953
Contract transactions:
Purchase payments................ 15,069 6,403 796 2,877 1,233 3,115 4,303 106 966
Transfers between funds.......... (13,495) 9,757 (1,290) 2,959 (792) (266) 736 (2,398) 800
Surrenders and terminations...... (9,580) (4,859) (846) (2,661) (1,077) (4,916) (8,372) (905) (636)
Rescissions...................... (410) (118) (24) (102) (17) (118) (113) (3) (16)
Other transactions............... 19 15 (2) 4 6 8 33 5 (1)
------ ------ ------ ----- ------ ------ ------ ----- -----
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) 1,113
------ ------ ----- ----- ------ ------ ------ ----- -----
Accumulation units outstanding
at December 31, 1995............. 31,040 46,893 6,919 18,756 10,998 34,313 66,669 - 6,066
====== ====== ===== ====== ====== ====== ====== ===== =====
Contract transactions:
Purchase payments................ 13,261 7,454 1,298 2,862 1,562 2,609 2,847 - 672
Transfers between funds.......... (6,879) 1,961 (484) 1,598 1,332 12,819 (7,585) - (308)
Surrenders and terminations...... (9,147) (6,143) (717) (2,446) (1,125) (5,122) (8,824) - (782)
Rescissions...................... (226) (163) (20) (38) (11) (44) (37) - (12)
Other transactions............... 11 25 2 4 1 23 16 - -
------ ------ ----- ----- ----- ------ ------ ----- -----
Net increase (decrease)
in accumulation units
resulting from contract
transactions.............. (2,980) 3,134 79 1,980 1,759 10,285 (13,583) - (430)
------ ------ ----- ----- ----- ------ ------- ----- -----
Accumulation units outstanding
at December 31, 1996............. 28,060 50,027 6,998 20,736 12,757 44,598 53,086 - 5,636
====== ====== ===== ====== ====== ====== ====== ===== =====
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Contract Transactions - Accumulation Unit Activity (In thousands) (cont.)
<TABLE>
<CAPTION>
Templeton
Zero Zero Global Investment Adjustable Templeton Templeton
Coupon Coupon Income Grade Income U.S. Pacific Rising International
Fund - Fund - Securities Intermediate Securities Government Growth Dividends Equity
2005 2010 Fund Bond Fund Fund Fund Fund Fund Fund
------ ------ ---------- ------------ -------- --------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding
at December 31, 1994.......... 2,780 2,589 16,855 9,772 56,569 19,865 27,231 28,778 60,464
Contract transactions:
Purchase payments............. 715 652 904 1,016 7,979 3,753 2,065 3,782 7,774
Transfers between funds....... 269 511 (1,494) 30 1,879 (6,551) (4,013) 4,493 (2,530)
Surrenders and terminations... (249) (297) (2,058) (1,099) (6,965) (2,397) (2,714) (3,208) (5,662)
Rescissions................... (10) (27) (28) (25) (192) (95) (82) (68) (168)
Other transactions............ (1) 9 2 (2) 39 25 (4) 12 5
----- ----- ------ ------ ------ ------ ------ ------ ------
Net increase (decrease)
in accumulation units
resulting from contract
transactions........... 724 848 (2,674) (80) 2,740 (5,265) (4,748) 5,011 (581)
----- ----- ------ ------ ------ ------ ------ ------ ------
Accumulation units outstanding
at December 31, 1995.......... 3,504 3,437 14,181 9,692 59,309 14,600 22,483 33,789 59,883
===== ===== ====== ====== ====== ====== ====== ====== ======
Contract transactions:
Purchase payments............. 513 618 740 719 7,457 2,202 2,196 3,849 7,288
Transfers between funds....... (139) (403) (1,254) (9,490) (1,819) (15,066) (62) 1,653 3,483
Surrenders and terminations... (290) (342) (1,802) (905) (7,308) (1,693) (2,537) (3,644) (6,198)
Rescissions................... (8) (12) (11) (18) (159) (46) (26) (87) (110)
Other transactions............ (1) (1) 3 2 24 3 7 9 29
----- ----- ------ ------ ------ ------ ------ ------ ------
Net increase (decrease)
in accumulation units
resulting from contract
transactions........... 75 (140) (2,324) (9,692) (1,805) (14,600) (422) 1,780 4,492
----- ----- ------ ------ ------ ------ ------ ------ ------
Accumulation units outstanding
at December 31, 1996.......... 3,579 3,297 11,857 - 57,504 - 22,061 35,569 64,375
===== ===== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Contract Transactions - Accumulation Unit Activity (In thousands) (cont.)
<TABLE>
<CAPTION>
Templeton Templeton Templeton
Developing Templeton Global International Mutual Mutual
Markets Global Asset Small Capital Smaller Discovery Shares Total
Equity Growth Allocation Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Fund Fund Fund Funds
--------- --------- ---------- ----- ------ ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding
at December 31, 1994.............. 9,774 14,637 - - - - - - 474,775
Contract transactions:
Purchase payments................. 4,364 10,991 538 212 - - - - 79,613
Transfers between funds........... 2,372 4,306 916 1,096 - - - - (2,705)
Surrenders and terminations....... (773) (1,448) (114) (4) - - - - (60,840)
Rescissions....................... (112) (183) (3) (2) - - - - (1,916)
Other transactions................ (7) 6 1 - - - - - 172
----- ------ ----- ----- ---- ---- ---- ---- -------
Net increase (decrease)
in accumulation units
resulting from contract
transactions............... 5,844 13,672 1,338 1,302 - - - - 14,324
----- ------ ----- ----- ---- ---- ---- ---- -------
Accumulation units outstanding
at December 31, 1995.............. 15,618 28,309 1,338 1,302 - - - - 489,099
====== ====== ===== ===== ==== ==== ==== ==== =======
Contract transactions:
Purchase payments................. 5,057 11,183 1,657 4,358 1,261 568 327 797 83,355
Transfers between funds........... 3,367 3,694 1,303 7,933 2,597 897 1,194 1,869 2,211
Surrenders and terminations....... (1,569) (2,720) (184) (786) (121) (72) (50) (53) (64,580)
Rescissions....................... (53) (141) (12) (38) (17) (4) - - (1,293)
Other transactions................ 3 2 2 15 2 (1) - - 180
------ ------ ----- ----- ----- ---- ----- ----- -------
Net increase (decrease)
in accumulation units
resulting from contract
transactions................ 6,805 12,018 2,766 11,482 3,722 1,388 1,471 2,613 19,873
------ ------ ----- ------ ----- ----- ----- ----- -------
Accumulation units outstanding
at December 31, 1996.............. 22,423 40,327 4,104 12,784 3,722 1,388 1,471 2,613 508,972
====== ====== ===== ====== ===== ===== ===== ===== =======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
7. Unit Values
A summary of accumulation unit values and accumulation units outstanding for
variable annuity contracts and the expense ratios, including expenses of the
underlying funds, for each of the five years in the period ended December 31,
1996 follows.
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Money Market Fund
December 31,
1996........................................................... 28,060 $13.359 $ 375,629 1.83%
1995........................................................... 31,040 12.883 399,935 1.80
1994........................................................... 39,437 12.354 487,239 1.86
1993........................................................... 10,247 12.066 123,639 2.06
1992........................................................... 6,951 11.932 82,944 2.09
Growth and Income Fund
December 31,
1996........................................................... 50,027 19.490 977,110 1.90
1995........................................................... 46,893 17.310 812,732 1.92
1994........................................................... 35,695 13.215 471,773 1.94
1993........................................................... 24,719 13.677 338,082 1.98
1992........................................................... 17,144 12.574 215,559 2.02
Precious Metals Fund
December 31,
1996........................................................... 6,998 14.467 101,248 2.05
1995........................................................... 6,919 14.109 97,630 2.06
1994........................................................... 8,285 13.979 115,828 2.08
1993........................................................... 4,685 14.464 67,770 2.08
1992........................................................... 1,419 9.424 13,374 2.09
High Income Fund
December 31,
1996........................................................... 20,736 19.375 402,379 1.94
1995........................................................... 18,756 17.252 323,580 1.96
1994........................................................... 15,679 14.608 229,026 2.00
1993........................................................... 11,787 15.155 178,627 2.04
1992........................................................... 4,780 13.278 63,462 2.08
Real Estate Securities Fund
December 31,
1996........................................................... 12,757 23.668 301,974 1.97
1995........................................................... 10,998 18.073 198,773 1.99
1994........................................................... 11,645 15.594 181,599 2.02
1993........................................................... 5,589 15.369 85,896 2.07
1992........................................................... 1,052 13.095 13,782 2.09
U.S. Government Securities Fund
December 31,
1996........................................................... 44,598 16.650 742,973 1.91
1995........................................................... 34,313 16.298 559,234 1.92
1994........................................................... 36,490 13.835 504,837 1.93
1993........................................................... 40,402 14.698 593,842 1.94
1992........................................................... 25,054 13.586 340,391 1.99
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
7. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Utility Equity Fund
December 31,
1996........................................................... 53,086 $20.654 $1,097,873 1.90%
1995........................................................... 66,669 19.565 1,305,495 1.90
1994........................................................... 70,082 15.104 1,058,531 1.92
1993........................................................... 84,217 17.319 1,458,533 1.91
1992........................................................... 39,387 15.889 625,803 1.95
Zero Coupon Fund - 1995
December 31,
1995 1......................................................... 1,670 15.200 25,382 1.80+
1994........................................................... 3,195 14.380 45,941 1.80
1993........................................................... 3,092 14.480 44,771 1.76
1992........................................................... 2,871 13.665 39,236 1.65
Zero Coupon Fund - 2000
December 31,
1996........................................................... 5,636 18.475 104,125 1.80
1995........................................................... 6,066 18.294 110,965 1.80
1994........................................................... 4,953 15.373 76,140 1.80
1993........................................................... 3,787 16.717 63,301 1.77
1992........................................................... 2,886 14.595 42,124 1.65
Zero Coupon Fund - 2005
December 31,
1996........................................................... 3,579 20.517 73,434 1.80
1995........................................................... 3,504 20.914 73,292 1.80
1994........................................................... 2,780 16.096 44,756 1.80
1993........................................................... 2,020 18.050 36,469 1.77
1992........................................................... 1,090 14.975 16,321 1.65
Zero Coupon Fund - 2010
December 31,
1996........................................................... 3,297 21.522 70,969 1.80
1995........................................................... 3,437 22.431 77,136 1.80
1994........................................................... 2,589 15.930 41,255 1.80
1993........................................................... 1,405 18.144 25,489 1.65
1992........................................................... 849 14.670 12,456 1.65
Templeton Global Income Securities Fund
December 31,
1996........................................................... 11,857 16.781 198,968 2.01
1995........................................................... 14,181 15.522 220,143 2.04
1994........................................................... 16,855 13.726 231,368 2.11
1993........................................................... 13,054 14.650 191,246 2.13
1992........................................................... 5,487 12.733 69,860 2.07
Investment Grade Intermediate Bond Fund
December 31,
1996 2......................................................... 8,323 15.740 131,012 2.00+
1995........................................................... 9,692 15.463 149,882 2.01
1994........................................................... 9,772 14.257 139,325 2.03
1993........................................................... 7,677 14.389 110,466 2.06
1992........................................................... 3,333 13.442 44,807 2.08
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
7. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Income Securities Fund
December 31,
1996........................................................... 57,504 $21.708 $1,251,844 1.90%
1995........................................................... 59,309 19.785 1,175,143 1.91
1994........................................................... 56,569 16.392 927,343 1.94
1993........................................................... 38,967 17.734 691,056 1.96
1992........................................................... 11,397 15.163 172,807 2.07
Adjustable U.S. Government Fund
December 31,
1996 2......................................................... 10,926 12.389 135,355 1.99+
1995........................................................... 14,600 11.951 174,507 1.99
1994........................................................... 19,865 11.077 220,042 1.97
1993........................................................... 24,975 11.254 281,061 1.98
1992........................................................... 21,858 11.020 240,875 2.00
Templeton Pacific Growth Fund
December 31,
1996........................................................... 22,061 14.932 330,159 2.39
1995........................................................... 22,483 13.630 306,843 2.41
1994........................................................... 27,231 12.802 348,655 2.47
1993........................................................... 14,240 14.233 202,676 2.54
1992 3......................................................... 534 9.761 5,209 2.71+
Rising Dividends Fund
December 31,
1996........................................................... 35,569 15.303 545,127 2.16
1995........................................................... 33,789 12.498 422,992 2.18
1994........................................................... 28,778 9.769 281,145 2.20
1993........................................................... 26,256 10.327 271,147 2.19
1992 3......................................................... 8,388 10.848 90,995 2.07+
Templeton International Equity Fund
December 31,
1996........................................................... 64,375 16.081 1,036,583 2.29
1995........................................................... 59,883 13.263 794,670 2.32
1994........................................................... 60,464 12.161 735,339 2.39
1993........................................................... 24,026 12.226 293,740 2.52
1992 3......................................................... 1,329 9.642 12,812 3.17+
Templeton Developing Markets Equity Fund
December 31,
1996........................................................... 22,423 11.487 259,346 2.89
1995........................................................... 15,618 9.582 150,481 2.81
1994 4......................................................... 9,774 9.454 92,469 2.93+
Templeton Global Growth Fund
December 31,
1996........................................................... 40,327 13.560 550,066 2.33
1995........................................................... 28,309 11.339 322,284 2.37
1994 4......................................................... 14,637 10.201 149,393 2.54+
Templeton Global Asset Allocation Fund
December 31,
1996........................................................... 4,104 12.514 52,117 2.26
1995 5......................................................... 1,338 10.591 14,234 2.30+
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT B
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
7. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Small Cap Fund
December 31,
1996........................................................... 12,784 $12.913 $ 165,578 2.17%
1995 6......................................................... 1,302 10.146 13,260 2.30+
Capital Growth Fund
December 31,
1996 7......................................................... 3,722 11.254 42,110 2.17+
Templeton International Smaller Companies Fund
December 31,
1996 7......................................................... 1,388 11.145 15,527 2.18+
Mutual Discovery Securities Fund
December 31,
1996 8......................................................... 1,471 10.180 15,074 2.77+
Mutual Shares Securities Fund
December 31,
1996 8......................................................... 2,613 10.330 27,141 2.40+
<FN>
*For the year ended December 31, including the effect of the expenses of the
underlying funds.
+Annualized.
1Period from January 1, 1995 to December 15, 1995 (fund closure).
2Period from January 1, 1996 to October 25, 1996 (fund closure).
3Period from January 27, 1992 (fund commencement) to December 31, 1992.
4Period from March 15, 1994 (fund commencement) to December 31, 1994.
5Period from May 1, 1995 (fund commencement) to December 31, 1995.
6Period from November 1, 1995 (fund commencement) to December 31, 1995.
7Period from May 1, 1996 (fund commencement) to December 31, 1996.
8Period from November 8, 1996 (fund commencement) to December 31, 1996.
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996 and 1995
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Report
The Board of Directors
Allianz Life Insurance Company of North America:
We have audited the accompanying consolidated balance sheets of Allianz Life
Insurance Company of North America (a wholly owned subsidiary of Allianz of
America, Inc.) and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholder's equity and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Allianz
Life Insurance Company of North America and subsidiaries as of December 31, 1996
and 1995, and the results of their operations, changes in stockholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
In 1994, as discussed in note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
February 4, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in thousands)
Assets 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments:
Fixed maturities, at market $ 2,768,306 2,549,598
Equity securities, at market 327,834 254,458
Mortgage loans on real estate 245,559 203,128
Real estate, at cost 34,129 8,806
Investment in real estate partnerships, at equity 10,695 11,975
Certificates of deposit and short-term securities 204,972 31,501
Policy loans 103,708 104,184
Other long-term investments 124 650
- ---------------------------------------------------------------------------------------------------------------------
Total investments 3,695,327 3,164,300
Cash 37,992 36,449
Accrued investment income 36,130 36,858
Receivables (net of allowance for uncollectible
accounts of $4,630 in 1996 and $7,697 in 1995) 155,278 124,700
Reinsurance receivable:
Funds held on deposit 1,101,716 1,060,566
Recoverable on future policy benefit reserves 48,909 43,248
Recoverable on unpaid claims 142,199 109,075
Receivable on paid claims 18,240 22,172
Prepaid insurance premiums 4,840 4,078
Home office property and equipment (net of accumulated
depreciation of $20,090 in 1996 and $21,256 in 1995) 9,590 8,790
Deferred acquisition costs 863,338 826,994
Federal income tax recoverable 12,455 3,947
Other assets 11,622 11,048
- ---------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 6,137,636 5,452,225
Separate account assets 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1996 and 1995
(in thousands)
1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Future policy benefit reserves:
Life $ 1,204,633 1,088,964
Annuity 2,879,221 2,601,943
Policy and contract claims 438,824 371,898
Unearned premiums 32,176 34,181
Reinsurance payable 96,857 72,838
Deferred income taxes 150,760 140,174
Accrued expenses 84,254 66,779
Commissions due and accrued 37,103 22,979
Other policyholder funds 52,267 82,138
Other liabilities 147,364 19,137
- ---------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 5,123,459 4,501,031
Separate account liabilities 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 14,644,020 12,903,034
- ---------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1 par value, 20 million shares
authorized, issued and outstanding 20,000 20,000
Preferred stock, $1 par value, cumulative,
200 million shares authorized, 25 million shares
issued and outstanding 25,000 25,000
Additional paid-in capital 407,088 407,088
Net unrealized gain on investments
net of deferred federal income taxes 102,637 139,204
Net unrealized Canadian currency loss (3,473) (3,455)
Retained earnings 462,925 363,357
- ---------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,014,177 951,194
Commitments and contingencies (notes 6 and 11)
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 284,084 257,647 234,295
Other life policy considerations 85,747 93,158 92,254
Annuity considerations 170,656 147,112 120,240
Accident and health premiums 603,230 527,059 547,508
- ----------------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,143,717 1,024,976 994,297
Premiums ceded 277,163 223,226 244,208
- ----------------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 866,554 801,750 750,089
Investment income, net 222,622 201,158 181,291
Realized investment gains, net 28,561 29,202 829
Other 6,193 10,140 12,703
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,123,930 1,042,250 944,912
- ----------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 281,441 268,163 254,326
Annuity benefits 153,238 145,636 131,793
Accident and health insurance benefits 434,793 374,743 379,122
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits 869,472 788,542 765,241
Benefit recoveries 249,552 210,702 212,144
- ----------------------------------------------------------------------------------------------------------------------------------
Net benefits 619,920 577,840 553,097
Commissions and other agent compensation 267,714 233,939 313,715
General and administrative expenses 99,018 115,419 111,116
Taxes, licenses and fees 19,959 17,672 22,514
Increase in deferred acquisition costs, net (36,344) (28,552) (132,090)
Minority interest in income of consolidated
subsidiary 0 (30) (66)
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 970,267 916,288 868,286
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 153,663 125,962 76,626
- ----------------------------------------------------------------------------------------------------------------------------------
Income tax expense:
Current 21,936 12,993 5,098
Deferred 30,559 25,772 16,053
- ----------------------------------------------------------------------------------------------------------------------------------
Total income tax expense 52,495 38,765 21,151
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 101,168 87,197 55,475
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 20,000 20,000 20,000
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock:
Balance at beginning of year 25,000 40,000 0
Issuance of stock during the year 0 0 40,000
Redemption of stock during the year 0 (15,000) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 25,000 25,000 40,000
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital:
Balance at beginning of year 407,088 406,494 401,304
Additional contribution from parent 0 594 5,190
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 407,088 407,088 406,494
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments:
Balance at beginning of year 139,204 (62,073) 9,071
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 0 0 74,866
Net unrealized gain on securities transferred
from held-to-maturity to available-for-sale
classification, net of deferred federal income taxes 0 1,789 0
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (36,567) 199,488 (146,010)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 102,637 139,204 (62,073)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized Canadian currency loss:
Balance at beginning of year (3,455) (3,787) (2,708)
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (18) 332 (1,079)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (3,473) (3,455) (3,787)
- ----------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 363,357 278,811 223,749
Net income 101,168 87,197 55,475
Cash dividend to stockholder (1,600) (2,651) (413)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 462,925 363,357 278,811
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $ 1,014,177 951,194 679,445
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 101,168 87,197 55,475
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized gains on investments (28,561) (29,202) (829)
Deferred federal income tax expense 30,559 25,772 16,053
Charges to policy account balances (84,069) (120,254) (125,488)
Interest credited to policy account balances 166,766 169,151 150,490
Change in:
Accrued investment income 728 (2,072) (764)
Receivables (30,578) (13,300) 12,040
Reinsurance receivables (119,384) (190,953) (93,453)
Deferred acquisition costs (36,344) (28,552) (132,090)
Future policy benefit reserves 76,478 66,932 20,791
Policy and contract claims
and other policyholder funds 37,055 25,116 25,072
Unearned premiums (2,005) (6,195) (1,194)
Reinsurance payable 24,019 (8,669) 19,779
Current tax recoverable (8,508) (153) (6,255)
Accrued expenses and other liabilities 15,506 17,365 7,556
Commissions due and accrued 14,124 (1,211) 3,316
Depreciation and amortization (25,874) (23,391) (11,498)
Other, net (1,568) 916 (86)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 28,344 (118,700) (116,560)
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities 129,512 (31,503) (61,085)
- -----------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities 129,512 (31,503) (61,085)
Cash flows used in investing activities:
Purchase of fixed maturities, at market $ (1,324,676) (1,533,290) (928,532)
Purchase of equity securities (137,304) (166,701) (145,267)
Purchase of real estate (26,980) 0 0
Funding of mortgage loans (70,265) (66,301) (64,808)
Sale of fixed maturities, at market 1,043,748 1,242,988 791,659
Matured or redeemed fixed maturities, at amortized cost 0 7,022 4,342
Matured fixed maturities, at market 2,711 38,991 32,508
Sale of equity securities 122,788 97,619 150,347
Sale of real estate 4,324 0 0
Repayment of mortgage loans 23,317 25,563 28,206
Purchase of minority interest's shares in subsidiary 0 (7,903) 0
Net change in certificates of deposit and
short-term securities (173,471) 123,806 (96,344)
Change in liability related to
reverse repurchase transactions 130,196 (58,150) 58,150
Other 2,090 (2,851) (6,699)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (403,522) (299,207) (176,438)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 592,670 553,699 526,918
Policyholders' withdrawals from account balances (368,490) (291,102) (235,309)
Change in assets held under reinsurance agreements 52,973 36,354 (59,349)
Net change in mortgage notes payable 0 (1,049) (39)
Additional paid-in capital from parent 0 594 5,190
Preferred stock transactions 0 (15,000) 40,000
Cash dividends paid (1,600) (2,651) (413)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities 275,553 280,845 276,998
- ------------------------------------------------------------------------------------------------------------------------
Net change in cash 1,543 (49,865) 39,475
Cash at beginning of year 36,449 86,314 46,839
- ------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 37,992 36,449 86,314
========================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allianz Life Insurance Company of North America (the Company) is a wholly owned
subsidiary of Allianz of America, Inc. (AZOA), a majority-owned subsidiary of
Allianz A.G. Holding, a Federal Republic of Germany company.
The Company is a life insurance company which is licensed to sell both group and
individual life, annuity and accident and health policies in the United States,
Canada and several U.S. territories. Based on 1996 gross premium volume, 14%,
64% and 22% of the Company's business is life, annuity and accident and health,
respectively. The Company's primary distribution channels are through strategic
alliances with other insurance companies and third party marketing
organizations. The Company has a significant relationship with a mutual fund
company and its broker/dealer network related to sales of its variable life and
variable annuity products and another significant administration, marketing and
reinsurance relationship with an unrelated insurance company.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major subsidiary, Preferred Life
Insurance Company of New York and other less significant subsidiaries have been
consolidated. All significant intercompany balances and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported assets
and liabilities including reporting or disclosure of contingent assets and
liabilities as of the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Actual results could vary
significantly from management's estimates.
RECOGNITION OF TRADITIONAL LIFE, GROUP LIFE AND GROUP ACCIDENT AND HEALTH
REVENUE
Traditional life products include products with guaranteed premiums and benefits
and consist principally of whole life and term insurance policies, limited
payment contracts and certain annuity products with life contingencies.
Premiums on traditional life and group life products are recognized as income
when due. Group accident and health premiums are recognized as earned on a pro
rata basis over the risk coverage periods. Benefits and expenses for traditional
and group products are matched with earned premiums so that profits are
recognized over the premium paying periods of the contracts. This matching is
accomplished by establishing provisions for future policy benefits and policy
and contract claims, and deferring and amortizing related policy acquisition
costs.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
RECOGNITION OF NONTRADITIONAL AND VARIABLE LIFE AND ANNUITY REVENUE
Nontraditional and variable life insurance and interest sensitive contracts that
have significant mortality or morbidity risk are accounted for in accordance
with the retrospective deposit method. Interest sensitive contracts that do not
have significant mortality or morbidity risk are accounted for in a manner
consistent with interest bearing financial instruments. For both types of
contracts, premium receipts are reported as deposits to the contractholder's
account while revenues consist of amounts assessed against contractholders
including surrender charges and earned administrative service fees. Mortality or
morbidity charges are also accounted for as revenue on those contracts
containing mortality or morbidity risk. Benefits consist of interest credited to
contractholder's accounts and claims or benefits incurred in excess of the
contractholder's balance.
DEFERRED ACQUISTION COSTS
Acquisition costs, consisting of commissions and other costs which vary with and
are primarily related to production of new business, are deferred. For
traditional life and group life products, such costs are amortized over the
revenue-producing period of the related policies using the same actuarial
assumptions used in computing future policy benefit reserves. Acquisition costs
for accident and health insurance policies are deferred and amortized over the
lives of the policies in the same manner as premiums are earned. For interest
sensitive products, acquisition costs are amortized in relation to the present
value of expected future gross profits from investment margins and mortality,
morbidity and expense charges. Deferred acquisition costs amortized during 1996,
1995 and 1994 were $137,618, $117,782 and $108,676, respectively.
FUTURE POLICY BENEFIT RESERVES
Future policy benefit reserves on traditional life products are computed by the
net level premium method based upon estimated future investment yield, mortality
and withdrawal assumptions, commensurate with the Company's experience, modified
as necessary to reflect anticipated trends, including possible unfavorable
deviations. Most life reserve interest assumptions are graded from 9% to 5.5%.
Future policy benefit reserves for interest sensitive products are generally
carried at accumulated contract values. Reserves on some deferred annuity
contracts are computed based on contractholder cash value accumulations,
adjusted for mortality, withdrawal and interest margin assumptions.
Fair values of investment contracts, which include deferred annuities and other
annuities without significant mortality risk, were determined by testing amounts
payable on demand against discounted cash flows using interest rates
commensurate with the risks involved. Fair values are based on the amount
payable on demand at December 31, 1996 and 1995.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent an estimate of claims and claim adjustment
expenses that have been reported but not yet paid and incurred but not yet
reported as of December 31.
REINSURANCE
Insurance liabilities are reported before the effects of reinsurance. Amounts
paid or deemed to have been paid for claims covered by reinsurance contracts are
recorded as reinsurance receivable. Reinsurance receivables are recognized in a
manner consistent with the liabilities related to the underlying reinsured
contracts.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
INVESTMENTS
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities which addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are classified in one of three
categories. Debt securities that the Company has the positive intent and ability
to hold to maturity are classified as "held-to-maturity securities" and reported
at amortized cost. Debt and equity securities bought and held principally for
the purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
"held-to-maturity securities" or "trading securities" are classified as
"available-for-sale securities" and reported at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity, net
of deferred taxes. At January 1, 1994, the Company classified the majority of
its investment portfolio as "available-for-sale securities" with a limited
number of securities classified as "held-to-maturity".
At December 31, 1995, the Company transferred all of its securities with an
amortized cost of $83,357 classified as "held-to-maturity' to the
"available-for-sale" classifications as provided in the Financial Accounting
Standards Board (FASB) Special Report on the implementation of SFAS No. 115. The
effect of this transfer was an increase in stockholder's equity of $1,789. All
of the Company's investment portfolio is classified as "available-for-sale" at
December 31, 1996 and 1995.
Short-term investments are carried at amortized cost which approximates market.
Policy loans are reflected at their unpaid principal balances. Mortgage loans
are reflected at unpaid principal balances adjusted for premium and discount
amortization and an allowance for uncollectible balances. During 1995, the
Company adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan
and SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures. SFAS No. 114 addresses accounting by creditors for
impairment of certain loans. It requires that impaired loans within the scope of
the Statement be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, alternatively, at the
loan's observable market price of the fair value of supporting collateral. The
Company analyzes loan impairment at least once a year when assessing the
adequacy of the allowance for possible credit losses. SFAS No. 118 permits
existing income recognition practices to continue. The Company does not accrue
interest on impaired loans and accounts for interest income on a cash basis. The
adoption of these Statements did not have a material impact on the Company's net
income or financial position.
Investments in real estate are reflected at the lower of cost or market value.
Real estate occupied by the Company is reflected at cost, less accumulated
depreciation. Investments in real estate, exclusive of land, are being
depreciated on a straight-line basis over estimated useful lives ranging from 3
to 30 years.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1996 and 1995, investments with a carrying value of $102,361
and $37,879, respectively, were held on deposit with various insurance
departments and in other trusts as required by statutory regulations.
The fair values of invested assets, excluding investments in real estate, are
deemed by management to approximate their estimated market values. The fair
value of mortgage loans has been calculated using discounted cash flows and is
based on pertinent information available to management as of year end. Policy
loan balances which are supported by the underlying cash value of the policies
approximate fair value. Changes in market conditions subsequent to year end may
cause estimates of fair values to differ from the amounts presented herein.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and investment
gains and losses accrue directly to the policyholders and contractholders. Each
account has specific investment objectives and the assets are carried at market
value. The assets of each account are legally segregated and are not subject to
claims which arise out of any other business of the Company.
Fair values of separate account assets were determined using the market value of
the investments held in segregated fund accounts. Fair values of separate
account liabilities were determined using the cash surrender values of the
policyholder's and contractholder's account.
RECEIVABLES
Receivable balances approximate estimated fair values. This is based on
pertinent information available to management as of year end including the
financial condition and credit worthiness of the parties underlying the
receivables. Changes in market conditions subsequent to year end may cause
estimates of fair values to differ from the amounts presented herein.
ACCOUNTING CHANGES
In 1996, the Company adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of by a company. No adjustments were made to the consolidated
financial statements upon adoption of this pronouncement.
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. In December 1996, the FASB issued
SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125, which defers the effective date of certain paragraphs of SFAS
No. 125 that are applicable to the Company. The Statements which address
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, is to be applied prospectively. Earlier or
retroactive application is not permitted. As a result of SFAS No. 127, the
Company will adopt SFAS No. 125 at January 1, 1998. Adoption of these
pronouncements is not expected to have a significant impact on the consolidated
financial statements.
RECLASSIFICATIONS
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(2) INVESTMENTS
<TABLE>
<CAPTION>
Investments at December 31, 1996 consist of:
Amount
Amortized Estimated shown on
cost fair balance
or cost value sheet
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. Government $ 620,236 645,264 645,264
States and political subdivisions 419 424 424
Foreign government 304,589 309,394 309,394
Public utilities 6,466 7,041 7,041
Corporate securities 1,025,189 1,040,322 1,040,322
Mortgage backed securities 669,181 687,054 687,054
Collateralized mortgage obligations 78,331 78,807 78,807
- --------------------------------------------------------------------------------------------------------
Total fixed maturities $ 2,704,411 2,768,306 2,768,306
- --------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Public utilities 4,941 5,087 5,087
Banks, trusts and insurance
companies 8,132 10,528 10,528
Industrial and miscellaneous 211,520 301,691 301,691
Nonredeemable preferred stocks 9,496 10,528 10,528
- --------------------------------------------------------------------------------------------------------
Total equity securities $ 234,089 327,834 327,834
- --------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 245,559 XXXXXXXXX 245,559
Real estate:
Investment properties 34,129 XXXXXXXXX 34,129
Partnerships 10,695 XXXXXXXXX 10,695
Certificates of deposit and
short term securities 204,972 XXXXXXXXX 204,972
Policy loans 103,708 XXXXXXXXX 103,708
Other long term investments 124 XXXXXXXXX 124
- --------------------------------------------------------------------------------------------------------
Total other investments $ 599,187 XXXXXXXXX 599,187
- --------------------------------------------------------------------------------------------------------
Total investments $ 3,537,687 XXXXXXXXX 3,695,327
========================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
At December 31, 1996 and 1995, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of available-for-sale securities are
as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
U.S. Government 620,236 25,954 926 645,264
States and political subdivisions 419 5 0 424
Foreign government 304,589 6,090 1,285 309,394
Public utilities 6,466 575 0 7,041
Corporate securities 1,025,189 24,137 9,004 1,040,322
Mortgage backed securities 669,181 18,444 571 687,054
Collateralized mortgage obligations 78,331 995 519 78,807
- ---------------------------------------------------------------------------------------------------
Total fixed maturities 2,704,411 76,200 12,305 2,768,306
Equity securities 234,089 98,711 4,966 327,834
- ---------------------------------------------------------------------------------------------------
Total $ 2,938,500 174,911 17,271 3,096,140
===================================================================================================
1995:
U.S. Government 793,311 74,482 0 867,793
States and political subdivisions 469 12 0 481
Foreign government 254,457 11,613 273 265,797
Public utilities 32,100 4,628 0 36,728
Corporate securities 709,906 41,746 4,043 747,609
Mortgage backed securities 516,538 31,644 0 548,182
Collateralized mortgage obligations 80,949 2,751 692 83,008
- ---------------------------------------------------------------------------------------------------
Total fixed maturities 2,387,730 166,876 5,008 2,549,598
Equity securities 201,608 61,753 8,903 254,458
- ---------------------------------------------------------------------------------------------------
Total $ 2,589,338 228,629 13,911 2,804,056
===================================================================================================
</TABLE>
The changes in unrealized gains (losses) on fixed maturities available-for-sale
securities were $(97,973), $261,471 and $(214,245) in each of the years ended
December 31, 1996, 1995, 1994 and the change in unrealized losses on
held-to-maturity securities was $(8,783) for the year ended December 31, 1994.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$40,895, $48,186 and $(9,587) for the years ended December 31, 1996, 1995 and
1994, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of fixed maturities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized Estimated
cost fair value
- --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 4,523 4,689
Due after one year through five years 337,770 347,854
Due after five years through ten years 1,261,874 1,287,172
Due after ten years 352,732 362,730
Mortgage backed securities 747,512 765,861
- --------------------------------------------------------------------------------
Totals $ 2,704,411 2,768,306
================================================================================
</TABLE>
Gross gains of $43,696, $41,962 and $26,848 and gross losses of $16,834, $14,607
and $26,805 were realized on sales of available-for-sale securities in 1996,
1995 and 1994, respectively; related taxes were $9,402, $9,574 and $715 in 1996,
1995 and 1994, respectively. Proceeds from redemptions of held-to-maturity
securities during 1995 and 1994 were $7,022 and $4,342, respectively, with no
gain or loss realized on the transactions.
<TABLE>
<CAPTION>
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities, at market $ 8,897 21,877 (2,712)
Equity securities 17,964 5,478 2,745
Mortgage loans (1,129) (687) (1,667)
Real estate 3,104 2,530 2,067
Other (275) 4 396
- --------------------------------------------------------------------------------
Net gains before taxes 28,561 29,202 829
Tax expense on net realized gains 9,996 10,218 352
- --------------------------------------------------------------------------------
Net gains after taxes $ 18,565 18,984 477
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
In 1995, in conjunction with an expanded marketing agreement, the Company
provided an unrelated insurance company with $30,000 in exchange for a fifteen
year convertible debenture paying 5% interest for the first five years with the
interest rate reset annually thereafter at the one-year LIBOR plus 1%. If
converted, the Company would obtain an approximate 10% equity ownership in the
unrelated company. The Company has no intention of converting the debenture in
the near term.
During 1996 and 1995, the Company entered into mortgage backed security reverse
repurchase transactions ("dollar rolls") with certain securities dealers. Under
this program, the Company sells certain securities for delivery in the current
month and simultaneously contracts with the same dealer to repurchase similar,
but not identical, securities on a specified future date. The Company gives up
the right to receive principal and interest on the securities sold. As of
December 31, 1996, mortgage backed securities underlying the agreements were
carried at a market value of $124,281 and other liabilities included $130,196
for funds received under these agreements. As of December 31, 1995 there were no
outstanding amounts under the Company's dollar roll program. Average balances
outstanding were $83,602 and $67,735 and weighted average interest rates were
7.5% and 7.4% during 1996 and 1995, respectively. The maximum balance
outstanding during 1996 was $130,196.
During 1996 and 1995, the Company participated in a securities lending program
administered by AZOA's investment division. Under this program, the Company
loans U.S. Treasury Notes to qualified third parties. The Company obtains
collateral for the loan equal to 102 percent of the estimated market value and
accrued interest on the loaned securities and receives a portion of the interest
earned on the collateral. In addition, the Company maintains full ownership
rights to the securities loaned, including investment income and has the ability
to sell the securities while they are on loan with the consent of the borrower.
There were no securities on loan at December 31, 1996 and 1995.
Impaired mortgage loans are defined as those where it is probable that amounts
due according to contractual terms, including principal and interest, will not
be collected. Impaired mortgage loans are measured by the Company at the fair
value of collateral. Interest income on impaired mortgage loans is recorded on a
cash basis. There were no impaired loans held by the Company as of December 31,
1996. Below is a summary of impaired mortgage loans as of December 31, 1995.
<TABLE>
<CAPTION>
Impaired Impaired Total
mortgage loans mortgage loans impaired
with a related without a related mortgage
allowance allowance loans
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995:
Balance $ 9,210 8,541 17,751
Related allowance 3,580 3,580
- ----------------------------------------------------------------------------------------
Balance, net of allowance $ 5,630 8,541 14,171
========================================================================================
Below is a summary of interest income on impaired mortgage loans.
1996 1995
- -----------------------------------------------------------------------------------------------
Average principal balance of impaired mortgage loans $ 9,835 19,671
Total interest income on impaired mortgage loans 557 1,100
Interest income on impaired mortgage loans recorded on a cash basis 557 1,100
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The valuation allowances at December 31, 1996, 1995 and 1994 and the changes in
the allowance for the years then ended are summarized as follows:
Writedowns
Beginning Charged to Charged to End
of year Operations Allowance Recoveries of year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996:
Mortgage loans $ 10,487 0 0 3,208 7,279
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 10,487 0 0 3,208 7,279
==========================================================================================================
December 31, 1995:
Mortgage loans $ 11,552 914 0 1,979 10,487
Investment in real estate 1,550 0 0 1,550 0
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 13,102 914 0 3,529 10,487
==========================================================================================================
December 31, 1994:
Mortgage loans $ 11,552 1,598 0 1,598 11,552
Investment in real estate 1,550 0 0 0 1,550
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 13,102 1,598 0 1,598 13,102
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Major categories of net investment income for the respective years ended
December 31 are:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 0 6,284 6,966
Fixed maturities, at market 178,664 158,421 141,611
Mortgage loans 19,267 16,125 13,706
Policy loans 7,013 6,688 6,329
Short-term investments 10,688 7,182 3,012
Dividends:
Preferred stock 818 581 495
Common stock 4,527 3,204 2,673
Rental income on real estate 3,161 2,781 3,135
Interest on assets held by reinsurers 9,709 10,445 10,470
Other 2,183 833 577
- --------------------------------------------------------------------------------
Total investment income 236,030 212,544 188,974
Investment expenses 13,408 11,386 7,683
- --------------------------------------------------------------------------------
Net investment income $ 222,622 201,158 181,291
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(3) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Financial assets
- ----------------
Fixed maturities, at market:
U.S. Government $ 645,264 645,264 867,793 867,793
States and political subdivisions 424 424 481 481
Foreign governments 309,394 309,394 265,797 265,797
Public utilities 7,041 7,041 36,728 36,728
Corporate securities 1,040,322 1,040,322 747,609 747,609
Mortgage backed securities 687,054 687,054 548,182 548,182
Collateralized mortgage obligations 78,807 78,807 83,008 83,008
Equity securities 327,834 327,834 254,458 254,458
Mortgage loans 245,559 252,825 203,128 212,766
Short term investments 204,972 204,972 31,501 31,501
Policy loans 103,708 103,708 104,184 104,184
Other long term investments 124 124 650 650
Receivables 155,278 155,278 124,700 124,700
Separate accounts assets 9,520,561 9,520,561 8,402,003 8,402,003
Financial liabilities
- ---------------------
Investment contracts 3,297,973 2,747,914 3,063,100 2,542,260
Separate account liabilities 9,520,561 9,324,358 8,402,003 8,181,725
- --------------------------------------------------------------------------------------------------------------------
<FN>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
</FN>
</TABLE>
(4) RECEIVABLES
<TABLE>
<CAPTION>
Receivables at December 31 consist of the following:
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Premiums due $ 125,216 83,695
Agents balances 5,523 7,236
Related party receivables 2,099 922
Reinsurance commission receivable 7,515 16,693
Scholarship enrollment fees 8,025 6,822
Due from administrators 3,244 6,149
Other 3,656 3,183
- -------------------------------------------------------------------------
Total receivables $ 155,278 124,700
=========================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(5) ACCIDENT AND HEALTH CLAIMS RESERVES
Accident and health claims reserves are based on long-range projections subject
to uncertainty. Uncertainty regarding reserves of a given accident year is
gradually reduced as new information emerges each succeeding year, thereby
allowing more reliable re-evaluations of such reserves. While management
believes that reserves as of December 31, 1996 are adequate, uncertainties in
the reserving process could cause such reserves to develop favorably or
unfavorably in the near term as new or additional information emerges. Any
adjustments to reserves are reflected in the operating results of the periods in
which they are made. Movements in reserves which are small relative to the
amount of such reserves could significantly impact future reported earnings of
the Company.
<TABLE>
<CAPTION>
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $14,348, $18,858 and $11,149 in
1996, 1995 and 1994, respectively, is summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $99,292, $96,090 and $86,551 $ 191,804 185,028 170,123
Incurred related to:
Current year 271,308 242,024 230,995
Prior years (11,642) (9,163) (7,290)
- --------------------------------------------------------------------------------------------------------
Total incurred 259,666 232,861 223,705
- --------------------------------------------------------------------------------------------------------
Paid related to:
Current year 107,842 100,165 82,338
Prior years 127,032 125,920 126,462
- --------------------------------------------------------------------------------------------------------
Total paid 234,874 226,085 208,800
- --------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
recoverables of $114,230, $99,292 and $96,090 $ 216,596 191,804 185,028
========================================================================================================
</TABLE>
Due to lower than anticipated losses related to prior years, the provision for
claims and claim adjustment expenses decreased.
(6) REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
risks under excess coverage and coinsurance contracts. The Company retains a
maximum of $1 million coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk to minimize its exposure
to significant losses from reinsurer insolvencies.
Included in reinsurance receivables at December 31, 1996 are $53,036, $799,499
and $248,389 recoverable from three insurers who, as of December 31, 1996, were
rated A+, A+ and B++, respectively, by Best's Insurance Reports. A contingent
liability exists to the extent that the Company's reinsurers are unable to meet
their contractual obligations. Management is of the opinion that no liability
will accrue to the Company with respect to this contingency.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Life insurance, annuities and accident and health business assumed from and
ceded to other companies is as follows:
Percentage
Assumed Ceded of amount
Gross from other to other Net assumed
Year ended amount companies companies amount to net
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996:
Life insurance In force $ 37,527,994 44,073,247 6,126,541 75,474,700 58.4%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 235,837 133,994 37,986 331,845 40.4%
Annuities 169,503 1,153 12,769 157,887 0.7%
Accident and health insurance 396,051 207,179 226,408 376,822 55.0%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 801,391 342,326 277,163 866,554 39.5%
=================================================================================================================
December 31, 1995:
Life insurance In force $ 39,601,531 28,790,199 6,884,645 61,507,085 46.8%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 242,704 108,102 40,291 310,515 34.8%
Annuities 145,994 1,117 10,376 136,735 0.8%
Accident and health insurance 361,290 165,769 172,559 354,500 46.8%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 749,988 274,988 223,226 801,750 34.3%
=================================================================================================================
December 31, 1994:
Life insurance In force $ 39,789,859 24,411,513 6,893,030 57,308,342 42.6%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 230,241 96,308 35,578 290,971 33.1%
Annuities 119,045 1,195 6,806 113,434 1.1%
Accident and health insurance 388,759 158,749 201,824 345,684 45.9%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 738,045 256,252 244,208 750,089 34.2%
=================================================================================================================
</TABLE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$381,381, $182,638 and $86,055 in 1996, 1995 and 1994, respectively, and life
insurance premiums earned of $1,293, $641 and $203 in 1996, 1995 and 1994,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company also
ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$1,922, $(7,520) and $12,256 in 1996, 1995 and 1994.
In addition to the above transactions, the Company ceded a portion of its
mortality risk associated with the variable annuity product to Allianz
Aktiengesellshaft. The Company recorded a recoverable on future policy benefit
reserves of $1,279 and $930 as of December 31, 1996 and 1995, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(7) INCOME TAXES
INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Total income tax expense (benefit) for the years ended December 31 are as
follows:
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 21,936 12,993 5,098
Deferred tax (benefit) expense 30,559 25,772 16,053
- ------------------------------------------------------------------------------------------------------
Total income tax expense attributable to operations $ 52,495 38,765 21,151
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 0 0 40,312
Attributable to unrealized gains and losses
for the year (19,967) 108,559 (79,201)
- ------------------------------------------------------------------------------------------------------
Total income tax effect on equity $ 32,528 147,324 (17,738)
======================================================================================================
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Income tax expense computed at the statutory rate of 35% in 1996, 1995 and 1994,
varies from tax expense reported in the Consolidated Statements of Income for
the respective years ended December 31 as follows:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $ 53,782 44,087 26,819
Dividends received deductions and tax-exempt interest (650) (5,430) (3,967)
Foreign tax (2,723) (464) (79)
Interest on tax deficiency 261 408 (716)
Other 1,824 164 (906)
- ---------------------------------------------------------------------------------------------------
Income tax expense as reported $ 52,494 38,765 21,151
===================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
<TABLE>
<CAPTION>
Tax effects of temporary differences giving rise to the significant components
of the net deferred tax liability at December 31 are as follows:
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 2,024 1,936
Allowance for uncollectible accounts 1,256 2,283
Policy reserves 158,131 175,963
- ----------------------------------------------------------------------
Total deferred tax assets 161,411 180,182
- ----------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs 240,906 234,393
Net unrealized gain 53,008 72,975
Other 18,257 12,988
- ----------------------------------------------------------------------
Total deferred tax liabilities 312,171 320,356
- ----------------------------------------------------------------------
Net deferred tax liability $ 150,760 140,174
======================================================================
</TABLE>
Although realization is not assured, the Company believes it is not necessary to
establish a valuation allowance for the deferred tax asset as it is more likely
than not the deferred tax asset will be realized principally through future
reversals of existing taxable temporary differences and future taxable income.
The amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future reversals of existing taxable
temporary differences and future taxable income are reduced.
As of December 31, 1996 and 1995, the Company had no tax loss carryforwards or
alternative minimum tax credits.
The Company files a consolidated federal income tax return with AZOA and all of
its wholly owned subsidiaries. The consolidated tax allocation agreement
stipulates that each company participating in the return will bear its share of
the tax liability pursuant to United States Treasury Department regulations. The
Company and each of its insurance subsidiaries generally will be paid for the
tax benefit on their losses, and any other tax attributes, to the extent they
could have obtained a benefit against their post-1990 separate return taxable
income or tax. Income taxes paid by the Company were $30,946, $14,865 and
$15,162 in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995 the
Company had a tax recoverable from AZOA of $11,599 and $3,257, respectively and
a recoverable from Revenue Canada Taxation of $856 and $690, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(8) RELATED PARTY TRANSACTIONS
In November 1995, the Company purchased the 400 non-voting common shares in its
subsidiary, Canadian American Financial Corporation from AZOA for $7,903. The
acquisition of the shares increased the Company's equity ownership in both
voting and non-voting common stock to 100%.
As of December 31, 1995, Allianz Real Estate (AzRE), a wholly owned subsidiary
of AZOA, owned 100% of the stock or was a limited partner of certain entities
whose assets include mortgage loans issued by the Company amounting to $6,245.
Included in the mortgage loans are properties originally foreclosed upon by the
Company of which the balances at December 31, 1995 was $1,650.
The Company reimbursed AZOA $86, $738 and $817 in 1996, 1995 and 1994,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $0 and $528 at December 31, 1996 and 1995, respectively.
AZOA's investment division manages the Company's investment portfolio. The
Company paid AZOA $1,657, $1,024 and $1,285 in 1996, 1995 and 1994,
respectively, for investment advisory fees. The Company's liability to AZOA was
$543 and $377 at December 31, 1996 and 1995, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $3,275, $3,752 and $4,228 in
1996, 1995 and 1994, respectively. The Company's liability for data center
charges was $58 and $337 at December 31, 1996 and 1995, respectively.
The Company has 200 million authorized shares of preferred stock with a par
value of $1 per share. This preferred stock is issuable in series with the
number of shares, redemption rights and dividend rate designated by the Board of
Directors for each series. Dividends are cumulative at a rate reflective of
prevailing market conditions at time of issue and are payable semiannually.
Dividend payments are restricted by provisions in State of Minnesota statutes.
In 1994, the Company issued 25 millions shares of Series A preferred stock with
a dividend rate of 6.4% to AZOA for $25,000 and issued 15 millions shares of
Series B preferred stock with a dividend rate of 6.95% to AZOA for $15,000. In
December 1995, the Company redeemed and canceled the 15 million shares of Series
B preferred stock issued to AZOA. There are currently 25 million shares of
Series A preferred stock issued and outstanding.
As of December 31, 1996, the Company sold to AZOA, without recourse, two
receivables due from third parties amounting to $6,600. The Company recognized a
loss of $416 resulting from these sales.
In 1995 and 1994, AZOA contributed additional capital to the Company of $594 and
$5,190, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(9) EMPLOYEE BENEFIT PLANS
The Company participates in the Allianz Primary Retirement Plan (Primary
Retirement Plan), a defined contribution plan. The Company makes contributions
to a money purchase pension plan on behalf of eligible participants. All
employees, excluding agents, are eligible to participate in the Primary
Retirement Plan after two years of service. The contributions are based on a
percentage of the participant's salary with the participants being 100% vested
upon eligibility. It is the Company's policy to fund the plan costs as accrued.
Total pension contributions were $808, $860 and $918 in 1996, 1995 and 1994,
respectively.
The Company participates in the Allianz Asset Accumulation Plan (Allianz Plan),
a defined contribution plan sponsored by AZOA. Under the Allianz Plan
provisions, the Company will match from 50% to 100% of eligible employees'
contributions up to a maximum of 6% of a participant's compensation. The total
Company match for 1996, 1995 and 1994 Plan participants was 100%. All employees,
excluding agents, are eligible to participate after one year of service and are
fully vested in the Company's matching contribution after three years of
service. The Allianz Plan will accept participants' pretax or after-tax
contributions up to 15% of the participant's compensation. It is the Company's
policy to fund the Allianz Plan costs as accrued. The Company has accrued
$1,105, $1,188 and $1,266 in 1996, 1995 and 1994, respectively, toward planned
contributions.
In 1995, the Company discontinued support of its individual agency field force
and suspended contributions to the agents' asset accumulation plan as of January
1, 1996. Prior to this event, the Company matched 100% of eligible agents'
contributions up to a maximum of 3% of a participant's compensation and accepted
participant's pretax or after tax contributions up to 10% of participant's
compensation. Also during 1995, participation in the Plan decreased
significantly resulting in a partial plan termination whereby participants as of
January 1, 1995 became fully vested in the Plan. The Company has no intention to
fully terminate the Plan in the near term. Total Company contributions to the
Plan were $0, $118 and $386 in 1996, 1995 and 1994, respectively.
The Company provides certain postretirement benefits to employees who retired on
or before December 31, 1988 or who were hired before December 31, 1988 and who
have at least ten years of service when they reach age 55. The Company's plan
obligation at December 31, 1996 and 1995 was $5,783 and $5,532, respectively,
and the liability is included in "Other liabilities" in the accompanying balance
sheet.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(10) STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS
Statutory accounting is directed toward insurer solvency and protection of
policyholders. Accordingly, certain items recorded in financial statements
prepared under GAAP are excluded or vary in determining statutory policyholders'
surplus and net gain from operations. These items include, among others,
deferred acquisition costs, furniture and fixtures, accident and health premiums
receivable which are more than 90 days past due, deferred taxes and undeclared
dividends to policyholders. Additionally, future life policy and annuity benefit
reserves calculated for statutory accounting do not include provisions for
withdrawals.
<TABLE>
<CAPTION>
The differences between stockholder's equity and net income reported in
accordance with statutory accounting practices and the accompanying consolidated
financial statements as of and for the year ended December 31 are as follows:
Stockholder's equity Net income
-------------------------- -------------------------------------
1996 1995 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 384,989 299,186 67,995 11,565 6,895
Adjustments:
Change in reserve basis (199,566) (211,678) 13,324 (43,642) (109,473)
Deferred acquisition costs 863,338 826,994 36,344 28,552 132,090
Net deferred taxes (150,760) (140,174) (30,559) (25,772) (16,053)
Statutory asset valuation reserve 133,564 100,462 0 0 0
Statutory interest maintenance reserve 26,342 25,061 1,183 8,756 (4,768)
Modified coinsurance reinsurance (113,743) (119,178) 5,435 104,222 44,920
Unrealized gains on investments 64,928 163,237 0 0 0
Nonadmitted assets 7,121 1,471 0 0 0
Other (2,036) 5,813 7,446 3,516 1,864
- -------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $ 1,014,177 951,194 101,168 87,197 55,475
===================================================================================================================
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1996 and 1995 was in compliance with these requirements. The maximum amount of
dividends which can be paid by Minnesota insurance companies to stockholders
without prior approval of the Commissioner of Commerce is subject to
restrictions relating to statutory earned surplus, also known as unassigned
funds. Unassigned funds are determined in accordance with the accounting
procedures and practices governing preparation of the statutory annual
statement, minus 25% of earned surplus attributable to unrealized capital gains.
In accordance with Minnesota Statutes, the Company may declare and pay from its
surplus, cash dividends of not more than the greater of 10% of its beginning of
the year statutory surplus in any year, or the net gain from operations of the
insurer, not including realized gains, for the 12-month period ending the 31st
day of the next preceding year. In 1996 and 1995, respectively, the Company paid
to AZOA dividends, on preferred stock only, in the amount of $1,600 and $2,651,
respectively. Dividends of $61,439 could be paid in 1997 without prior approval
of the Commissioner of Commerce.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
REGULATORY RISK BASED CAPITAL
An insurance enterprise's state of domicile imposes minimum risk-based capital
requirements that were developed by the National Association of Insurance
Commissioners (NAIC). The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of an enterprise's regulatory total adjusted
capital to its authorized control level risk-based capital, as defined by the
NAIC. Enterprises below specific triggerpoints or ratios are classified within
certain levels, each of which requires specified corrective action. The levels
and ratios are as follows:
Ratio of total adjusted capital to
authorized control level risk-based
Regulatory Event Capital (less than or equal to)
------------------------- -------------------------------------
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7
The Company met the minimum risk-based capital requirements as of December 31,
1996 and 1995.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company is required to file annual statements with insurance regulatory
authorities which are prepared on an accounting basis prescribed or permitted by
such authorities. Currently, prescribed statutory accounting practices include
state laws, regulations, and general administrative rules, as well as a variety
of publications of the NAIC. Permitted statutory accounting practices encompass
all accounting practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a state, and may
change in the future. The NAIC currently has a project underway to codify
statutory accounting practices, the result of which is expected to constitute
the only source of "prescribed" statutory accounting practices. Accordingly,
that project will likely change the definition of what comprises prescribed
versus permitted statutory accounting practices, and may result in changes to
existing accounting policies insurance enterprises use to prepare their
statutory financial statements. The Company does not currently use permitted
statutory accounting practices which have a significant impact on its statutory
financial statements.
STATE EXAMINATION
Preferred Life is currently under routine examination by the New York State
Department of Insurance. No matters of significance or adjustments to Preferred
Life's statutory financial statements have been brought to management's
attention as a result of this examination.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(11) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion of
management, the ultimate resolution of such litigation will not have a material
effect on the consolidated financial position of the Company.
The Company is contingently liable for possible future assessments under
regulatory requirements pertaining to insolvencies and impairments of
unaffiliated insurance companies. Provision has been made for assessments
currently received and assessments anticipated for known insolvencies.
(12) FOREIGN CURRENCY TRANSLATION
<TABLE>
<CAPTION>
The net assets of the Company's foreign operations are translated into U.S.
dollars using exchange rates in effect at each year end. Translation adjustments
arising from differences in exchange rates from period to period are included in
the accumulated foreign currency translation adjustment reported as a separate
component of stockholder's equity. An analysis of this account for the
respective years ended December 31 follows:
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $ (3,455) (3,787) (2,708)
- -------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments (28) 511 (1,659)
Amount of income tax benefit (expense)
for period related to aggregate adjustment 10 (179) 580
- -------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity (18) 332 (1,079)
- -------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $ (3,473) (3,455) (3,787)
=======================================================================================================
Canadian foreign exchange rate at end of year 0.7297 0.7329 0.7129
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(13) SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
The following table summarizes certain financial information by line of business
for 1996, 1995 and 1994:
As of December 31 For the year ended December 31
------------------------------------------ -------------------------------------------------------------------
Future Benefits, Net
policy Other Premium claims change
benefits, policy revenue losses, in
Deferred losses, claims and other Net and policy
policy claims and contract invest- settle- acquisi- Other Premiums
acquistion and loss Unearned benefits consider- ment ment tion operating written
costs expense premiums payable ations income expenses costs (a) expenses (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996:
Life $ 175,608 1,204,633 5,502 62,369 331,845 89,049 258,221 4,308 103,352
Annuities 672,797 2,879,221 0 1,859 157,887 113,537 105,335 (43,283) 161,002
Accident and health 14,933 0 26,674 374,596 376,822 20,036 256,364 2,631 122,337
- -----------------------------------------------------------------------------------------------------------------------------------
$ 863,338 4,083,854 32,176 438,824 866,554 222,622 619,920 (36,344) 386,691
===================================================================================================================================
1995:
Life $ 179,915 1,088,964 5,493 62,660 310,514 83,741 239,287 8,475 124,415
Annuities 629,515 2,601,943 0 580 136,736 98,214 89,321 (34,235) 137,000
Accident and health 17,564 0 28,688 308,658 354,500 19,203 249,232 (2,792) 105,615
- ------------------------------------------------------------------------------------------------------------------------------------
$ 826,994 3,690,907 34,181 371,898 801,750 201,158 577,840 (28,552) 367,030
===================================================================================================================================
1994:
Life $ 188,390 1,022,537 6,012 63,728 290,971 78,100 228,383 6,889 114,767
Annuities 595,280 2,304,560 0 360 113,434 86,168 88,100 (140,776) 210,933
Accident and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797 121,645
- -----------------------------------------------------------------------------------------------------------------------------------
$ 798,442 3,327,097 40,376 355,411 750,089 181,291 553,097 (132,090) 447,345
===================================================================================================================================
<FN>
(a) See note 1 for total gross amortization.
(b) Premiums written are not applicable for life insurance companies.
</FN>
</TABLE>
<PAGE>
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, 1996 and 1995.
3. Consolidated Statements of Income for the years ended December
31, 1996, 1995 and 1994.
4. Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
6. Notes to Consolidated Financial Statements - December 31, 1996,
1995 and 1994.
The following financial statements of the Variable Account are
included in Part B hereof.
1. Independent Auditors' Report.
2. Statements of Assets and Liabilities as of December 31, 1996.
3. Statements of Operations for the year ended December 31, 1996.
4. Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
5. Notes to Financial Statements - December 31, 1996.
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account#
2. Not Applicable
3. Principal Underwriter Agreement
4. Individual Immediate Variable Annuity Contract
4. (i) Individual Immediate Variable Annuity Contract Endorsements
5. Application for Individual Immediate Variable Annuity##
6. (i) Copy of Articles of Incorporation of the Company#
(ii) Copy of the Bylaws of the Company#
7. Not Applicable
8. Form of Fund Participation Agreement##
9. Opinion and Consent of Counsel
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information
14. Company Organizational Chart
27. Not Applicable
# Incorporated by reference to Registrant's Post-Effective Amendment No.
2 to Form N-4 which was electronically filed on November 1, 1995.
## Incorporated by reference to Registrant's Post-Effective Amendment No.
3 to Form N-4 which was electronically filed on April 24, 1996.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- --------------------------- -----------------------------------------
<S> <C>
Lowell C. Anderson Chairman, President, Chief
1750 Hennepin Avenue Executive Officer and Director
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Blvd.
Minneapolis, MN 55439
Dr. Jerry E. Robertson Director
220-13E-29/3M Center
St. Paul, MN 55144
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 17
D - 70178
Stuttgart, Germany
Edward J. Bonach Senior Vice President, Chief Financial
1750 Hennepin Avenue Officer and Treasurer
Minneapolis, MN 55403
Alan A. Grove Vice President-Law & Secretary
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James President-Individual Marketing
1750 Hennepin Avenue
Minneapolis, MN 55403
Ronald L. Wobbeking President-Mass Marketing Division
1750 Hennepin Avenue
Minneapolis, MN 55403
Reverend Dennis J. Dease Director
c/o University of St.Thomas
2115 Summit Avenue
Box AQU100
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
The Insurance Company organizational chart is included as Exhibit 14.
Item 27. Number of Contract Owners
As of February 21, 1997, there were 138 qualified Contract Owners and 84
non-qualified Contract Owners with Contracts in the Separate Account.
Item 28. Indemnification
The Bylaws of the Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a Director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
a. NALAC Financial Plans, 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>
Name & Principal Positions and Offices
Business Address with Underwriter
- ----------------------- -----------------------------
<S> <C>
Alan A. Grove Director
1750 Hennepin Avenue
Minneapolis, MN 55403
James P. Kelso Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford President and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Edward J. Bonach Director
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael J. Yates Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
</TABLE>
c. Not Applicable
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota,
maintains physical possession of the accounts, books or documents of the
Variable Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this registration statement and
has caused this registration statement to be signed on its behalf in the City of
Minneapolis and State of Minnesota, on this 24th day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/ ALAN A. GROVE
------------------------------
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By: /s/ ALAN A. GROVE
------------------------------
</TABLE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature and Title
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board,
Lowell C. Anderson President and Chief 04/24/97
Executive Officer Date
Herbert F. Hansmeyer* Director 04/24/97
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 04/24/97
Michael P. Sullivan Date
Dr. Jerry E. Robertson* Director 04/24/97
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 04/24/97
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 04/24/97
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 04/24/97
Rev. Dennis J. Dease Date
James R. Campbell* Director 04/24/97
James R. Campbell Date
* By /s/ ALAN A. GROVE
---------------------
Attorney-in-Fact
</TABLE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX-99.B3 Principal Underwriter Agreement
EX-99.B4 Individual Immediate Variable Annuity Contract
EX-99.B4(i) Individual Immediate Variable Annuity Contract Endorsements
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Independent Auditors' Consent
EX-99.B13 Calculation of Performance Information
EX-99.B14 Company Organizational Chart
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
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
1750 Hennepin Avenue South
Minneapolis, Minnesota 55403-2195 [ALLIANZ LOGO]
(612) 347-6500
A Stock Company
(Herein Called the Company)
This is a legal Contract between you (referred to in this Contract as you and
your) and Allianz Life Insurance Company of North America (herein referred to as
- - we, us, and our). We will pay benefits to you, the Annuitant or Joint
Annuitant, if any, if either of you are living on the Income Date. The manner in
which the dollar amounts of annuity payments are determined is described in this
Contract. The First annuity payment will be paid on the Income Date and
subsequent payments will be made on the corresponding day of each month (or
other agreed to intervals) thereafter in accordance with the Annuity Option
selected.
This Contract is issued in consideration of the payment of the Single Purchase
Payment.
READ YOUR CONTRACT CAREFULLY
RIGHT TO CANCEL THIS CONTRACT
THIS CONTRACT MAY BE RETURNED WITHIN 10 DAYS AFTER YOU RECEIVE IT (THE
"FREE-LOOK PERIOD"). IT CAN BE MAILED OR DELIVERED TO EITHER US OR THE AGENT WHO
SOLD IT. RETURN OF THIS CONTRACT BY MAIL IS EFFECTIVE ON BEING POSTMARKED,
PROPERLY ADDRESSED AND POSTAGE PRE-PAID. THE RETURNED CONTRACT WILL BE TREATED
AS IF WE HAD NEVER ISSUED IT. WE WILL PROMPTLY REFUND THE NET AMOUNT ALLOCATED
TO THE VARIABLE ACCOUNT MODIFIED FOR INVESTMENT EXPERIENCE PLUS ANY TAXES
DEDUCTED LESS ANY BENEFITS PAID IN STATES WHERE PERMITTED. THIS MAY BE MORE OR
LESS THAN THE SINGLE PURCHASE PAYMENT. WE HAVE THE RIGHT TO ALLOCATE THE SINGLE
PURCHASE PAYMENT TO THE MONEY MARKET SUB-ACCOUNT UNTIL THE EXPIRATION OF THE
FREE-LOOK PERIOD. IF WE SO ALLOCATE THE PURCHASE PAYMENT, WE WILL REFUND THE
SINGLE PURCHASE PAYMENT, LESS ANY BENEFITS PAID.
Benefits available under this Contract are not less than those required by
statute of the state in which this Contract is delivered.
THIS IS A VARIABLE ANNUITY CONTRACT WITH ANNUITY PAYMENTS AND OTHER ANNUITY
BENEFITS INCREASING OR DECREASING DEPENDING ON THE EXPERIENCE OF THE VARIABLE
ACCOUNT WHICH IS SET FORTH IN THE CONTRACT SCHEDULE.
Signed by the Company:
/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
---------------------------- --------------------------------------
Vice President and Secretary Chairman of the Board, President & CEO
INDIVIDUAL IMMEDIATE VARIABLE ANNUITY
NONPARTICIPATING
L30196 (2-94)
TABLE OF CONTENTS
RIGHT TO CANCEL THIS CONTRACT 1
CONTRACT SCHEDULE
INTRODUCTION 2
DEFINITIONS
Age 2
Annuitant 2
Annuity Calculation Date 2
Annuity Option 2
Annuity Unit 2
Assumed Investment Return 2
Contract Anniversary 2
Contract Owner 2
Contract Value 2
Effective Date 2
Eligible Investment(s) 2
Fund 2
Income Date 2
Joint Annuitant 2
Net Asset Value 2
Valuation Date 2
Valuation Period 2
Variable Account 2
VIP Unit 3
GENERAL PROVISIONS
The Contract 3
Modification of Contract 3
Non-Participating in Surplus 3
Incontestability 3
Misstatement of Age 3
Reports 3
Taxes 3
Evidence of Survival 3
Protection of Proceeds 3
OWNERSHIP PROVISIONS
Ownership 3
Assignment 3
BENEFICIARY PROVISIONS
Beneficiary 4
Change of Beneficiary 4
Death of Beneficiary 4
PURCHASE PAYMENT PROVISIONS
Single Purchase Payment 4
Net Purchase Payment 4
Allocation of Net Purchase Payment 4
VARIABLE ACCOUNT
General Description 4
Investment Allocations to the Variable Account 4
Valuation of Assets 4
VIP Unit 4&5
Contract Value 5
Transfers 5
Mortality and Expense Risk Charge 5
Administrative Expense Charge 5
Mortality and Expense Guarantee 5
ANNUITY PROVISIONS
Income Date 5
Annuity Options 5
Option 1 - Life Annuity 5
Option 2 - Life Annuity with 60, 120, 180, or 240
Monthly Payments Guaranteed 6
Option 3 - Joint and Last Survivor Annuity 6
Option 4 - Joint and Last Survivor Annuity with
60, 120, 180, or 240 Monthly Payments Guaranteed 6
Option 5 - Unit Refund Life Annuity 6
Determination of Annuity Payments 6
Basis for Purchase of Annuity 7
PROCEEDS PAYABLE ON DEATH 7
DELAY OF PAYMENTS 8
L30196 (2-94)
CONTRACT SCHEDULE
ANNUITANT: (JOE DOE) SINGLE PURCHASE PAYMENT: ($50,000.00)
DATE OF BIRTH: (JANUARY 1, 1941)
JOINT ANNUITANT: (JANE DOE) ANNUITY OPTION SELECTED: ( )
DATE OF BIRTH: (JANUARY 1, 1940)
CONTRACT NUMBER: (********)
EFFECTIVE DATE: (12/20/1993)
INCOME DATE: (1/15/1994)
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to (1.25%) of the
average daily net assets of the Variable Account.
ADMINISTRATIVE EXPENSE CHARGE: Equal on an annual basis to (.15%) of the average
daily net assets of the Variable Account.
COMMUTATION FACTOR APPLICABLE TO ANNUITY OPTIONS 2 AND 4:
(CONTRACT YEAR COMMUTATION FACTOR
--------------- ------------------
1-2 5%
3 4%
4 3%
5 2%
6+ 1%)
COMMUTATION FACTOR APPLICABLE TO ANNUITY OPTION 6:
(1% of the proceeds for the first contract year)
MAXIMUM CUMULATIVE LIQUIDATION FOR ANNUITY OPTIONS 2 AND 4:
(25%) of the Total Withdrawal Value
MINIMUM REMAINING TOTAL WITHDRAWAL VALUE FOLLOWING PARTIAL WITHDRAWAL FOR OPTION
6: ($35,000)
BASIS OF ANNUITY TABLE: (1983(a) Blended Unisex Mortality Table, with 50% female
content projected to the year 2000 with Projection Scale G.)
ASSUMED INVESTMENT RETURN: (5%)
ELIGIBLE INVESTMENTS: The Franklin Valuemark Funds
(- CAPITAL GROWTH FUND) (- UTILITY EQUITY FUND)
(- GROWTH & INCOME FUND) (- TEMPLETON DEVELOPING MARKETS EQUITY FUND)
(- INCOME SECURITIES FUND) (- TEMPLETON GLOBAL ASSET ALLOCATION FUND)
(- MONEY MARKET FUND) (- TEMPLETON GLOBAL GROWTH FUND)
(- MUTUAL DISCOVERY SECURITES FUND) (- TEMPLETON INTERNATIONAL EQUITY FUND)
(- MUTUAL SHARES SECURITIES FUND) (- TEMPLETON INTERNATIONAL SMALLER
COMPANIES FUND)
(- RISING DIVIDENDS FUND) (- TEMPLETON PACIFIC GROWTH FUND)
(- SMALL CAP FUND) (- FIXED INCOME ALLOCATION)
VARIABLE ACCOUNT: (Allianz Life Variable Account B)
ANNUITY SERVICE OFFICE:
Allianz Life Insurance Company of North America
(700 Central Avenue)
(St. Petersburg, FL 33701)
((800) 774-5001)
FOR USE WITH (ALLIANZ LIFE VARIABLE ACCOUNT B)
A SEPARATE INVESTMENT ACCOUNT OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
L20068 (2-96) (3-96)
INTRODUCTION
THIS CONTRACT IS ISSUED ON THE LIFE OF THE ANNUITANT AND THE JOINT
ANNUITANT, IF ANY. THE ANNUITANT IS ALSO THE CONTRACT OWNER.
IF YOU DIE BEFORE THE INCOME DATE AND THERE IS NO JOINT ANNUITANT, THE
CONTRACT WILL BE TREATED AS IF WE HAD NEVER ISSUED IT AND WE WILL RETURN THE
SINGLE PURCHASE PAYMENT TO YOUR ESTATE.
DEFINITIONS
AGE - Age to the nearest month unless otherwise specified.
ANNUITANT - The primary person upon whose continuation of life any annuity
payment involving life contingencies depends. The Contract Owner is the
Annuitant. See also, Joint Annuitant.
ANNUITY CALCULATION DATE - The date on which the first annuity payment is
calculated which will be no more than 10 business days prior to the Income Date.
ANNUITY OPTION - An arrangement under which annuity payments are made under this
Contract.
ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Annuity Calculation Date.
ASSUMED INVESTMENT RETURN - The investment return upon which the annuity
payments in the Contract are based.
CONTRACT ANNIVERSARY - An anniversary of the Effective Date of this Contract.
CONTRACT OWNER - The person who owns the Contract as named in our records. The
Annuitant is the Contra ct Owner of this Contract.
CONTRACT VALUE - The dollar value as of any Valuation Date prior to the Annuity
Calculation Date of all amounts accumulated under this Contract.
EFFECTIVE DATE - The date on which the Net Purchase Payment is allocated to the
Variable Account.
ELIGIBLE INVESTMENT(S) - Those investments available under the Contract. Current
Eligible Investments are shown on the Contract Schedule.
FUND - A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment.
INCOME DATE - The date on which annuity payments are to begin.
JOINT ANNUITANT - A person other than the Annuitant on whose life annuity
payments may also be based.
NET ASSET VALUE - The total value of the shares of the Eligible Investment or
Fund less the liabilities of the Eligible Investment or Fund held by the
sub-account, as of the close of trading on a Valuation Date.
VALUATION DATE - The Variable Account will be valued each day that the New York
Stock Exchange is open for trading.
VALUATION PERIOD - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account maintained by us in which a
portion of our assets has been allocated for this and certain other contracts.
It has been designated on the Contract Schedule.
VIP UNIT - An accounting unit of measure used to calculate the Contract Value
prior to the Annuity Calculation Date.
GENERAL PROVISIONS
THE CONTRACT - The entire Contract consists of this Contract, and any attached
application, endorsements or riders. This Contract may be changed or altered
only by our President or Secretary. Any change, modification or waiver must be
made in writing.
MODIFICATION OF CONTRACT: This Contract may not be modified by us without your
consent except as may be required by applicable law.
NON-PARTICIPATION IN SURPLUS - This Contract does not share in any distribution
of our profits or surplus.
INCONTESTABILITY - We will not contest this Contract from its Effective Date.
MISSTATEMENT OF AGE - We require proof of your Age and that of any Joint
Annuitant before making any life contingent annuity payment provided for by this
Contract. If your Age or that of any Joint Annuitant has been misstated, the
amount payable will be adjusted to reflect the amount that would have been
provided at the true Age.
Any underpayments will be made up in one sum with the next annuity payment, and
overpayments will be deducted from the future annuity payments until the total
is repaid.
REPORTS - We will furnish you with an annual report of the Variable Account.
This report will be sent to your last known address.
TAXES - Any Taxes paid to any governmental entity, including any premium taxes,
will be charged against the Contract. We will, at our sole discretion, determine
when Taxes have resulted from: the investment experience of the Variable
Account; receipt by us of the Single Purchase Payment; or commencement of
annuity payments.
EVIDENCE OF SURVIVAL - Where any benefits under this Contract are contingent
upon the recipient being alive on a given date, we may require proof
satisfactory to us that the condition has been met.
PROTECTION OF PROCEEDS - No payee may commute, encumber, alienate or assign any
payments under this Contract before they are due. To the extent permitted by
law, no payments will be subject to the debts, contracts or engagements of any
payee or to any judicial process to levy upon or attach the same for payment
thereof.
OWNERSHIP PROVISIONS
OWNERSHIP - The Annuitant is the Contract Owner. The Contract Owner exercises
all the rights of this Contract, subject to the rights of:
1. any assignee under an assignment filed with our Service Office, and
2. any irrevocably named Beneficiary.
Upon your death, the Joint Annuitant, if any, will become the Owner. On or after
the Income Date, if there is no Joint Annuitant or upon the death of the Joint
Annuitant, the Beneficiary(ies) become the Owner(s) of their respective shares.
ASSIGNMENT - You may assign this Contract. A copy of any assignment must be
filed with our Service Office. We are not responsible for the validity of any
assignment. If you assign this Contract, your rights and those of any
revocably-named person will be subject to the assignment. An assignment will not
affect any payments we may make or actions we may take before such assignment
has been recorded at our Service Office.
BENEFICIARY PROVISIONS
BENEFICIARY - The Beneficiary and any Contingent Beneficiary are named by the
Contract Owner.
CHANGE OF BENEFICIARY - The Contract Owner may change the Beneficiary. A written
request, dated and signed by the Contract Owner, must be filed at our Service
Office. After the change is recorded, it will take effect as of the date the
request was signed. If the request reaches our Service Office after the Contract
Owner dies but before any payment to a Beneficiary, the change will be valid.
DEATH OF BENEFICIARY - Unless you have provided otherwise, any amount payable
after your death and that of any Joint Annuitant will be payable;
1. in equal shares to such Beneficiaries as are then living;
2. if no Beneficiary is then living, payment will be made in equal shares to
such Contingent Beneficiaries as are then living;
3. if no Beneficiary or Contingent Beneficiary is then living, payment will be
made to the Contract Owner's estate.
PURCHASE PAYMENT PROVISIONS
SINGLE PURCHASE PAYMENT - The Single Purchase Payment is paid to the Company at
its Annuity Service Office.
NET PURCHASE PAYMENT - The Net Purchase Payment is equal to the Single Purchase
Payment less any Taxes levied.
ALLOCATION OF NET PURCHASE PAYMENT - The Net Purchase Payment is allocated to
one or more of the sub-accounts of the Variable Account on the Effective Date.
The allocation to each sub-account is made in percentages of the Net Purchase
Payment. Whole percentages must be used and each must be at least 10%. We have
the right to allocate the Net Purchase Payment to the Money Market sub-account
until the expiration of the free-look period. Thereafter, the allocations will
be made to the sub-accounts as selected by the Contract Owner. We reserve the
right to limit the number of allocations that you can have at any time.
VARIABLE ACCOUNT
GENERAL DESCRIPTION - The name of the Variable Account is shown in the Contract
Schedule. The assets of the Variable Account are our property but are not
chargeable with the liabilities arising out of any other business we may
conduct, except to the extent that the assets of the Variable Account exceed the
liabilities of the Variable Account arising under the Contracts supported by the
Variable Account.
INVESTMENT ALLOCATIONS TO THE VARIABLE ACCOUNT - The assets of the Variable
Account are segregated by Eligible Investments or Funds and where appropriate by
Funds within the Eligible Fund, thus establishing a series of sub-accounts
within the Variable Account.
We may, from time to time, add additional Eligible Investments or Funds. In such
event, you may be permitted to select from these other Eligible Investments or
Funds limited by the terms and conditions we may impose on such transactions.
We may also substitute other Eligible Investments or Funds. The investment
policy of the Variable Account will not be changed without approval pursuant to
the insurance laws of the State of Minnesota. If required, approval of or change
of any investment policy will be filed with the insurance department of the
state where this Contract is delivered.
VALUATION OF ASSETS - Assets of Eligible Investments within each sub-account
will be valued at their Net Asset Value on each Valuation Date.
VIP UNIT - When the Net Purchase Payment is allocated, the amount allocated to
each sub-account is converted to VIP Units. The number of VIP Units credited to
each sub-account is determined by dividing the portion of the Net Purchase
Payment allocated to the sub-account by the value of the VIP Unit for the
sub-account as of the Effective Date. The VIP Unit value for each sub-account
was arbitrarily set initially at $10. The VIP Unit value for any later Valuation
Period on or before the Annuity Calculation Date is determined by subtracting
(2) from (1) and dividing the result by (3) where:
1. is the net result of:
a. the assets of the sub-account attributable to VIP Units; plus or minus
b. the cumulative charge or credit for Taxes reserved which is determined
by us to have resulted from the operation of the sub-account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge and
for the Administrative Expense Charge, which are shown on the Contract
Schedule; and
3. is the number of VIP Units outstanding at the end of the Valuation Period.
The VIP Unit value may increase or decrease from Valuation Period to Valuation
Period.
CONTRACT VALUE - The Contract Value on or before the Annuity Calculation Date is
the sum of the values for the Contract within each sub-account. The value within
each sub-account is determined by multiplying the number of VIP Units
attributable to this Contract in the sub-account by the VIP Unit value for the
sub-account. On the Annuity Calculation Date the Contract Value is converted to
annuity payments.
TRANSFERS - You may transfer all or part of your interest in a sub-account to
another sub-account. All transfers are subject to the following:
1. No partial transfer will be made if it would result in any selected
sub-account providing less than 10% of the benefits under the Contract.
2. Transfers will take effect during the Valuation Period next following receipt
by us of a written transfer request (or by telephone, if authorized)
containing all required information. No transfers may occur until the end of
the free-look period.
3. Any transfer direction must clearly specify:
a. the new allocation percentage(s); and
b. the sub-accounts which are to be re-allocated.
4. We reserve the right to limit the number of transfers among sub-accounts to
not fewer than six transfers per calendar year. We also reserve the right at
any time and without prior notice to any party to modify the transfer
provisions described above.
MORTALITY AND EXPENSE RISK CHARGE - We deduct a Mortality and Expense Risk
Charge equal, on an annual basis, to the amount shown on the Contract Schedule.
The Mortality and Expense Risk Charge compensates us for assuming the mortality
and expense risks under this Contract.
ADMINISTRATIVE EXPENSE CHARGE - We deduct an Administrative Expense Charge
equal, on an annual basis, to the amount shown on the Contract Schedule. The
Administrative Expense Charge compensates us for some of the costs associated
with the administration of this Contract and the Variable Account.
MORTALITY AND EXPENSE GUARANTEE - We guarantee that the dollar amount of each
annuity payment after the first will not be affected by variations in mortality
or expense experience.
ANNUITY PROVISIONS
INCOME DATE - You select an Income Date at the time of issue. The Income Date
must be the first or fifteenth day of a calendar month and not later than 60
days from the Effective Date.
ANNUITY OPTIONS - This Contract provides an Annuity under one of the Annuity
Options described below, provided the Annuitant or any Joint Annuitant are alive
on the Income Date. The Annuity Option selected is shown on the Contract
Schedule. Once selected the option is irrevocable. The amount of each payment
depends upon the Annuity Option chosen and the Annuitant's and any Joint
Annuitant's Age on the Annuity Calculation Date. Additionally, annuity payments
under all Options will vary with the investment experience of the sub-account(s)
of the Variable Account and may be either higher or lower than the first
payment.
OPTION 1 - LIFE ANNUITY - Monthly annuity payments are paid during the life of
the Annuitant ceasing with the last annuity payment due prior to the Annuitant's
death.
OPTION 2 - LIFE ANNUITY WITH 60, 120, 180, OR 240 MONTHLY PAYMENTS GUARANTEED -
Monthly annuity payments are paid during the life of an Annuitant with a
guarantee that if, at the Annuitant's death, annuity payments have been made for
less than a 60, 120, 180, or 240 month period as elected then annuity payments
will be continued thereafter to the Beneficiary for the remainder of the
guaranteed period. The Beneficiary may elect to have the present value of the
guaranteed annuity payments remaining, as of the date notice of death is
received by us, commuted at the Assumed Investment Return and paid in a lump
sum, less the applicable commutation factor as shown on the Contract Schedule.
The Company will require the return of the Contract and proof of death prior to
the payment of any commuted values.
OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY - Monthly annuity payments are paid
during the joint lifetime of the Annuitant and the Joint Annuitant. Upon the
death of the Annuitant, if the Joint Annuitant is then living, payments will be
paid thereafter during the remaining lifetime of the Joint Annuitant at a level
of 100%, 75%, or 50% of the original level as elected. Monthly payments cease
with the final annuity payment due prior to the last survivor's death.
OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH 60, 120, 180, OR 240 MONTHLY
PAYMENTS GUARANTEED - Monthly annuity payments are paid during the joint
lifetime of the Annuitant and the Joint Annuitant. Monthly payments are paid
thereafter during the remaining lifetime of the Joint Annuitant at 100% of the
original level. If at the last death of the Annuitant and the Joint Annuitant,
annuity payments have been made for less than a 60, 120, 180 or 240 month period
as elected then annuity payments will be continued thereafter to the Beneficiary
for the remainder of the guaranteed period. The Beneficiary may elect to have
the present value of the guaranteed Annuity Payments remaining, as of the date
notice of death is received by us, commuted at the Assumed Investment Return and
paid in a lump sum, less the applicable commutation factor as shown on the
Contract Schedule. The Company will require the return of the Contract and proof
of death prior to the payment of any commuted values.
OPTION 5 - UNIT REFUND LIFE ANNUITY - Monthly annuity payments are paid during
the life of the Annuitant ceasing with the last annuity payment due prior to the
Annuitant's death with a guarantee that, at the Annuitant's death, the
Beneficiary will receive in a single cash sum the then dollar value of the
number of Annuity Units equal to (1) total net amount applied to purchase the
Annuity divided by the Annuity Unit value used to determine the first annuity
payment, minus (2) the product of the number of the Annuity Units represented by
each payment and the number of payments made. No payment will be made if the
difference of (1) minus (2) is negative. This calculation will be made based
upon the assumption that the allocation of Annuity Units actually in-force at
the time of the Annuitant's death had been the allocation of Annuity Units at
issue and at all times thereafter.
DETERMINATION OF ANNUITY PAYMENTS - On the Annuity Calculation Date, a fixed
number of Annuity Units will be purchased, determined as follows:
The first annuity payment is equal to the Contract Value, divided first by
$1,000 and then multiplied by the appropriate annuity payment amount for each
$1,000 of value for the Annuity Option selected. In each sub-account the fixed
number of Annuity Units is determined by dividing the amount of the initial
annuity payment determined for each sub-account by the Annuity Unit value on the
Annuity Calculation Date. Thereafter, the number of Annuity Units in each
sub-account remains unchanged unless you elect to transfer between sub-accounts.
All calculations shall appropriately reflect the annuity payment frequency
selected.
On each subsequent annuity payment date, the total annuity payment is the sum of
the annuity payments determined for each sub-account. The annuity payment in
each sub-account is determined by multiplying the number of Annuity Units then
allocated to such sub-account by the Annuity Unit value for that sub-account.
For each sub-account, the value of an Annuity Unit was initially established at
$1.00. On each subsequent Valuation Date the value of an Annuity Unit is
determined in the following way:
FIRST: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
a. is the net increase or decrease in the Net Asset Value per share of
the Fund (or other Eligible Investment) plus the per share amount of
any dividend or capital gain distribution paid by the Fund (or
Eligible Investment) during the Valuation Period, plus or minus a per
share charge or credit for any Taxes incurred by or reserved for in
the sub-account as of the end of the current Valuation Period which
the Company determines to have resulted from maintenance of the
sub-account; and
b. is the Net Asset Value per share of the Fund (or other Eligible
Investment) at the beginning of the Valuation Period, plus or minus a
per share charge or credit for any Taxes incurred by or reserved for
in the sub-account as of the end of the immediately preceding
Valuation Period which the Company determines to have resulted from
maintenance of the sub-account; and
c. is the net result of 1.000 less the Valuation Period deduction for the
charges to the sub-account.
The Net Investment Factor may be more or less than one.
SECOND: The value of an Annuity Unit for a Valuation Date is equal to:
a. the value of the Annuity Unit on the immediately preceding Valuation
Date;
b. multiplied by the Net Investment Factor for the Valuation Period ending
on the current Valuation Date;
c. divided by the Assumed Net Investment Factor (see below) for the
Valuation Period.
The Assumed Net Investment Factor is equal to one plus the Assumed
Investment Return which is used in determining the basis for the purchase
of an Annuity, adjusted to reflect the particular Valuation Period. For
example, with a 5% Assumed Investment Return, the Assumed Net Investment
Factor for a one-year Valuation Period would be 1.05. For a one-day
Valuation Period, the Assumed Net Investment Factor would be 1.000133.
The value of an Annuity Unit as of any date other than a given Valuation Date is
equal to its value on the next succeeding Valuation Date.
BASIS FOR PURCHASE OF ANNUITY - The annuity benefits, provided for under this
Contract are based upon:
a. MORTALITY. The mortality table as set forth on the Contract Schedule.
b. INTEREST. Assumed Investment Return as set forth on the Contract
Schedule.
c. TAXES. Any applicable taxes.
PROCEEDS PAYABLE AT DEATH
If you die before the Income Date and there is no Joint Annuitant, the Contract
will be treated as if we had never issued it and we will return the Single
Purchase Payment to your estate.
If you have chosen either Option 3 or Option 4 and either you or the Joint
Annuitant dies before the Income Date, the Annuity Option will be changed to
Option 2 with 120 monthly payments guaranteed. If the life expectancy of the
survivor is less than 120 months, the period of guaranteed payments will be 60
months.
If you or any Joint Annuitant die on or after the Income Date, the death
benefit, if any, will be payable under the selected Annuity Option. We will
require proof of death.
DELAY OF PAYMENTS
We will make any payments under this Contract within seven days of a request
received in good order. We reserve the right to suspend or postpone any type of
payment from the Variable Account for any period when:
1. the New York Stock Exchange is closed for 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 it is not reasonably
practicable to dispose of securities held in the Variable Account or
determine their value; or
4. the Securities and Exchange Commission so permits delay for the
protection of security holders.
The applicable rules of the Securities and Exchange Commission will govern as to
whether the conditions in (2) or (3) exist.
INDIVIDUAL IMMEDIATE VARIABLE ANNUITY
NONPARTICIPATING
Allianz Life Insurance Company of North America
1750 Hennepin Avenue South
Minneapolis, Minnesota 55403-2195
(612) 347-6500
L30196 (2-94)
L30196 (2-94)
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/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
---------------------------- ------------------------------
Vice President and Secretary Chairman of the Board,
President & CEO
JOINT OWNERS ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Date of Issue shown on the Contract
Schedule.
Any Joint Owner must be the spouse of the other Owner.
Any Joint Owner must be a Joint Annuitant.
If Joint Owners are named, all references to Contract Owner shall mean the Joint
Owners.
All other terms and conditions of the Contract remain unchanged.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
------------------------------ -------------------------
Vice President and Secretary Chairman of the Board,
President & CEO
S20123 (7-94)
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached and is
effective as of the date of the Contract.
The following provisions apply to a Contract which is issued on a qualified
basis under Internal Revenue Code ("IRC") section 408. In the case of a conflict
with any provision in the Contract, the provisions of this Endorsement will
control. The Contract is amended as follows:
1. This Contract Owner is the Annuitant.
2. This Contract is not transferable.
3. This Contract and the benefits under it, cannot be sold, assigned or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose to any person other than to the issuer
of the Contract.
4. The Contract Owner's entire interest in this Contract is nonforfeitable.
5. This Contract is established for the exclusive benefit of the Contract
Owner and the Contract Owner's beneficiary(ies).
6. No Purchase Payments will be accepted other than a rollover
contribution, as permitted by section 402(c), 403(a)(4), 403(b)(8), or
408(d)(3) of the Code, or a nontaxable transfer from another individual
retirement account or individual retirement annuity.
7. Distribution under the Contract must commence to be distributed, no
later than the first day of April following the calendar year in which the
Contract Owner attains age 70( (required beginning date), over
(a) the life of the Contract Owner, or the lives of the Contract Owner
and the Joint Annuitant, or
(b) a period certain not extending beyond the life expectancy of
the Contract Owner, or the joint and last survivor expectancy
of the Contract Owner and the Joint Annuitant. Payments must
be made in periodic payments at intervals of no longer than one
year.
All distributions made hereunder shall be made in accordance with the
requirements of section 401(a)(9) of the IRC, including the incidental death
benefit requirements of the section 401(a)(9)(G) of the IRC, and the regulations
thereunder, including the minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Income Tax Regulations. Life expectancy for
distributions under an Annuity Option may not be recalculated.
8. Upon the death of the Contract Owner:
(a) if the Contract Owner dies after distributions of benefits has
commenced, the remaining portion of such interest will continue
to be distributed at least as rapidly as under the method of
distribution being used prior to the Contract Owner's death;
(b) if the Contract Owner dies before distribution of benefits
commences, the entire amount payable to the Beneficiary will
be distributed no later than December 31 of the calendar year
which contains the fifth anniversary of the date of the Contract
Owner's death except to the extent that an election is made
to receive distributions under an Annuity Option in the Contract
in accordance with 1) or 2) below:
1) if any portion of the Contract proceeds is payable to a
Beneficiary, distributions may be made in installments
over the life or over a period not extending beyond the
life expectancy of the Beneficiary commencing no later
than December 31 of the calendar year immediately
following the calendar year in which the Contract Owner
died;
2) if the designated Beneficiary is the Contract Owner's
surviving spouse, and benefits are to be distributed in
accordance with (1) above, distributions must begin on
or before the later of (a) December 31 of the calendar
year immediately following the calendar year in which
the Contract Owner died; or (b) December 31 of the
calendar year in which the Contract Owner would have
attained age 70.
3) if the designated Beneficiary is the Contract Owner's
surviving spouse, the spouse may treat the Contract as
his or her own IRA. This election will be deemed to
have been made if such surviving spouse makes a regular
IRA contribution to the Contract, makes a rollover to
or from such Contract, or fails to elect any of the
above provisions.
For purposes of Subsection (b) above, if a Joint Annuitant is named, such Joint
Annuitant will be treated as the primary Beneficiary and any other Beneficiary
shall be treated as a Contingent Beneficiary.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Income Tax Regulations. Life expectancy for
distributions under an Annuity Option may not be re- calculated.
Distributions under this section are considered to have begun if distributions
are made on account of the Contract Owner reaching his or her required beginning
date or if prior to the required beginning date distributions irrevocably
commence to the Contract Owner over a period permitted and in an annuity form
acceptable under section 1.401(a)(9) of the Income Tax Regulations.
9. Except to the extent Treasury regulations allow the Company to offer
different Annuity Options that are agreed to by the Company, only Annuity
Options 1, 2, 3, 4, 5 and 6 will be available to the Contract Owner.
If a Joint Owner is named who is not the Contract Owner's spouse and the
Contract Owner is more than 10 years older than the Joint Annuitant, the
Contract Owner may not select Annuity Option 3 with
annuity payments during the Joint Annuitant's lifetime at a level of 100 percent
of the original level, and may not select Annuity Option 4. If a Joint Annuitant
is named who is not the Contract Owner's spouse and the Contract Owner is more
than 19 years older than the Joint Annuitant, the Contract Owner may not select
Annuity Option 3 with annuity payments during the Joint Annuitant's lifetime at
a level of 75 percent of the original level.
If a guaranteed period of payments is chosen under an Annuity Option, the length
of the period must not exceed the shorter of (1) the Contract Owner's life
expectancy, or if a Joint Annuitant is named, the joint and last survivor
expectancy of the Contract Owner and the Joint Annuitant, and (2) the applicable
maximum period under section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Payments must be made in periodic payments at intervals of no longer than one
year. In addition, payments either must be nonincreasing or may increase only as
provided in Q&A F-3 of section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
10. The Company shall furnish annual calendar year reports concerning the
status of the annuity.
11. The Company will amend this endorsement when such amendment is
necessary to assure continued qualification of this Contract as an
individual retirement annuity under Section 403(b) of the Code (and any
successor provision) as in effect from time to time. Any changes to this
endorsement that reduce or eliminate coverage under your policy will be
subject to your acceptance or rejection.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
---------------------------- -------------------------
Vice President and Secretary Chairman of the Board,
President & CEO
S30040 (06-96)
FIXED ACCOUNT RIDER
This Rider is part of the Contract to which it is attached and is effective
upon issuance. The terms of this Rider apply to the Contract when the purchase
payment or transfers are allocated to the Fixed Account. Such allocations will
be credited with interest by the Company as set forth herein. This Rider applies
to the Contract as follows:
A. The Right to Cancel provision of this Contract also applies to this
Rider if any portion of the purchase payment under the contract
is allocated to the Fixed Account.
B. Modifications to DEFINITIONS section:
1. Replace the existing definition of Assumed Investment Return with the
following:
ASSUMED INVESTMENT RETURN: The investment return upon which variable
annuity payments in the Contract are based.
2. The following definition is added:
FIXED ACCOUNT - The Company's general investment account that contains
all the assets of the Company except for the Variable Account and
other segregated asset accounts.
C. The ALLOCATION OF NET PURCHASE PAYMENT section is deleted and
replaced by the following:
The Net Purchase Payment is allocated to one or more of the
sub-accounts of the Variable Account on the Effective Date. Any
allocations requested to the Fixed Account will be placed in the Money
Market sub-account on the Effective Date, and then will be allocated
to the Fixed Accou on the Annuity Calculation Date. The allocation to
each sub-account and/or to the Fixed Account is made in percentages of
the Net Purchase Payment. Whole percentages must be used and each must
be at least 10%. We have the right to allocate the entire Net Purchase
Payment to the Money Market sub-account until the expiration of the
free-look period. We reserve the right to limit the number of
allocations that you can have at any time.
D. The TRANSFERS section is deleted and replaced by the following:
You may transfer all or part of your interest in a sub-account to
another sub-account or to the Fixed Account. No transfer may take
place from (out of) the Fixed Account. All transfers are subject to
the following:
1. No partial transfer will be made if it would result in any selected
sub-account or the Fixed Account providing less than 10% of
the benefits under the Contract.
2. Transfers will take effect during the next Valuation Period
following receipt by us of a written transfer request (or
by telephone, if authorized) containing all required information.
No transfers may occur until the end of the free-look period. 3. At
least one allocation to the Fixed Account will be allowed.
Additional allocations may be allowed by the Company's
administrative rules then in effect. Both the initial allocation to
the Fixed Account, and each transfer to the Fixed Account from
the Variable Account, will be treated as an allocation.
4. Any transfer direction must clearly specify:
a. the new allocation percentage(s); and
b. the sub-accounts and/or Fixed Account which are to be
reallocated.
5. We reserve the right to limit the number of transfers to not fewer
than six transfers per calendar year. We also reserve the right at
any time and without prior notice to any party to modify the
transfer provisions described above.
E. The following is added to the end of the MORTALITY AND EXPENSE RISK
CHARGE section:
This charge will not be assessed against allocations in the Fixed
Account.
F. The following is added to the end of the ADMINISTRATIVE EXPENSE CHARGE
section:
This charge will not be assessed against allocations in the Fixed
Account.
G. The ANNUITY OPTIONS section is deleted and replaced by the following:
This Contract provides an annuity under one of the Annuity Options
described in the Contract. The Annuity Option selected is shown on the
Contract Schedule. Once selected the option is irrevocable. The amount
of each payment depends upon the Annuity Option chosen and the
Annuitan (and any Joint Annuitant's) Age on the Annuity Calculation
Date. Annuity payments from the Variable Account will vary with the
investment experience of the sub-account(s) of the Variable Account
and may be either higher or lower than the first payment. Annuity
payments from the Fixed Account will be equal payments unless
otherwise specified by the Annuity Option selected. Each annuity
payment will be the sum of (1) the annuity payment from allocations to
the Variable Account (variable payment), and (2) the annuity payment
from allocations to the Fixed Account (fixed payment). All
calculations shall appropriately reflect the annuity payment frequency
selected.
H. OPTION 2, OPTION 4, and OPTION 5 under the ANNUITY PROVISIONS
section are deleted and replaced by the following:
OPTION 2 - LIFE ANNUITY WITH 60, 120, 180, or 240 MONTHLY PAYMENTS
GUARANTEED -
Monthly annuity payments are paid during the life of the Annuitant.
Upon the Annuitant's death, if annuity payments have been made for
less than a 60, 120, 180, or 240 month period as elected then annuity
payments will be continued thereafter to the Beneficiary for the
remainder of the guaranteed period.
The Beneficiary may elect to have the present value of the guaranteed
annuity payments remaining commuted and paid in a lump sum, less the
applicable commutation factor as shown on the Contract Schedule.
Variable payments will be commuted at the Assumed Investment Return.
Fixed payments will be commuted using an indexed rate. This indexed
rate will be equal to the Statutory Calendar Year Interest Rate based
on the NAIC Standard Valuation Law for Single Premium Immediate
Annuities corresponding to the Effective Date of this contract. The
Company will require the return of the Contract and proof of death
prior to the payment of any commuted values.
OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH 60, 120, 180, OR 240
MONTHLY PAYMENTS GUARANTEED -
Monthly annuity payments are paid during the joint lifetime of the
Annuitant and the Joint Annuitant. Monthly payments are paid
thereafter during the remaining lifetime of the Joint Annuitant at
100% of the original level. If at the last death of the Annuitant and
the Joint Annuitant, annuity payments have been made for less than a
60, 120, 180 or 240 month period as elected then annuity payments will
be continued thereafter to the Beneficiary for the remainder of the
guaranteed period. The Beneficiary may elect to have the present value
of the guaranteed annuity payments remaining commuted and paid in a
lump sum, less the applicable commutation factor as shown on the
Contract Schedule. Variable payments will be commuted at the Assumed
Investment Return. Fixed payments will be commuted using an indexed
rate. This indexed rate will be equal to the Statutory Calendar Year
Interest Rate based on the NAIC Standard Valuation Law for Single
Premium Immediate Annuities corresponding to the Effective Date of
this contract. The Company will require the return of the Contract and
proof of death prior to the payment of any commuted values.
OPTION 5 - REFUND LIFE ANNUITY - Monthly annuity payments are paid
during the life of the Annuitant ceasing with the last annuity payment
due prior to the Annuitant's death. Upon the Annuitant's death, the
Beneficiary is guaranteed to receive a single cash payment (refund)
equal to the sum of (a) and (b), where;
(a) is the dollar value, if positive, of the number of Annuity Units
equal to:
(1) the total Annuity Units purchased in the Variable Account at
issue, minus
(2) the total number of Annuity Units cashed out in the Variable
Account due to transfers or annuity payments, plus
(3) the total number of Annuity Units purchased within the
Variable Account due to transfers.
(b) is the dollar value, if positive, equal to:
(1) the portion of the Net Purchase Payment allocated to the Fixed
Account, plus
(2) the sum of the values, if any, of refund amounts (as described
in (a) above) transferred from the Variable Account to the
Fixed Account, minus
(3) the sum of the annuity payments made from the Fixed Account.
I. The DETERMINATION OF ANNUITY PAYMENTS section is deleted and replaced
by the following:
DETERMINATION OF VARIABLE ANNUITY PAYMENTS - The amount of the initial
variable annuity payment is determined on the Annuity Calculation Date
when a fixed number of Annuity Units are purchased. This payment is
determined as follows:
The first variable annuity payment is equal to the Contract Value in
the Variable Account, divided first by $1,000 and then multiplied by
the appropriate annuity payment rate for the Annuity Option selected.
In each sub-account, the fixed number of Annuity Units is calculated
by dividing the amount of the initial annuity payment determined for
each sub-account by the Annuity Unit value on the Annuity Calculation
Date. Thereafter, the number of Annuity Units in each sub-account
remains unchanged unless you elect to reallocate using transfers.
On each subsequent annuity payment date, the variable annuity payment
is the sum of the annuity payments determined for each sub-account.
The annuity payment in each sub-account is determined by multiplying
the number of Annuity Units then allocated to such sub-account by the
Annui Unit value for that sub-account.
For each sub-account, the value of an Annuity Unit was initially
established at $1.00. On each subsequent Valuation Date the value of
an Annuity Unit is equal to:
a. the value of the Annuity Unit on the immediately preceding
Valuation Date; multiplied by
b. the Net Investment Factor (see below) for the Valuation Period
ending on the current Valuation Date; divided by
c. the Assumed Net Investment Factor (see below) for the Valuation
Period.
The Net Investment Factor is determined by dividing (a) by (b) and
adding (c) to the result, where:
a. is equal to:
(1) the net increase or decrease in the Net Asset Value per share
of the Fund (or other Eligible Investment); plus
(2) the per share amount of any dividend or capital gain
distribution paid by the Fund during the Valuation Period; plus
or minus
(3) the per share charge or credit for any Taxes incurred by or
reserved for in the sub-account as of the end of the current
Valuation Period. and
b. is equal to:
(1) the Net Asset Value per share of the Fund (or other Eligible
Investment) at the beginning of the Valuation Period; plus or
minus
(2) the per share charge or credit for any Taxes incurred by or
reserved for in the sub-account as of the end of the
immediately preceding Valuation Period and
c. is the net result of 1.000 less the Valuation Period deduction for
the charges to the sub-account.
The Net Investment Factor may be more or less than one.
The Assumed Net Investment Factor is equal to one plus the Assumed
Investment Return adjusted to reflect the particular Valuation Period.
For example, with a 5% Assumed Investment Return, the Assumed Net
Investment Factor for a one-year Valuation Period would be 1.05. For a
one-day Valuation Period, the Assumed Net Investment Factor would be
1.00013368062.
The value of an Annuity Unit as of any date other than a given
Valuation Date is equal to its value on the next succeeding Valuation
Date.
DETERMINATION OF FIXED ANNUITY PAYMENTS - On the Annuity Calculation
Date, a stream of annuity payments is purchased. The amount of the
fixed annuity payment will be the value in the Contract allocated to
the Fixed Account, divided by $1,000, then multiplied by the
appropriate annuity payment factor for the Annuity Option selected.
The dollar amount of this fixed annuity payment will not change unless
specified otherwise by the Annuity Option chosen.
J. The BASIS FOR PURCHASE OF ANNUITY section is deleted and replaced by
the following:
The variable annuity benefits provided for under this Contract are
based upon:
a. MORTALITY: The mortality table as set forth on the Contract
Schedule.
b. INTEREST: Assumed Investment Return as set forth on the Contract
Schedule.
c. TAXES: Any applicable taxes.
K. The fixed annuity benefits provided for under this contract will be no
less favorable than rates based upon:
a. MORTALITY: The mortality table as set forth on the Contract
Schedule.
b. INTEREST: An annual rate of 2 1/2 percent.
c. TAXES: Any applicable taxes.
L. The following provision is added to the end of the DELAY OF PAYMENTS
section:
We reserve the right to postpone distributions from the Fixed Account
for a period of up to six months.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
---------------------------- -------------------------
Vice President and Secretary Chairman of the Board,
President & CEO
S30046 (4-95)
PERIOD CERTAIN AND
PARTIAL LIQUIDATION ENDORSEMENT
This Endorsement modifies and forms a part of the Contract to which it is
attached. The Effective Date is the Effective Date shown on the Contract
Schedule of the Contract to which this Endorsement is attached. In the case of a
conflict with any provision in the contract, the provisions of this Endorsement
will control. The following hereby amends and supersedes the sections of the
Contract as set forth below:
The ANNUITY OPTIONS section is deleted and replaced with the following:
ANNUITY OPTIONS - This Contract provides an Annuity under any of the Annuity
Options described below, provided the Annuitant or any Joint Annuitant is alive
on the Income Date. The Annuity Option selected is shown on the Contract
Schedule. Once selected the option is irrevocable. The amount of each payment
depends upon the Annuity Option chosen and, for Annuity Options 1-5, the
Annuitant's and any Joint Annuitant's Age on the Annuity Calculation Date.
Additionally, annuity payments under all Options will vary with the investment
experience of the sub-accounts of the Variable Account and may be either higher
or lower than the first payment.
The following Annuity Option is to be added to the "Annuity Provisions" section
on page 6 of the contract immediately preceding DETERMINATION OF ANNUITY
PAYMENTS:
OPTION 6 - SPECIFIED PERIOD CERTAIN ANNUITY - Monthly annuity payments
are paid for a specified period of time. The Specified Period Certain
is elected by the Contract Owner and must be specified as a whole
number of years from 5 to 30. If at the time of the last death of the
Annuitant and any Joint Annuitant, the annuity payments actually made
have been for less than the Specified Period Certain, then annuity
payments will be continued thereafter to the Beneficiary for the
remainder of the Specified Period Certain. A withdrawal may be made at
least once per contract year up to the Total Withdrawal Value in the
Contract. The Total Withdrawal Value is equal to the present value of
the remaining annuity payments, to the end of the Specified Period
Certain, commuted at the Assumed Investment Return less a commutation
fee. The commutation fee is a percentage of the amount withdrawn as
shown on the Contract Schedule. We reserve the right to restrict the
amount of a partial withdrawal to a minimum of $2,500 and a maximum
amount that would result in the remaining Total Withdrawal Value of
the contract as shown on the Contract Schedule after the partial
withdrawal is processed. Partial withdrawals will be processed on the
next Annuity Calculation Date following your written request. The
company will require the return of the contract prior to the payment
of the entire commuted value.
Additionally, the following contract Provision is to be added following the
"Annuity Provisions" section, directly preceding the PROCEEDS PAYABLE AT DEATH
section of the Contract.
PARTIAL LIQUIDATION PROVISION
This provision will apply under Annuity Options 2 and 4. During the lifetime of
the Annuitant(s) and while the number of annuity payments made is less than the
guaranteed number of payments elected, the Contract Owner may request a
withdrawal representing a partial liquidation of the Total Withdrawal Value. The
Total Withdrawal Value is equal to the present value of the remaining guaranteed
annuity payments, to the end of the period certain, commuted at the Assumed
Investment Return less a commutation fee. The commutation fee is a charge
collected by the company equal to a percentage of the Total Withdrawal Value
liquidated as shown on the Contract Schedule. Partial Liquidations will be
processed on the next Annuity Calculation Date following your written request.
After a partial liquidation the subsequent monthly annuity payments during the
guaranteed period certain will be reduced by the percentage of the Total
Withdrawal Value liquidated, including the commutation fee. After the guaranteed
number of payments has been paid the number of annuity units used in calculating
the monthly payments will be restored to their original values as if no
liquidations had taken place.
PARTIAL LIQUIDATION PROVISION GUARANTEES - The Company guarantees to make this
provision available to the Contract Owner at least once per contract year
starting no later than the first Contract Anniversary. The total amount allowed
to be liquidated as a cumulative percentage of the Total Withdrawal Value is
guaranteed to be no less than 25%. The minimum allowable partial liquidation
will be the lesser of $2,500 or the remaining portion of the Total Withdrawal
Value available to be liquidated.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
/S/ ALAN A. GROVE /S/ LOWELL C. ANDERSON
---------------------------- ------------------------------
Vice President and Secretary Chairman of the Board,
President & CEO
S20144
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 18, 1997
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Re: Opinion and Consent of Counsel
Allianz Life Variable Account B
Dear Sir or Madam:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of a Registration Statement on Form N-4 for the Individual Immediate
Variable Annuity Contracts to be issued by Allianz Life Insurance Company of
North America and its separate account, Allianz Life Variable Account B.
We are of the following opinions:
1. Allianz Life Variable Account B is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by a Contract Owner pursuant
to a Contract issued in accordance with the Prospectus contained in
the Registration Statement and upon compliance with applicable law, such
a Contract Owner will have a legally-issued, fully-paid, non-assessable
contractual interest under such Contract.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD, & HASENAUER, P.C.
By: /s/ LYNN KORMAN STONE
- ----------------------------------
Lynn Korman Stone
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America and
Contract Owners of Allianz Life Variable Account B:
We consent to the use of our report, dated January 24, 1997, on the financial
statements of Allianz Life Variable Account B and our report dated February 4,
1997, on the consolidated financial statements of Allianz Life Insurance Company
of North America and subsidiaries included herein and to the reference to our
Firm under the heading "EXPERTS".
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 24, 1997
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON VALUEMARK INCOME PLUS
ALLIANZ LIFE VARIABLE ACCOUNT B
CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
ORIGINAL PURCHASE AS OF DECEMBER 31, 1995
VALUATION DATE AS OF DECEMBER 31, 1996
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME
12-31-95 Purchase $1,000.00 $17.30965999 57.771 57.771 $1,000.00
12-31-96 Current Value 19.48959860 0.000 57.771 1,125.94
Cumulative and Average Annual Total Returns 12.59% A
INCOME SECURITIES
12-31-95 Purchase $1,000.00 $19.78534185 50.542 50.542 $1,000.00
12-31-96 Current Value 21.70827863 0.000 50.542 1,097.19
Cumulative and Average Annual Total Returns 9.72% A
MONEY MARKET
12-31-95 Purchase $1,000.00 $12.88349436 77.619 77.619 $1,000.00
12-31-96 Current Value 13.35923111 0.000 77.619 1,036.93
Cumulative and Average Annual Total Returns 3.69% A
REAL ESTATE SECURITIES
12-31-95 Purchase $1,000.00 $18.07282328 55.332 55.332 $1,000.00
12-31-96 Current Value 23.66770609 0.000 55.332 1,309.57
Cumulative and Average Annual Total Returns 30.96% A
RISING DIVIDENDS
12-31-95 Purchase $1,000.00 $12.49836348 80.010 80.010 $1,000.00
12-31-96 Current Value 15.30299222 0.000 80.010 1,224.40
Cumulative and Average Annual Total Returns 22.44% A
SMALL CAP
12-31-95 Purchase $1,000.00 $10.14638787 98.557 98.557 $1,000.00
12-31-96 Current Value 11.48724479 0.000 98.557 1,272.64
Cumulative and Average Annual Total Returns 27.26% A
TEMPLETON DEVELOPING MARKETS EQUITY
12-31-95 Purchase $1,000.00 $9.58170209 104.366 104.366 $1,000.00
12-31-96 Current Value 11.48724479 0.000 104.366 1,198.87
Cumulative and Average Annual Total Returns 19.89% A
TEMPLETON GLOBAL ASSET ALLOCATION
12-31-95 Purchase $1,000.00 $10.59122588 94.418 94.418 $1,000.00
12-31-96 Current Value 12.51416879 0.000 94.418 1,181.56
Cumulative and Average Annual Total Returns 18.16% A
TEMPLETON GLOBAL GROWTH
12-31-95 Purchase $1,000.00 $11.33894840 88.192 88.192 $1,000.00
12-31-96 Current Value 13.55953972 0.000 88.192 1,195.84
Cumulative and Average Annual Total Returns 19.58% A
TEMPLETON INTERNATIONAL EQUITY
12-31-95 Purchase $1,000.00 $13.26267921 75.400 75.400 $1,000.00
12-31-96 Current Value 16.08142393 0.000 75.400 1,212.53
Cumulative and Average Annual Total Returns 21.25% A
TEMPLETON PACIFIC GROWTH
12-31-95 Purchase $1,000.00 $13.63037545 73.366 73.366 $1,000.00
12-31-96 Current Value 14.93159316 0.000 73.366 1,095.46
Cumulative and Average Annual Total Returns 9.55% A
UTILITY EQUITY
12-31-95 Purchase $1,000.00 $19.56451758 51.113 51.113 $1,000.00
12-31-96 Current Value 20.65439774 0.000 51.113 1,055.71
Cumulative and Average Annual Total Returns 5.57% A
<FN>
A = (Accumulated Value as of December 31, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF DECEMBER 31, 1993
VALUATION DATE AS OF DECEMBER 31, 1996
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME
12-31-93 Purchase $1,000.00 $13.67694811 73.116 73.116 $1,000.00
12-31-94 Current Value 13.21462941 0.000 73.116 966.20
12-31-95 Current Value 17.30965999 0.000 73.116 1,265.61
12-31-96 Current Value 19.48959860 0.000 73.116 1,425.00
Cumulative Total Return 42.50% A
Average Annual Total Return 12.53% B
INCOME SECURITIES
12-31-93 Purchase $1,000.00 $17.73437317 56.388 56.388 $1,000.00
12-31-94 Current Value 16.39171653 0.000 56.388 924.29
12-31-95 Current Value 19.78534185 0.000 56.388 1,115.65
12-31-96 Current Value 21.70827863 0.000 56.388 1,224.08
Cumulative Total Return 22.41% A
Average Annual Total Return 6.97% B
MONEY MARKET
12-31-93 Purchase $1,000.00 $12.06579747 82.879 82.879 $1,000.00
12-31-94 Current Value 12.35398427 0.000 82.879 1,023.88
12-31-95 Current Value 12.88349436 0.000 82.879 1,067.77
12-31-96 Current Value 13.35923111 0.000 82.879 1,107.20
Cumulative Total Return 10.72% A
Average Annual Total Return 3.45% B
REAL ESTATE SECURITIES
12-31-93 Purchase $1,000.00 $15.36898235 65.066 65.066 $1,000.00
12-31-94 Current Value 15.59407180 0.000 65.066 1,014.65
12-31-95 Current Value 18.07282328 0.000 65.066 1,175.93
12-31-96 Current Value 23.66770609 0.000 65.066 1,539.97
Cumulative Total Return 54.00% A
Average Annual Total Return 15.48% B
RISING DIVIDENDS
12-31-93 Purchase $1,000.00 $10.32720317 96.832 96.832 $1,000.00
12-31-94 Current Value 9.76873744 0.000 96.832 945.92
12-31-95 Current Value 12.49836348 0.000 96.832 1,210.24
12-31-96 Current Value 15.30299222 0.000 96.832 1,481.81
Cumulative Total Return 48.18% A
Average Annual Total Return 14.01% B
TEMPLETON INTERNATIONAL EQUITY
12-31-93 Purchase $1,000.00 $12.22565227 81.795 81.795 $1,000.00
12-31-94 Current Value 12.16131942 0.000 81.795 994.74
12-31-95 Current Value 13.26267921 0.000 81.795 1,084.82
12-31-96 Current Value 16.08142393 0.000 81.795 1,315.38
Cumulative Total Return 31.54% A
Average Annual Total Return 9.57% B
TEMPLETON PACIFIC GROWTH
12-31-93 Purchase $1,000.00 $14.23330574 70.258 70.258 $1,000.00
12-31-94 Current Value 12.80173310 0.000 70.258 899.42
12-31-95 Current Value 13.63037545 0.000 70.258 957.64
12-31-96 Current Value 14.93159316 0.000 70.258 1,049.06
Cumulative Total Return 4.91% A
Average Annual Total Return 1.61% B
UTILITY EQUITY
12-31-93 Purchase $1,000.00 $17.31879581 57.741 57.741 $1,000.00
12-31-94 Current Value 15.10395032 0.000 57.741 872.11
12-31-95 Current Value 19.56451758 0.000 57.741 1,129.67
12-31-96 Current Value 20.65439774 0.000 57.741 1,192.60
Cumulative Total Return 19.26% A
Average Annual Total Return 6.05% B
<FN>
A = (Accumulated Value as of December 31, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+1)^(1/3 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF DECEMBER 31, 1991
VALUATION DATE AS OF DECEMBER 31, 1996
Dollar Units This Accum Accum
Date Transaction Amount Unit Value Trans Units Value
---- ----------- ------ ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME
12-31-91 Purchase $1,000.00 $11.94928651 83.687 83.687 $1,000.00
12-31-92 Current Value 12.57361730 0.000 83.687 1,052.25
12-31-93 Current Value 13.67694811 0.000 83.687 1,144.58
12-31-94 Current Value 13.21462941 0.000 83.687 1,105.89
12-31-95 Current Value 17.30965999 0.000 83.687 1,448.59
12-31-96 Current Value 19.48959860 0.000 83.687 1,631.03
Cumulative Total Return 63.10% A
Average Annual Total Return 10.28% B
INCOME SECURITIES
12-31-91 Purchase $1,000.00 $13.58029545 73.636 73.636 $1,000.00
12-31-92 Current Value 15.16252410 0.000 73.636 1,116.51
12-31-93 Current Value 17.73437317 0.000 73.636 1,305.89
12-31-94 Current Value 16.39171653 0.000 73.636 1,207.02
12-31-95 Current Value 19.78534185 0.000 73.636 1,456.92
12-31-96 Current Value 21.70827863 0.000 73.636 1,598.51
Cumulative Total Return 59.85% A
Average Annual Total Return 9.84% B
MONEY MARKET
12-31-91 Purchase $1,000.00 $11.74177967 85.166 85.166 $1,000.00
12-31-92 Current Value 11.93209752 0.000 85.166 1,016.21
12-31-93 Current Value 12.06579747 0.000 85.166 1,027.60
12-31-94 Current Value 12.35398427 0.000 85.166 1,052.14
12-31-95 Current Value 12.88349436 0.000 85.166 1,097.24
12-31-96 Current Value 13.35923111 0.000 85.166 1,137.75
Cumulative Total Return 13.78% A
Average Annual Total Return 2.61% B
REAL ESTATE SECURITIES
12-31-91 Purchase $1,000.00 $11.84810701 84.402 84.402 $1,000.00
12-31-92 Current Value 13.09547341 0.000 84.402 1,105.28
12-31-93 Current Value 15.36898235 0.000 84.402 1,297.17
12-31-94 Current Value 15.59407180 0.000 84.402 1,316.17
12-31-95 Current Value 18.07282328 0.000 84.402 1,525.38
12-31-96 Current Value 23.66770609 0.000 84.402 1,997.59
Cumulative Total Return 99.76% A
Average Annual Total Return 14.84% B
UTILITY EQUITY
12-31-91 Purchase $1,000.00 $14.82143005 67.470 67.470 $1,000.00
12-31-92 Current Value 15.88865152 0.000 67.470 1,072.01
12-31-93 Current Value 17.31879581 0.000 67.470 1,168.50
12-31-94 Current Value 15.10395032 0.000 67.470 1,019.06
12-31-95 Current Value 19.56451758 0.000 67.470 1,320.02
12-31-96 Current Value 20.65439774 0.000 67.470 1,393.55
Cumulative Total Return 39.35% A
Average Annual Total Return 6.86% B
<FN>
A = (Accumulated Value as of December 31, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+1)^(1/5 Years)]-1
</FN>
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL PURCHASE AS OF SUB-ACCOUNT INCEPTION
VALUATION DATE AS OF DECEMBER 31, 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
12-31-96 Current Value 11.25417490 0.000 100.000 1,125.42
Cumulative Total Return 12.54% A
Average Annual Total Return NA B
GROWTH AND INCOME
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 9.60621064 0.000 100.000 960.62
1-24-91 Current Value 10.04911751 0.000 100.000 1,004.91
1-24-92 Current Value 12.19460473 0.000 100.000 1,219.46
1-24-93 Current Value 12.62194644 0.000 100.000 1,262.19
1-24-94 Current Value 14.16249217 0.000 100.000 1,416.25
1-24-95 Current Value 13.34952632 0.000 100.000 1,334.95
1-24-96 Current Value 17.36302808 0.000 100.000 1,736.30
12-31-96 Current Value 19.48959860 0.000 100.000 1,948.96
Cumulative Total Return 94.90% A
Average Annual Total Return 8.77% B
INCOME SECURITIES
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.71309911 0.000 100.000 1,071.31
1-24-91 Current Value 9.95244729 0.000 100.000 995.24
1-24-92 Current Value 14.03346495 0.000 100.000 1,403.35
1-24-93 Current Value 15.36060973 0.000 100.000 1,536.06
1-24-94 Current Value 17.72926867 0.000 100.000 1,772.93
1-24-95 Current Value 16.36456157 0.000 100.000 1,636.46
1-24-96 Current Value 20.20965612 0.000 100.000 2,020.97
12-31-96 Current Value 21.70827863 0.000 100.000 2,170.83
Cumulative Total Return 117.08% A
Average Annual Total Return 10.25% B
MONEY MARKET
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.67978818 0.000 100.000 1,067.98
1-24-91 Current Value 11.32877884 0.000 100.000 1,132.88
1-24-92 Current Value 11.75876120 0.000 100.000 1,175.88
1-24-93 Current Value 11.94119334 0.000 100.000 1,194.12
1-24-94 Current Value 12.07592840 0.000 100.000 1,207.59
1-24-95 Current Value 12.38828249 0.000 100.000 1,238.83
1-24-96 Current Value 12.92030455 0.000 100.000 1,292.03
12-31-96 Current Value 13.35923111 0.000 100.000 1,335.92
Cumulative Total Return 33.59% A
Average Annual Total Return 3.72% B
MUTUAL DISCOVERY SECURITIES
11-8-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-96 Current Value 10.18045638 0.000 100.000 1,018.05
Cumulative Total Return 1.80% A
Average Annual Total Return NA B
MUTUAL SHARES SECURITIES
11-8-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-96 Current Value 10.33016898 0.000 100.000 1,033.02
Cumulative Total Return 3.30% A
Average Annual Total Return NA B
REAL ESTATE SECURITIES
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 10.13988901 0.000 100.000 1,013.99
1-24-91 Current Value 9.37706788 0.000 100.000 937.71
1-24-92 Current Value 12.28427530 0.000 100.000 1,228.43
1-24-93 Current Value 13.54478625 0.000 100.000 1,354.48
1-24-94 Current Value 15.37525910 0.000 100.000 1,537.53
1-24-95 Current Value 15.00928122 0.000 100.000 1,500.93
1-24-96 Current Value 18.15857148 0.000 100.000 1,815.86
12-31-96 Current Value 23.66770609 0.000 100.000 2,366.77
Cumulative Total Return 136.68% A
Average Annual Total Return 11.46% B
RISING DIVIDENDS
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 10.69831588 0.000 100.000 1,069.83
1-27-94 Current Value 10.38483458 0.000 100.000 1,038.48
1-27-95 Current Value 9.97357882 0.000 100.000 997.36
1-27-96 Current Value 12.53425589 0.000 100.000 1,253.43
12-31-96 Current Value 15.30299222 0.000 100.000 1,530.30
Cumulative Total Return 53.03% A
Average Annual Total Return 9.01% B
SMALL CAP
11-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
11-1-96 Current Value 12.15810442 0.000 100.000 1,215.81
12-31-96 Current Value 12.91274591 0.000 100.000 1,291.27
Cumulative Total Return 29.13% A
Average Annual Total Return 24.49% B
TEMPLETON DEVELOPING MARKETS EQUITY
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 8.62834892 0.000 100.000 862.83
3-15-96 Current Value 10.29583833 0.000 100.000 1,029.58
12-31-96 Current Value 11.48724479 0.000 100.000 1,148.72
Cumulative Total Return 14.87% A
Average Annual Total Return 5.08% B
TEMPLETON GLOBAL ASSET ALLOCATION
5-1-95 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
5-1-96 Current Value 11.25238520 0.000 100.000 1,125.24
12-31-96 Current Value 12.51416879 0.000 100.000 1,251.42
Cumulative Total Return 25.14% A
Average Annual Total Return 14.36% B
TEMPLETON GLOBAL GROWTH
3-15-94 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
3-15-95 Current Value 10.10361218 0.000 100.000 1,010.36
3-15-96 Current Value 11.81545835 0.000 100.000 1,181.55
12-31-96 Current Value 13.55953972 0.000 100.000 1,355.95
Cumulative Total Return 35.60% A
Average Annual Total Return 11.49% B
TEMPLETON INTERNATIONAL EQUITY
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.54360836 0.000 100.000 954.36
1-27-94 Current Value 12.87738433 0.000 100.000 1,287.74
1-27-95 Current Value 11.94433728 0.000 100.000 1,194.43
1-27-96 Current Value 13.57666972 0.000 100.000 1,357.67
12-31-96 Current Value 16.08142393 0.000 100.000 1,608.14
Cumulative Total Return 60.81% A
Average Annual Total Return 10.11% B
TEMPLETON INTERNATIONAL SMALLER COMPANIES
5-1-96 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
12-31-96 Current Value 11.14519961 0.000 100.000 1,114.52
Cumulative Total Return 11.45% A
Average Annual Total Return NA B
TEMPLETON PACIFIC GROWTH
1-27-92 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-27-93 Current Value 9.92851087 0.000 100.000 992.85
1-27-94 Current Value 14.10178760 0.000 100.000 1,410.18
1-27-95 Current Value 11.94769270 0.000 100.000 1,194.77
1-27-96 Current Value 14.49670523 0.000 100.000 1,449.67
12-31-96 Current Value 14.93159316 0.000 100.000 1,493.16
Cumulative Total Return 49.32% A
Average Annual Total Return 8.47% B
UTILITY EQUITY
1-24-89 Purchase $1,000.00 $10.00000000 100.000 100.000 $1,000.00
1-24-90 Current Value 11.48396786 0.000 100.000 1,148.40
1-24-91 Current Value 11.97256112 0.000 100.000 1,197.26
1-24-92 Current Value 14.23979461 0.000 100.000 1,423.98
1-24-93 Current Value 15.97559846 0.000 100.000 1,597.56
1-24-94 Current Value 16.50535338 0.000 100.000 1,650.54
1-24-95 Current Value 15.57082971 0.000 100.000 1,557.08
1-24-96 Current Value 19.81799066 0.000 100.000 1,981.80
12-31-96 Current Value 20.65439774 0.000 100.000 2,065.44
Cumulative Total Return 106.54% A
Average Annual Total Return 9.57% B
<FN>
A = (Accumulated Value as of December 31, 1996 - Accum. Value at Purch.)/Accum. Value at Purch.
B = [(A+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.
