File Nos. 333-95729
811-05618
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. 1 (X)
Post-Effective Amendment No. ( )
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 63 (X)
(Check appropriate box or boxes.)
ALLIANZ LIFE VARIABLE ACCOUNT B
-----------------------------------
(Exact Name of Registrant)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
-----------------------------------------------------
(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 347-6596
Name and Address of Agent for Service
-------------------------------------------
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Title of Securities Registered:
Individual Deferred Variable Annuity Contracts
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CROSS REFERENCE SHEET
(Required by Rule 495)
Item No. Location
- -------- --------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . Index of Terms
Item 3. Synopsis or Highlights. . . . . . . . . . . Summary
Item 4. Condensed Financial Information. . . . . . . Not Applicable
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies. . . . . . . . . . . . Other Information-
The Separate Account,
Allianz Life,
Investment Options
Item 6. Deductions. . . . . . . . .. . . . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . .The Variable
Annuity Contract
Item 8. Annuity Period. . .. . . . . . . . . . . . . . Annuity Payments
(The Payout Phase)
Item 9. Death Benefit. . . . . . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value. . . . . . . . . .Purchase
Item 11. Redemptions. . . . . . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information. . . . . . . . . . . Table of Contents
of the Statement of
Additional Information
CROSS REFERENCE SHEET (cont'd)
(Required by Rule 495)
Item No. Location
- -------- --------
PART B
Item 15. Cover Page. . . . . . . . .. . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . . . Insurance Company
Item 18. Services. . . . . . . . . . . . .. . . . . Not Applicable
Item 19. Purchase of Securities Being Offered. . . . Not Applicable
Item 20. Underwriters. . . . . . . . . . . . . . . . Distributor
Item 21. Calculation of Performance Data. . . . . . Calculation of
Performance Data
Item 22. Annuity Payments. . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements. . . . . . . . . . . Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
PART A
THE VARIABLE ANNUITY CONTRACT
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
This prospectus describes the bonus variable annuity contract with a Fixed
Account offered by Allianz Life Insurance Company of North America (Allianz
Life).
The annuity has 37 Sub-Accounts, each of which invests in one of the Portfolios
listed below, and a Fixed Account of Allianz Life. You can select up to 10
Investment Options (which includes any of the Sub-Accounts and the Fixed
Account). The Fixed Account may not be available in your state.
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
DAVIS VARIABLE ACCOUNT FUND, INC.:
Davis VA Financial Portfolio
Davis VA Real Estate Portfolio
Davis VA Value Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST*:
Franklin Growth and Income Securities Fund
Franklin Rising Dividends Securities Fund
Franklin Small Cap Fund
Franklin U.S. Government Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Developing Markets Securities Fund
Templeton Growth Securities Fund
Templeton Pacific Growth Securities Fund
*Effective May 1, 2000, Templeton Variable Products Series Fund
was merged into Franklin Templeton Variable Insurance Products
Trust.
JP MORGAN SERIES TRUST II:
J.P. Morgan International Opportunities Portfolio
J.P. Morgan U.S. Disciplined Equity Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Global Securities Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
PIMCO VARIABLE INSURANCE TRUST:
PIMCO VIT High Yield Bond Portfolio
PIMCO VIT StocksPLUS Growth and Income Portfolio
PIMCO VIT Total Return Bond Portfolio
SELIGMAN PORTFOLIOS, INC.:
Seligman Global Technology Portfolio
Seligman Small-Cap Value Portfolio
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund
USAllianz VIP Fixed Income Fund
USAllianz VIP Global Opportunities Fund
USAllianz VIP Growth Fund
USAllianz VIP Money Market Fund
VAN KAMPEN LIFE INVESTMENT TRUST:
Van Kampen LIT Enterprise Portfolio
Van Kampen LIT Growth and Income Portfolio
Expenses for a bonus Contract may be higher than expenses for a Contract without
a bonus. The amount of the bonus credit may be more than offset by any
additional fees and/or charges associated with the bonus.
Please read this prospectus before investing and keep it for future reference.
It contains important information about the variable annuity contract with a
Fixed Account.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated ___________, 2000.
The SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of this prospectus. The Table of Contents of the SAI is on page
__ of this prospectus. The SEC maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference and other information about
companies that file electronically with the SEC. For a free copy of the SAI,
call us at (800) 542-5427 or write us at: 1750 Hennepin Avenue, Minneapolis,
Minnesota 55403-2195.
The Variable Annuity Contracts:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell the Contracts. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Dated: , 2000.
TABLE OF CONTENTS
Index of Terms
Summary
Fee Table
The Variable Annuity Contract
Ownership
Contract Owner
Joint Owner
Annuitant
Beneficiary
Assignment
Annuity Payments (The Payout Phase)
Income Date
Annuity Payments
Annuity Options
Purchase
Purchase Payments
Automatic Investment Plan
Allocation of Purchase Payments
Free Look
Accumulation Units
Investment Options
Transfers
Dollar Cost Averaging Program
Flexible Rebalancing
Financial Advisers - Asset Allocation Programs
Voting Privileges
Substitution
Expenses
Insurance Charges
Mortality and Expense Risk Charge
Administrative Charge
Distribution Expense Charge
Contract Maintenance Charge
Contingent Deferred Sales Charge
Waiver of Contingent Deferred
Sales Charge Benefits
Reduction or Elimination of the
Contingent Deferred Sales Charge
Commutation Fee
Transfer Fee
Premium Taxes
Income Taxes
Portfolio Expenses
Taxes
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Multiple Contracts
Surrenders - Non-Qualified Contracts
Surrenders - Qualified Contracts
Surrenders - Tax-Sheltered Annuities
Diversification
Access to Your Money
Systematic Withdrawal Program
Minimum Distribution Program
Suspension of Payments or Transfers
Performance
Death Benefit
Upon Your Death
Death of Annuitant
Other Information
Allianz Life
The Separate Account
Distribution
Administration
Financial Statements
Table of Contents of the Statement of Additional Information
Appendix
INDEX OF TERMS
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This prospectus is written in plain English to make it as understandable as
possible. However, there are some technical words or terms used which are
capitalized in the prospectus. The page that is indicated below is where you
will find the definition for the word or term.
Page
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Options
Annuity Payments
Annuity Unit
Beneficiary
Contract
Contract Owner
Contract Value
Fixed Account
Income Date
Investment Option
Joint Owner
Non-Qualified
Payout Phase
Portfolio
Purchase Payment
Qualified
Rewards Value
Sub-Account
Tax Deferral
Underlying Mutual Fund
SUMMARY
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The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
The Variable Annuity Contract: The annuity contract offered by Allianz Life
provides a means for investing on a tax-deferred basis in the Investment Options
which consist of 37 Sub-Accounts and the Allianz Life Fixed Account. The
Contract is intended for retirement savings or other long-term investment
purposes.
Annuity Payments: If you want to receive regular income from your annuity, you
can choose an Annuity Option. You can choose whether to have payments come from
our general account, the available Sub-Accounts or both. If you choose to have
any part of your payments come from the Sub-Accounts, the dollar amount of your
payments may go up or down based on the performance of the Portfolios the
Sub-Accounts invest in.
Purchase: You can buy the Contract with $15,000 or more. You can add $250 or
more (or $100 if you select our automatic investment plan) any time you like
during the Accumulation Phase.
Bonus: For all Purchase Payments you make prior to your 81st birthday, Allianz
Life will credit your Contract with a bonus at the time of contribution to the
Contract. The amount of the bonus will be based on the total amount of Purchase
Payments you have made at the time of the contribution, less any surrenders you
have made (and assessed contingent deferred sales charges). Bonus amounts are
available for surrender, annuitization or payment of a death benefit only when
the bonus becomes vested (which varies depending upon how long Allianz Life
has had your Purchase Payment).
Contract charges are deducted from the total value of your Contract. Therefore,
when we credit your Contract with a bonus, your Contract incurs expenses on the
total Rewards Value, which includes the vested and unvested portions of the
bonus. When you cancel your Contract during the Free Look period, or if you make
a surrender, annuitize or when a death benefit is payable in the first 3 years
from any Purchase Payment date, you will forfeit all or some of your bonus.
Since charges will have been assessed against the higher amount (Purchase
Payment plus bonus), it is possible that upon surrender, particularly in a
declining market, you will receive less money back than you would have if you
had not received the bonus or not purchased a bonus Contract. You may alleviate
this risk by allocating the bonus amounts to the USAllianz VIP Money Market
Fund. We expect to profit from certain charges assessed under the Contract
(i.e., the contingent deferred sales charge and the mortality and expense risk
charge) associated with the bonus.
Investment Options: You can put your money in the Sub-Accounts and/or you can
invest in the Allianz Life Fixed Account (together, these are the "Investment
Options"). Each Sub-Account invests in an underlying Portfolio. The investment
returns on the Portfolios are not guaranteed. You can lose money. You can make
transfers between Investment Options.
Expenses: The contract has insurance features and investment features, and there
are costs related to each.
Each year, Allianz Life deducts a $40 contract maintenance charge from your
Contract. Allianz Life currently waives this charge if the Rewards Value of your
Contract is at least $75,000.
Allianz Life deducts a mortality and expense risk charge which varies depending
upon whether you select the traditional death benefit or the enhanced death
benefit. The charge is equal, on an annual basis, to 1.50% of the average daily
value of the Contract invested in a Sub-Account if you select the traditional
death benefit and 1.70% of the average daily value of the Contract invested in a
Sub-Account if you select the enhanced death benefit. Allianz Life also deducts
an administrative charge which is equal, on an annual basis, to 0.15% of the
value of the Contract invested in a Sub-Account.
There are also daily investment charges which range, on an annual basis, from
0.60% to 1.81% of the average daily value of the Portfolio, depending upon the
Portfolio.
You can make 12 free transfers each year. After that, Allianz Life deducts a $25
transfer fee for each additional transfer.
If you take money out of the Contract, Allianz Life may assess a contingent
deferred sales charge against each Purchase Payment withdrawn. The contingent
deferred sales charge starts at 8.5% in the first year and declines to 0% after
10 complete years.
Access to Your Money: You can take money out of your Contract during the
Accumulation Phase. Surrenders during the Accumulation Phase may be subject to
a contingent deferred sales charge. You may also have to pay income tax and a
tax penalty on any money you take out. Under certain circumstances, you can also
take money out during the Payout Phase if you select Annuity Option 2, 4 or 6.
Money you take out during the Payout Phase is subject to a commutation fee.
Taxes: Your earnings are not taxed until you take them out. If you take money
out during the Accumulation Phase, for tax purposes earnings come out first and
are taxed as income. If you are younger than 59 1/2 when you take money out, you
may be subject to a 10% federal tax penalty on the earnings withdrawn.
Death Benefit: If you die before moving to the Payout Phase, the person you have
chosen as a Beneficiary will receive a death benefit. The amount of the death
benefit depends on whether you select the traditional death benefit or the
enhanced death benefit.
Free-Look: You can cancel the contract within 10 days after receiving it (or
whatever period is required in your state). Allianz Life will refund the
Contract Value on the day it receives your request to cancel the Contract.
This may be more or less than your original payment. In certain states, or if
you have purchased the Contract as an individual retirement annuity, Allianz
Life will refund the Purchase Payment.
Inquiries: If you have any questions about your Contract or need more
information, please contact us at:
USAllianz Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
(800) 624-0197
FEE TABLE
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The purpose of this Fee Table is to help you understand the costs of investing,
directly or indirectly, in the Contract. It reflects expenses of the Separate
Account as well as the Portfolios.
CONTRACT OWNER TRANSACTION FEES
Contingent Deferred Sales Charge*
(as a percentage of Purchase Payments)
Number of Complete Years
Since Receipt of Purchase
Payment Charge
---------------------------------------------------------
0-1 8.5%
1-2 8.5%
2-3 8.5%
3-4 8.5%
4-5 8.0%
5-6 7.0%
6-7 6.0%
7-8 5.0%
8-9 4.0%
9-10 3.0%
10 or more 0.0%
Commutation Fee
(as a percentage of amount liquidated under Annuity Option 2,4 or 6)
Years Since Income Date Charge
- ----------------------- ------
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
over 6 1%
Transfer Fee
First 12 transfers in a Contract year are currently free.
Thereafter, the fee is $25 per transfer. Dollar Cost
Averaging transfers and Flexible Rebalancing transfers
are not currently counted.
CONTRACT MAINTENANCE CHARGE** $40 per Contract per year
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily account value)
Traditional Enhanced
Death Benefit Death Benefit
------------- ----------------
<S> <C> <C>
Mortality and Expense Risk Charge 1.50% 1.70%
Administrative Charge .15% .15%
Distribution Expense Charge*** 0% 0%
----- -----
Total Separate Account Annual Expenses 1.65% 1.85%
<FN>
* Each year, on a non-cumulative basis (less any previous surrenders you make
in the current Contract year which are not subject to a contingent deferred
sales charge), you may make partial surrenders of up to a total of 10% of
Purchase Payments and no contingent deferred sales charge will be assessed.
See "Access to Your Money" for additional options.
** The charge is waived if the Rewards Value of your Contract is at least
$75,000. If you own more than one Contract offered under this Prospectus
(registered with the same social security number), we will determine the
total Rewards Value of all your Contracts. If the total Rewards Value of
all your Contracts is at least $75,000, the charge is waived on all your
Contracts.
*** The maximum Distribution Expense Charge is .30%. The current Distribution
Expense Charge is 0%
</FN>
</TABLE>
<TABLE>
<CAPTION>
1999 ANNUAL FUND EXPENSES (as a percentage of a Portfolio's average daily net
assets for the most recent fiscal year). See the accompanying fund prospectuses
for more information.
Other Expenses Total Fund Expenses
(after waivers/ (after waivers/
Management 12b-1 reimbursements, reimbursements,
if any, as if any, as
Portfolio Fees Fees noted) noted)
- --------- ---------- ----- --------------- -------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund .62% - .11% .73%
AIM V.I. Growth Fund .63% .10% .73%
AIM V.I. International Equity Fund .75% .22% .97%
AIM V.I. Value Fund .61% - .15% .76%
Alger American Growth Portfolio .75% - .04% .79%
Alger American Leveraged AllCap
Portfolio1 .85% - .08% .93%
Alger American MidCap Growth Portfolio .80% - .05% .85%
Alger American Small Capitalization
Portfolio .85% .05% .90%
Davis VA Financial Portfolio2 .75% .25% 1.00%
Davis VA Real Estate Portfolio2 .75% .25% 1.00%
Davis VA Value Portfolio2 .75% .25% 1.00%
Franklin Growth and Income Securities
Fund, Class 23 .47% .25% .02% .74%
Franklin Rising Dividends Securities
Fund, Class 23 .73% .25% .02% 1.00%
Franklin Small Cap Fund, Class 23/4/5 .55% .25% .27% 1.07%
Franklin U.S. Government Fund, Class 23 .49% .25% .02% .76%
J.P. Morgan International Opportunities
Portfolio6 .60% - .60% 1.20%
J.P. Morgan U.S. Disciplined Equity
Portfolio6 .35% - .50% .85%
Mutual Discovery Securities Fund,
Class 2 3/5 .80% .25% .21% 1.26%
Mutual Shares Securities Fund,
Class 23/5/7 .60% .25% .19% 1.04%
Oppenheimer Global Securities Fund/VA .67% - .02% .69%
Oppenheimer High Income Fund/VA .74% - .01% .75%
Oppenheimer Main Street Growth &
Income Fund/VA .73% - .05% .78%
PIMCO VIT High Yield Bond Portfolio8 .25% - .50% .75%
PIMCO VIT StocksPLUS Growth and Income
Portfolio8 .40% - .25% .65%
PIMCO VIT Total Return Bond Portfolio8 .25% - .40% .65%
Seligman Global Technology Portfolio9 1.00% - .40% 1.40%
Seligman Small-Cap Value Portfolio9 1.00% - .00% 1.00%
Templeton Developing Markets Securities
Fund, Class 23/5/10 1.25% .25% .31% 1.81%
Templeton Growth Securities Fund,
Class 23/11 .83% .25% .05% 1.13%
Templeton Pacific Growth Securities
Fund, Class 23 1.00% .25% .08% 1.33%
USAllianz VIP Diversified Assets Fund12 .55% .25% .20% 1.00%
USAllianz VIP Fixed Income Fund12 .50% .25% .00% .75%
USAllianz VIP Global Opportunities Fund12.95% .25% .31% 1.51%
USAllianz VIP Growth Fund12 .65% .25% .00% .90%
USAllianz VIP Money Market Fund12 .35% .25% .30% .90%
Van Kampen LIT Enterprise Portfolio13 .48% - .12% .60%
Van Kampen LIT Growth & Income
Portfolio13 .43% - .32% .75%
<FN>
1. The Alger American Leveraged AllCap Portfolio's "Other Expenses" includes
.01% of interest expense.
2. Without reimbursement, other expenses and total operating expenses would
have been 3.49% and 4.24%, respectively for the Davis VA Financial
Portfolio, 10.95% and 11.70%, respectively for the Davis VA Real Estate
Portfolio, and 1.54% and 2.29%, respectively for the Davis VA Value
Portfolio.
3. For the Portfolios of Franklin Templeton Variable Insurance Products Trust,
Class 2 shares have a distribution plan which is referred to as a rule
12b-1 plan. While the maximum amount payable under the fund's Class 2 rule
12b-1 plan is 0.35% per year of the fund's average daily net assets, the
Board of Trustees of Franklin Templeton Variable Insurance Products Trust
has set the current rate at 0.25% per year. See "Fund Account Policies" in
the accompanying Franklin Templeton Variable Insurance Products Trust
prospectus for more information about the rule 12b-1 plan.
4. On 2/8/00, a merger and reorganization was approved that combined the
assets of the fund with a similar fund of the Templeton Variable Products
Series Fund, effective 5/1/00. On 2/8/00, fund shareholders approved new
management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and assets of the
fund as of 12/31/99, and not the assets of the combined fund. However, if
the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.55%,
Distribution and Service Fees (12b-1 fees) 0.25%, Other Expenses 0.27%, and
Total Fund Operating Expenses 1.07%.
5. The Franklin Small Cap Fund, the Mutual Discovery Securities Fund, the
Mutual Shares Securities Fund, and the Templeton Developing Markets
Securities Fund incur a portfolio administration fee as a direct expense of
the portfolio which is shown under "Other Expenses". Other Portfolios of
Franklin Templeton Variable Insurance Products Trust pay for similar
services indirectly through the Management Fee.
6. Without reimbursement, other expenses and total operating expenses would
have been 1.38% and 1.98%, respectively for the J.P. Morgan International
Opportunities Portfolio and 0.52% and 0.87%, respectively for the J.P.
Morgan U.S. Disciplined Equity Portfolio.
7. On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows restated total expenses based on the fund's assets
as of 12/31/99, and not the assets of the combined fund. However, if the
table reflected combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.60%, Distribution and Service Fees (12b-1
fees) 0.25%, Other Expenses 0.19%, and Total Fund Operating Expenses 1.04%.
8. "Other Expenses" reflect a 0.35% administrative fee for the PIMCO High
Yield Bond Portfolio, a 0.10% administrative fee for the PIMCO StocksPLUS
Growth and Income Portfolio, and a 0.25% administrative fee and 0.04%
representing organizational expenses and pro rata Trustees' fees for the
Total Return Bond Portfolio. PIMCO has contractually agreed to reduce total
annual portfolio operating expenses to the extent they would exceed, due to
the payment of organizational expenses and Trustees' fees, 0.75%, 0.65% and
0.65%, respectively, of average daily net assets for the PIMCO High Yield,
StocksPLUS Growth and Income and Total Return Bond Portfolios. Without such
reductions, Total Annual Expenses for the fiscal year ended December 31,
1999 would have been 0.75%, 0.65% and 0.69%, respectively. Under the
Expense Limitation Agreement, PIMCO may recoup these waivers and
reimbursements in future periods, not exceeding three years, provided total
expenses, including such recoupment, do not exceed the annual expense
limit.
9. J. & W. Seligman & Co. Incorporated ("Seligman") voluntarily agreed to
reimburse expenses of Seligman Global Technology Portfolio, other than the
management fee, which exceed .40%, and to reimburse all expenses of
Seligman Small-Cap Value Portfolio, other than management fees. Without
reimbursement, other expenses and total operating expenses would have been
0.41% and 1.41%, respectively, for Seligman Global Technology Portfolio,
and 0.41% and 1.41%, respectively, for Seligman Small-Cap Value Portfolio.
There is no assurance that Seligman will continue this policy in the
future.
10. On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Developing Markets Equity Fund, effective
5/1/00. The shareholders of that fund had approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and the assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 1.25%, Distribution and
Service Fees (12b-1 fees) 0.25%, Other Expenses 0.29%, and Total Fund
Operating Expenses 1.79%.
11. On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows restated total expenses based on the fund's assets
as of 12/31/99, and not the assets of the combined fund. However, if the
table reflected combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.80%, Distribution and Service Fees (12b-1
fees) 0.25%, Other Expenses 0.05%, and Total Fund Operating Expenses 1.10%.
12. Certain expenses of the USAllianz VIP Funds have been assumed by the
Adviser. Had those expenses not been assumed, total return would have been
lower and total fund expenses would have been 3.80% for the Diversified
Assets Fund, 3.77% for the Fixed Income Fund, 2.59% for the Global
Opportunities Fund (estimated for 2000), 3.90% for the Growth Fund, and
1.91% for the Money Market Fund (estimated for 2000). The USAllianz VIP
Diversified Assets Fund, USAllianz VIP Fixed Income Fund and the USAllianz
VIP Growth Fund commenced operations on November 12, 1999, and the
USAllianz VIP Global Opportunities Fund and the USAllianz VIP Money Market
Fund commenced operations on January 13, 2000. The expenses shown for these
portfolios are therefore estimated for the current fiscal year.
13. If certain expenses had not been assumed by the Adviser, total return would
have been lower and total fund expenses would have been .62% for the Van
Kampen LIT Enterprise Portfolio and .92% for the Van Kampen LIT Growth and
Income Portfolio.
</FN>
</TABLE>
Examples
o The examples below should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
o The $40 contract maintenance charge is included in the examples as a
prorated charge of $1. Since the average Contract size is greater than
$1,000, the contract maintenance charge is reduced accordingly.
o Premium taxes are not reflected in the tables. Premium taxes may apply.
o The current Distribution Expense Charge of 0% is reflected in the examples.
The maximum Distribution Expense Charge is .30%
o For additional information, see "Expenses."
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on your money if you surrender your Contract at the end of each time period
for Contracts with:
(a) the traditional death benefit
(b) the enhanced death benefit
Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (a)$111 (a)$166 (a)$218 (a)$325
(b) 113 (b) 172 (b) 229 (b) 346
AIM V.I. Growth Fund (a) 111 (a) 166 (a) 218 (a) 325
(b) 113 (b) 172 (b) 229 (b) 346
AIM V.I. International Equity Fund (a) 114 (a) 174 (a) 231 (a) 350
(b) 116 (b) 180 (b) 241 (b) 370
AIM V.I. Value Fund (a) 112 (a) 167 (a) 220 (a) 328
(b) 114 (b) 173 (b) 230 (b) 349
Alger American Growth Portfolio (a) 112 (a) 168 (a) 222 (a) 332
(b) 114 (b) 174 (b) 232 (b) 352
Alger American Leveraged AllCap
Portfolio (a) 113 (a) 172 (a) 229 (a) 346
(b) 116 (b) 179 (b) 239 (b) 366
Alger American MidCap Growth
Portfolio (a) 113 (a) 170 (a) 225 (a) 338
(b) 115 (b) 176 (b) 235 (b) 358
Alger American Small Capitalization
Portfolio (a) 113 (a) 171 (a) 227 (a) 343
(b) 115 (b) 178 (b) 238 (b) 363
Davis VA Financial Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
Davis VA Real Estate Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
Davis VA Value Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
Franklin Growth and Income Securities Fund (a) 111 (a) 166 (a) 219 (a) 326
(b) 114 (b) 173 (b) 229 (b) 347
Franklin Rising Dividends Securities Fund (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
Franklin Small Cap Fund (a) 115 (a) 177 (a) 236 (a) 360
(b) 117 (b) 183 (b) 246 (b) 380
Franklin U.S. Government Fund (a) 112 (a) 167 (a) 220 (a) 328
(b) 114 (b) 173 (b) 230 (b) 349
J.P. Morgan International
Opportunities Portfolio (a) 116 (a) 181 (a) 243 (a) 373
(b) 118 (b) 187 (b) 253 (b) 393
J.P. Morgan U.S. Disciplined Equity
Portfolio (a) 113 (a) 170 (a) 225 (a) 338
(b) 115 (b) 176 (b) 235 (b) 358
Mutual Discovery Securities Fund (a) 117 (a) 183 (a) 246 (a) 379
(b) 119 (b) 189 (b) 256 (b) 399
Mutual Shares Securities Fund (a) 115 (a) 176 (a) 235 (a) 357
(b) 117 (b) 182 (b) 245 (b) 377
Oppenheimer Global Securities
Fund/VA (a) 111 (a) 165 (a) 216 (a) 321
(b) 113 (b) 171 (b) 227 (b) 342
Oppenheimer High Income Fund/VA (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
Oppenheimer Main Street Growth &
Income Fund/VA (a) 112 (a) 168 (a) 221 (a) 330
(b) 114 (b) 174 (b) 231 (b) 351
PIMCO VIT High Yield Bond Portfolio (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
PIMCO VIT StocksPLUS Growth &
Income Portfolio (a) 110 (a) 163 (a) 214 (a) 317
(b) 113 (b) 170 (b) 225 (b) 338
PIMCO VIT Total Return Bond
Portfolio (a) 110 (a) 163 (a) 214 (a) 317
(b) 113 (b) 170 (b) 225 (b) 338
Seligman Global Technology
Portfolio (a) 118 (a) 187 (a) 253 (a) 393
(b) 120 (b) 193 (b) 263 (b) 413
Seligman Small-Cap Value Portfolio (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
Templeton Developing Markets
Securities Fund (a) 123 (a) 200 (a) 274 (a) 433
(b) 125 (b) 206 (b) 284 (b) 451
Templeton Growth Securities Fund (a) 116 (a) 179 (a) 239 (a) 366
(b) 118 (b) 185 (b) 250 (b) 386
Templeton Pacific Growth Securities Fund (a) 118 (a) 185 (a) 250 (a) 386
(b) 120 (b) 191 (b) 260 (b) 406
USAllianz VIP Diversified Assets
Fund (a) 114 (a) 174 (a) 233 (a) 353
(b) 116 (b) 181 (b) 243 (b) 373
USAllianz VIP Fixed Income Fund (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
USAllianz VIP Global Opportunities
Fund (a) 119 (a) 190 (a) 259 (a) 404
(b) 122 (b) 196 (b) 269 (b) 423
USAllianz VIP Growth Fund (a) 113 (a) 171 (a) 227 (a) 343
(b) 115 (b) 178 (b) 238 (b) 363
USAllianz VIP Money Market Fund (a) 113 (a) 171 (a) 227 (a) 343
(b) 115 (b) 178 (b) 238 (b) 363
Van Kampen LIT Enterprise Portfolio (a) 110 (a) 162 (a) 212 (a) 311
(b) 112 (b) 168 (b) 222 (b) 333
Van Kampen LIT Growth & Income
Portfolio (a) 112 (a) 167 (a) 219 (a) 327
(b) 114 (b) 173 (b) 230 (b) 348
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on your money if your Contract is not surrendered or if you apply your Contract
value to an Annuity Option for Contracts with:
(a) the traditional death benefit
(b) the enhanced death benefit
Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (a)$26 (a)$ 81 (a)$138 (a)$295
(b) 28 (b) 87 (b) 149 (b) 316
AIM V.I. Growth Fund (a) 26 (a) 81 (a) 138 (a) 295
(b) 28 (b) 87 (b) 149 (b) 316
AIM V.I. International Equity Fund (a) 29 (a) 89 (a) 151 (a) 320
(b) 31 (b) 95 (b) 161 (b) 340
AIM V.I. Value Fund (a) 27 (a) 82 (a) 140 (a) 298
(b) 29 (b) 88 (b) 150 (b) 319
Alger American Growth Portfolio (a) 27 (a) 83 (a) 142 (a) 302
(b) 29 (b) 89 (b) 152 (b) 322
Alger American Leveraged AllCap
Portfolio (a) 28 (a) 87 (a) 149 (a) 316
(b) 31 (b) 94 (b) 159 (b) 336
Alger American MidCap Growth
Portfolio (a) 28 (a) 85 (a) 145 (a) 308
(b) 30 (b) 91 (b) 155 (b) 328
Alger American Small Capitalization
Portfolio (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
Davis VA Financial Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
Davis VA Real Estate Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
Davis VA Value Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
Franklin Growth and Income Securities Fund (a) 26 (a) 81 (a) 139 (a) 296
(b) 29 (b) 88 (b) 149 (b) 317
Franklin Rising Dividends Securities Fund (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
Franklin Small Cap Fund (a) 30 (a) 92 (a) 156 (a) 330
(b) 32 (b) 98 (b) 166 (b) 350
Franklin U.S. Government Fund (a) 27 (a) 82 (a) 140 (a) 298
(b) 29 (b) 88 (b) 150 (b) 319
J.P. Morgan International
Opportunities Portfolio (a) 31 (a) 96 (a) 163 (a) 343
(b) 33 (b) 102 (b) 173 (b) 363
J.P. Morgan U.S. Disciplined Equity
Portfolio (a) 28 (a) 85 (a) 145 (a) 308
(b) 30 (b) 91 (b) 155 (b) 328
Mutual Discovery Securities Fund (a) 32 (a) 98 (a) 166 (a) 349
(b) 34 (b) 104 (b) 176 (b) 369
Mutual Shares Securities Fund (a) 30 (a) 91 (a) 155 (a) 327
(b) 32 (b) 97 (b) 165 (b) 347
Oppenheimer Global Securities
Fund/VA (a) 26 (a) 80 (a) 136 (a) 291
(b) 28 (b) 86 (b) 147 (b) 312
Oppenheimer High Income Fund/VA (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
Oppenheimer Main Street Growth &
Income Fund/VA (a) 27 (a) 83 (a) 141 (a) 300
(b) 29 (b) 89 (b) 151 (b) 321
PIMCO VIT High Yield Bond Portfolio (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
PIMCO VIT StocksPLUS Growth &
Income Portfolio (a) 25 (a) 78 (a) 134 (a) 287
(b) 28 (b) 85 (b) 145 (b) 308
PIMCO VIT Total Return Bond
Portfolio (a) 25 (a) 78 (a) 134 (a) 287
(b) 28 (b) 85 (b) 145 (b) 308
Seligman Global Technology
Portfolio (a) 33 (a) 102 (a) 173 (a) 363
(b) 35 (b) 108 (b) 183 (b) 383
Seligman Small-Cap Value Portfolio (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
Templeton Developing Markets
Securities Fund (a) 38 (a) 115 (a) 194 (a) 403
(b) 40 (b) 121 (b) 204 (b) 421
Templeton Growth Securities Fund (a) 31 (a) 94 (a) 159 (a) 336
(b) 33 (b) 100 (b) 170 (b) 356
Templeton Pacific Growth Securities Fund (a) 33 (a) 100 (a) 170 (a) 356
(b) 35 (b) 106 (b) 180 (b) 376
USAllianz VIP Diversified Assets
Fund (a) 29 (a) 89 (a) 153 (a) 323
(b) 31 (b) 96 (b) 163 (b) 343
USAllianz VIP Fixed Income Fund (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
USAllianz VIP Global Opportunities
Fund (a) 34 (a) 105 (a) 179 (a) 374
(b) 37 (b) 111 (b) 189 (b) 393
USAllianz VIP Growth Fund (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
USAllianz VIP Money Market Fund (a) 28 (a) 86 (a) 147 (a) 313
(b) 30 (b) 93 (b) 158 (b) 333
Van Kampen LIT Enterprise Portfolio (a) 25 (a) 77 (a) 132 (a) 281
(b) 27 (b) 83 (b) 142 (b) 303
Van Kampen LIT Growth & Income
Portfolio (a) 27 (a) 82 (a) 139 (a) 297
(b) 29 (b) 88 (b) 150 (b) 318
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THE VARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
This prospectus describes a flexible purchase payment variable deferred annuity
contract with a Fixed Account offered by Allianz Life. All references in this
prospectus to "we, us, our" refer to Allianz Life.
* Flexible Purchase Payments means that you may choose to make Purchase
Payments at any time during the Accumulation Phase, in whatever amount
you choose, subject to certain minimum and maximum requirements.
* A deferred annuity contract means that Annuity Payments do not begin
for a specified period of time in the future (usually when you retire)
or until you reach a certain age.
* A variable annuity is one in which Contract values and the variable
Annuity Payments vary depending on the performance of the
Portfolios of the Underlying Mutual Funds.
An annuity is a contract between you, the owner, and an insurance company (in
this case Allianz Life), where the insurance company promises to pay you (or
someone else you choose) an income, in the form of Annuity Payments. The Annuity
Payments must begin on a designated date that is at least three years after we
issue the Contract. Until you decide to begin receiving Annuity Payments, your
annuity is in the Accumulation Phase. Once you begin receiving Annuity Payments,
your Contract switches to the Payout Phase.
The Contract benefits from Tax Deferral. Tax Deferral means that you are not
taxed on any earnings or appreciation on the assets in your Contract until you
take money out of your Contract.
You have 38 Investment Options- the 37 Sub-Accounts, each of which invests in
one Portfolio of an Underlying Mutual Fund, and the Fixed Account of Allianz
Life. Depending upon market conditions, you can make or lose money in the
Contract based on the investment performance of the Portfolios. The Portfolios
are designed to offer a better return than the Fixed Account. However, this is
not guaranteed.
The amount of money you are able to accumulate in your Contract during the
Accumulation Phase depends in large part upon the investment performance of the
Portfolio(s) you select. The amount of the Annuity Payments you receive during
the Payout Phase also depends in large part upon the investment performance of
the Portfolios you select for the Payout Phase.
The Contract also contains a Fixed Account. The Fixed Account offers an interest
rate that is guaranteed by Allianz Life for all deposits made within the 12
month period. Your initial interest rate is set on the date when your money is
invested in the Fixed Account and remains effective for one year. Initial
interest rates are declared monthly. Allianz Life guarantees that the interest
credited to the Fixed Account will not be less than 3% per year. If you select
the Fixed Account, your money will be placed with the other general assets of
Allianz Life. Allianz Life may change the terms of the Fixed Account in the
future - please contact Allianz Life for the most current terms.
If you select the Fixed Account, the amount of money you are able to accumulate
in your Contract during the Accumulation Phase depends upon the total interest
credited to your Contract.
Allianz Life will not make any changes to your Contract without your permission
except as may be required by law.
Ownership
Contract Owner. You, as the Contract Owner, have all the rights under the
Contract. The Contract Owner is as designated at the time the Contract is
issued, unless changed. You may change Contract Owners at any time. The change
will become effective as of the date the request is signed. This may be a
taxable event. Allianz Life is not responsible for any tax consequences of any
such change. You should consult with your tax adviser before requesting a
change.
Joint Owner. The Contract can be owned by Joint Owners. Any Joint Owner must be
the spouse of the other Contract Owner (this requirement may not apply in
certain states). Upon the death of either Joint Owner, the surviving Joint Owner
will be the primary Beneficiary. Any other Beneficiary designation at the time
the Contract was issued or as may have been later changed will be treated as a
contingent Beneficiary unless otherwise indicated.
Annuitant. The Annuitant is the natural person on whose life we base Annuity
Payments. You name an Annuitant (subject to our underwriting rules then in
effect). You may change the Annuitant at any time before the Income Date unless
the Contract is owned by a non-individual (for example, a corporation).
Beneficiary. The Beneficiary is the person(s) or entity you name to receive any
death benefit. The Beneficiary is named at the time the Contract is issued
unless changed at a later date. Unless an irrevocable Beneficiary has been
named, you can change the Beneficiary or contingent Beneficiary.
Assignment. You can transfer ownership of (assign) the Contract at any time
during your lifetime. Allianz Life will not be liable for any payment or other
action we take in accordance with the Contract before we record the assignment.
Any assignment made after the death benefit has become payable can only be done
with our consent. An assignment may be a taxable event.
If the Contract is issued pursuant to a Qualified plan, you may be unable to
assign the Contract.
ANNUITY PAYMENTS (THE PAYOUT PHASE)
- --------------------------------------------------------------------------------
Income Date
You can receive regular monthly income payments under your Contract. You can
choose the month and year in which those payments begin. We call that date the
Income Date. Your Income Date must be the first day of a calendar month and must
be at least 3 years after we issue the Contract.
We ask you to choose your Income Date when you purchase the Contract. You can
change it at any time before the Income Date with 30 days notice to us. Your
Income Date must not be later than the Annuitant's 90th birthday or 10 years
from the date the Contract was issued (if later), or the maximum date permitted
under state law.
Annuity Payments
You may elect to receive your Annuity Payments as:
* a variable payout,
* a fixed payout, or
* a combination of both.
Under a fixed payout, all of the Annuity Payments will be the same dollar amount
(equal installments). If you choose a variable payout, you can select from the
available Sub-Accounts. If you do not tell us otherwise, your Annuity Payments
will be based on the investment allocations that were in place on the Income
Date. There is no minimum required Annuity Payment.
If you choose to have any portion of your Annuity Payments based on the
investment performance of the Sub-Account(s), the dollar amount of your payments
will depend upon three factors:
1) the value of your Contract in the Sub-Account(s) on the Income
Date,
2) the assumed investment rate used in the annuity table for the
Contract, and
3) the performance of the Sub-Account(s) you selected.
The assumed investment rate (AIR) is 5%. However, we may agree with you to use a
different value. The AIR will never exceed 7%. The 7% AIR is not available in
all states. If the actual performance exceeds the AIR, your Annuity Payments
will increase. Similarly, if the actual rate is less than the AIR, your Annuity
Payments will decrease.
You (or someone you designate) will receive the Annuity Payments. You will
receive tax reporting on those payments.
Annuity Options
You can choose among income plans. We call those Annuity Options. You can choose
one of the Annuity Options described below. Allianz Life may make available
other Annuity Options. You may, at any time prior to the Income Date, 30 days in
advance, select and/or change the Annuity Option. After Annuity Payments begin,
you cannot change the Annuity Option. If you do not choose an Annuity Option
prior to the Income Date, we will assume that you selected Option 2 which
provides a life annuity with 10 years of monthly payments guaranteed.
Option 1. Life Annuity. Under this option, we will make monthly Annuity Payments
so long as the Annuitant is alive. After the Annuitant dies, we stop making
Annuity Payments.
Option 2. Life Annuity with Monthly Payments Over 10, 15 or 20 Years Guaranteed.
Under this option, we will make monthly Annuity Payments so long as the
Annuitant is alive. However, if the Annuitant dies before the end of the
selected guaranteed period, we will continue to make Annuity Payments to you or
any person you choose for the rest of the guaranteed period. Alternatively, if
you do not want to receive Annuity Payments after the Annuitant's death, you can
ask us for a single lump sum equal to the present value of the guaranteed
monthly Annuity Payments remaining, as of the date Allianz Life receives notice
of the Annuitant's death, commuted as set forth in the Contract.
During the lifetime of the Annuitant, and while the number of Annuity Payments
made is less than the guaranteed number of payments elected, and if you elected
to receive payments on a variable basis, you may request a surrender (partial
liquidation). You will be allowed to make a partial liquidation at least once
per Contract year after the Income Date. The liquidation value is equal to the
present value of the remaining guaranteed Annuity Payments, to the end of the
period certain, commuted at the AIR. The total of all partial liquidations,
measured as a percentage of the liquidation value, cannot exceed 75% of the
liquidation value, less any previously liquidated amounts. A commutation fee
will be subtracted from the amount liquidated before the proceeds are paid out.
Partial liquidations will be processed on the next Annuity Payment date
following your written request. The minimum allowable partial liquidation will
be the lesser of $500 or the remaining portion of the liquidation value
available.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
monthly Annuity Payments during the joint lifetime of the Annuitant and the
joint Annuitant. When the Annuitant dies, if the joint Annuitant is still alive,
we will continue to make Annuity Payments so long as the joint Annuitant
continues to live. The amount of the Annuity Payments we will make to you can be
equal to 100%, 75% or 50% (as selected) of the amount that was being paid when
both Annuitants were alive. The monthly Annuity Payments will end when the last
surviving Annuitant dies.
Option 4. Joint and Last Survivor Annuity with Monthly Payments Over 10, 15 or
20 Years Guaranteed. Under this option, we will make monthly Annuity Payments
during the joint lifetime of the Annuitant and the joint Annuitant. When the
Annuitant dies, if the joint Annuitant is still alive, we will continue to make
Annuity Payments, so long as the surviving Annuitant continues to live, at 100%
of the amount that was being paid when both were alive. If, when the last death
occurs, we have made Annuity Payments for less than the selected guaranteed
period, we will continue to make Annuity Payments to you or any person you
choose for the rest of the guaranteed period. Alternatively, if you do not want
to receive Annuity Payments after the Annuitant's death, you can ask us for a
single lump sum equal to the present value of the guaranteed monthly Annuity
Payments remaining, as of the date Allianz Life receives notice of the
Annuitant's death, commuted as set forth in the Contract.
During the lifetime of the Annuitant or joint Annuitant, and while the number of
Annuity Payments made is less than the guaranteed number of payments elected,
and if you elected to receive payments on a variable basis, you may request a
surrender (partial liquidation). You will be allowed to make a partial
liquidation at least once per Contract year after the Income Date. The
liquidation value is equal to the present value of the remaining guaranteed
Annuity Payments, to the end of the period certain, commuted at the AIR. The
total of all partial liquidations, measured as a percentage of the liquidation
value, cannot exceed 75% of the liquidation value, less any previously
liquidated amounts. A commutation fee will be subtracted from the amount
liquidated before the proceeds are paid out. Partial liquidations will be
processed on the next Annuity Payment date following your written request. The
minimum allowable partial liquidation will be the lesser of $500 or the
remaining portion of the liquidation value available.
Option 5. Refund Life Annuity. Under this option, we will make monthly Annuity
Payments during the Annuitant's lifetime. If at the time of death of the
Annuitant the value of the Annuity Payments made is less than the value applied
to the Annuity Option, then you will receive a refund.
For a fixed Annuity Option, the amount of the refund will be any excess of the
amount applied to this Annuity Option over the total of all Annuity Payments
made under this option. For a variable Annuity Option, the amount of the refund
will be the then value of the number of Annuity Units equal to (1) the value
applied to this Annuity Option divided by the value of the Annuity Unit used to
determine the first Annuity Payment, minus (2) the product of the number of
Annuity Units of each Annuity Payment and the number of payments made.
Option 6. Specified Period Certain Annuity. Under this option, we will make
monthly Annuity Payments for a specified period of time. You elect the specified
period which must be a whole number of years from 10 to 30. If at the time of
the death of the last Annuitant and any joint Annuitant, Annuity Payments have
been made for less than the specified period certain, then we will continue to
make Annuity Payments to you for the rest of the period certain. If you have
selected to receive payments under a variable Annuity Option, you may make a
surrender representing a partial liquidation at least once each Contract year of
up to 100% of the liquidation value in the Contract. A commutation fee will be
subtracted from the amount liquidated before the proceeds are paid out. The
liquidation will be processed on the next Annuity Payment date after your
written request is received as set forth in the Contract.
PURCHASE
- --------------------------------------------------------------------------------
Purchase Payments
A Purchase Payment is the money you invest in the Contract. The Purchase Payment
requirements are:
* the minimum initial payment Allianz Life will accept to establish a
Contract is $15,000.
* the maximum amount we will accept without our prior approval is $1
million.
* you can make additional Purchase Payments of $250 (or as low as $100
if you have selected the Automatic Investment Plan) or more.
Allianz Life may, at its sole discretion, waive the minimum payment
requirements. We reserve the right to decline any Purchase Payments. At the time
you buy the Contract, you and the Annuitant cannot be older than 80 years old.
This product is not designed for professional market timing organizations, other
entities, or persons using programmed, large or frequent transfers.
Bonus
Allianz Life will credit each Purchase Payment you make prior to your and any
Joint Owner's 81st birthday with a bonus at the time it is made. The bonus rate
will be based on the total amount of Purchase Payments made at the time of the
contribution, less any surrenders you have made (and assessed contingent
deferred sales charges). The bonus rates are:
4% of the Purchase Payment with total Purchase Payments (less surrenders
and related contingent deferred sales charges) of under $25,000;
5% of the Purchase Payment with total Purchase Payments (less surrenders
and related contingent deferred sales charges) of $25,000 - $99,999;
6% of the Purchase Payment with total Purchase Payments (less surrenders
and related contingent deferred sales charges) of $100,000 - $999,999;
7% of the Purchase Payment with total Purchase Payments (less surrenders
and related contingent deferred sales charges) of $1,000,000 - $4,999,999;
8% of the Purchase Payment with total Purchase Payments (less surrenders
and related contingent deferred sales charges) of $5,000,000 or greater.
The bonus will be credited to your Contract subject to the following terms:
(1) Bonus amounts are available for surrender, annuitization or payment of a
death benefit only when such amounts become vested as follows:
0% - up through 12 completed months from the date of Purchase Payment;
35% - at least 12 and through 24 completed months from date of Purchase
Payment;
70% - at least 24 months and through 36 completed months from date of
Purchase Payment;
100% - at least 36 completed months from date of Purchase Payment.
(2) All bonus amounts and any gains or losses attributable to such amounts are
treated as earnings under the Contract and are treated as such for purposes
of the contingent deferred sales charge.
(3) All gains and losses attributable to the bonus are part of your Contract
Value and are always 100% vested.
(4) If Joint Owners are named, the age of the older Joint Owner will be used
and if the Contract Owner is a non-natural person, then the age of the
Annuitant will be used to determine whether a bonus applies.
All bonus amounts are paid from the general account assets of Allianz Life.
Contract charges are deducted from the total value of your Contract. Therefore,
your Contract incurs expenses on the total Rewards Value, which includes all
vested and unvested portions of the bonus. When you cancel your Contract during
the Free Look period, or if you make a surrender, annuitize or when a death
benefit is payable in the first 3 years from any Purchase Payment date, you will
forfeit all or some of your bonus. Since charges will have been assessed against
the higher amount (Purchase Payment plus bonus), it is possible that upon
surrender, particularly in a declining market, you will receive less money back
than you would have if you had not received the bonus or not purchased a bonus
Contract. You may alleviate this risk by allocating the bonus amounts to the
USAllianz VIP Money Market Fund. We expect to profit from certain charges
assessed under the Contract (i.e., the contingent deferred sales charge and the
mortality and expense risk charge) associated with the bonus.
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program which allows you to make
additional Purchase Payments to your Contract on a monthly or quarterly basis by
electronic transfer of monies from your savings, checking or brokerage account.
You may participate in this program by completing the appropriate form. We must
receive your form by the first of the month in order for AIP to begin that same
month. Investments will take place on the 20th of the month, or the next
business day. The minimum investment that can be made by AIP is $100. You may
stop AIP at any time you want. We need to be notified by the first of the month
in order to stop or change AIP that month. If AIP is used for a Qualified
Contract, you should consult your tax adviser for advice regarding maximum
contributions.
Allocation of Purchase Payments
When you purchase a Contract, we will allocate your Purchase Payment and bonus
amounts to the Fixed Account and/or one or more of the Sub-Accounts you have
selected. We ask that you allocate your money in either whole percentages or
round dollars. The Fixed Account may not be available in your state (check with
your registered representative). Transfers do not change the allocation
instructions for payments. You can instruct us how to allocate additional
Purchase Payments and bonus amounts. If you do not instruct us, we will allocate
them in the same way as your previous instructions to us. If you select the
USAllianz VIP Money Market Fund for your bonus allocation, that will be the
default allocation for the bonus unless otherwise specified. If you do not
select the USAllianz VIP Money Market Fund for your bonus allocation, then the
bonus will be allocated the same way as the corresponding Purchase Payment. You
may change the allocation of future payments without fee, penalty or other
charge upon written notice or telephone instructions to the USAllianz Service
Center. A change will be effective for payments received on or after we receive
your notice or instructions.
Allianz Life reserves the right to limit the number of Sub-Accounts that you may
invest in at one time. Currently, you may invest in 10 Investment Options, which
include the Sub-Accounts and the Allianz Life Fixed Account. We may change this
in the future. However, we will always allow you to invest in at least five
Sub-Accounts.
Once we receive your Purchase Payment and the necessary information, we will
issue your Contract and allocate your first Purchase Payment within 2 business
days. If you do not give us all of the information we need, we will contact you
or your registered representative to get it. If for some reason we are unable to
complete this process within 5 business days, we will either send back your
money or get your permission to keep it until we get all of the necessary
information. If you make additional Purchase Payments, we will credit these
amounts to your Contract within one business day. Our business day closes when
the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning the Contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you cancel
the Contract within this time period, Allianz Life will not assess a contingent
deferred sales charge. Allianz Life will refund your Contract Value as of the
day we receive your request. This includes any gains or losses associated with
the bonus. In certain states, or if you have purchased the Contract as an IRA,
we may be required to give you back your Purchase Payment if you decide to
cancel your Contract within 10 days after receiving it (or whatever period is
required in your state). If that is the case, we reserve the right to allocate
your initial Purchase Payment to the USAllianz VIP Money Market Fund for 15 days
after we receive it. (In some states, the period may be longer.) At the end of
that period, we will re-allocate your money as you selected. Currently, however,
we will directly allocate your money to the Sub-Accounts and/or the Fixed
Account as you have selected.
Rewards Value and Contract Value
The Rewards Value of your Contract is the dollar value as of any business day of
all amounts accumulated under your Contract including all vested and unvested
bonus amounts and gains and losses attributable to all bonus amounts.
The Contract Value is the Rewards Value of your Contract as of any business day
less any unvested bonus.
Accumulation Units
The value of the portion of your Contract allocated to the Sub-Accounts will go
up or down based upon the investment performance of the Sub-Account(s) you
choose. The value of your Contract will also depend on the expenses of the
Contract. In order to keep track of the value of your Contract, we use a
measurement called an Accumulation Unit (which is like a share of a mutual
fund). During the Payout Phase of the Contract we call it an Annuity Unit.
Every business day we determine the value of an Accumulation Unit for each
Sub-Account by multiplying the Accumulation Unit value for the previous period
by a factor for the current period. The factor is determined by:
1. dividing the value of a Portfolio at the end of the current period by
the value of a Portfolio for the previous period; and
2. multiplying it by one minus the daily amount of the mortality and
expense risk charge, administrative charge and distribution expense
charge and any charges for taxes.
The value of an Accumulation Unit may go up or down from business day to
business day.
When you make a Purchase Payment, we credit your Contract with Accumulation
Units for any portion of your Purchase Payment and bonus amount allocated to a
Sub-Account. The number of Accumulation Units we credit your Contract with is
determined by dividing the amount of the Purchase Payment and bonus amount
allocated to a Sub-Account by the value of the corresponding Accumulation Unit.
We calculate the value of each Accumulation Unit after the New York Stock
Exchange closes each day and then credit your Contract.
Example:
On Wednesday we receive an additional Purchase Payment of $3,000 from you and
assume the bonus rate is 4%. You have told us you want this to go to the Alger
American Growth Portfolio. When the New York Stock Exchange closes on that
Wednesday, we determine that the value of an Accumulation Unit based on an
investment in the Alger American Growth Portfolio is $13.25. We then divide
$3,120 ($3,000 Purchase Payment plus $120 bonus amount) by $13.25 and credit
your Contract on Wednesday night with 235.47 Accumulation Units.
If you select the USAllianz VIP Money Market Fund for your bonus allocation,
that will be the default allocation for the bonus unless otherwise specified. If
you do not select the USAllianz VIP Money Market Fund for your bonus allocation,
then the bonus will be allocated the same way as the corresponding Purchase
Payment.
INVESTMENT OPTIONS
The Contract offers Sub-Accounts. Each Sub-Account invests in one of the
Portfolios of the Underlying Mutual Funds listed below. Each Portfolio has its
own investment objective. Additional Portfolios may be available in the future.
The Contract also offers a Fixed Account of Allianz Life.
You should read the Fund prospectuses (which are attached to this prospectus)
carefully before investing.
Franklin Templeton Variable Insurance Products Trust (formerly, Franklin
Valuemark Funds) issues two classes of shares. Only Class 2 shares are available
in connection with your Contract. Class 2 shares have Rule 12b-1 plan expenses.
Effective May 1, 2000, the funds of Templeton Variable Products Series Fund were
merged into similar funds of Franklin Templeton Variable Insurance Products
Trust.
Investment advisers for each Portfolio are listed in the table below. Certain
advisers have retained one or more subadvisers to help them manage the
Portfolios.
The investment objectives and policies of certain Portfolios are similar to the
investment objectives and policies of other mutual funds that certain of the
investment advisers manage. Although the objectives and policies may be similar,
the investment results of the Portfolios may be higher or lower than the results
of such other mutual funds. The investment advisers cannot guarantee, and make
no representation, that the investment results of similar funds will be
comparable even though the Portfolios have the same investment advisers.
A Portfolio's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a Portfolio with a small asset base.
A Portfolio may not experience similar performance as its assets grow.
The following is a list of the Portfolios available under the Contract
and investment advisers for each Portfolio:
<TABLE>
<CAPTION>
Investment
Available Portfolios Advisers
- -------------------------------------------------------------------------------
<S> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Capital Appreciation Fund A I M Advisors, Inc.
AIM V.I. Growth Fund A I M Advisors, Inc.
AIM V.I. International Equity Fund A I M Advisors, Inc.
AIM V.I. Value Fund A I M Advisors, Inc.
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio (seeks long
term capital appreciation) Fred Alger Management, Inc.
Alger American MidCap Growth Portfolio Fred Alger Management, Inc.
Alger American Small Capitalization Portfolio Fred Alger Management, Inc.
DAVIS VARIABLE ACCOUNT FUND, INC.:
Davis VA Financial Portfolio Davis Selected Advisers, LP
Davis VA Real Estate Portfolio Davis Selected Advisers, LP
Davis VA Value Portfolio Davis Selected Advisers, LP
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
Franklin Growth and Income Securities Fund Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund Franklin Advisory Services, LLC
Franklin Small Cap Fund Franklin Advisers, Inc.
Franklin U.S. Government Fund Franklin Advisers, Inc.
Mutual Discovery Securities Fund (capital appreciation) Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund (capital appreciation with
income as a secondary goal) Franklin Mutual Advisers, LLC
Templeton Developing Markets Securities Fund Templeton Asset Management Ltd.
Templeton Growth Securities Fund Templeton Global Advisors Limited
Templeton Pacific Growth Securities Fund Franklin Advisers, Inc.
Effective May 1, 2000, Templeton Variable Products Series Fund was merged into
Franklin Templeton Variable Insurance Products Trust.
JP MORGAN SERIES TRUST II:
J.P. Morgan International Opportunities Portfolio J.P. Morgan Investment Management Inc.
J.P. Morgan U.S. Disciplined Equity Portfolio J.P. Morgan Investment Management Inc.
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Global Securities Fund/VA OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA OppenheimerFunds, Inc.
Oppenheimer Main Street Growth & Income Fund/VA OppenheimerFunds, Inc.
PIMCO VARIABLE INSURANCE TRUST:
PIMCO VIT High Yield Bond Portfolio Pacific Investment Management Company
PIMCO VIT StocksPLUS Growth and Income Portfolio Pacific Investment Management Company
PIMCO VIT Total Return Bond Portfolio Pacific Investment Management Company
SELIGMAN PORTFOLIOS, INC.:
Seligman Global Technology Portfolio J. & W. Seligman & Co. Incorporated
Seligman Small-Cap Value Portfolio J. & W. Seligman & Co. Incorporated
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Fixed Income Fund Allianz of America, Inc.
USAllianz VIP Global Opportunities Fund Allianz of America, Inc.
USAllianz VIP Growth Fund Allianz of America, Inc.
USAllianz VIP Money Market Fund Allianz of America, Inc.
VAN KAMPEN LIFE INVESTMENT TRUST:
Van Kampen LIT Enterprise Portfolio (seeks capital
appreciation) Van Kampen Asset Management Inc.
Van Kampen LIT Growth and Income Portfolio Van Kampen Asset Management Inc.
</TABLE>
Shares of the Underlying Mutual Funds may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various
insurance companies which may or may not be affiliated with Allianz Life.
Certain Underlying Mutual Funds may also be sold directly to qualified plans.
The Underlying Mutual Funds believe that offering their shares in this manner
will not be disadvantageous to you.
Allianz Life may enter into certain arrangements under which it is reimbursed by
the Underlying Mutual Funds' advisers, distributors and/or affiliates for the
administrative services and benefits which it provides to the Portfolios.
Transfers
You can transfer money among the Investment Options. Transfers may be subject to
a transfer fee. Allianz Life currently allows you to make as many transfers as
you want to each year. Allianz Life may change this practice in the future.
However, this product is not designed for professional market timing
organizations or other persons using programmed, large, or frequent transfers.
Such activity may be disruptive to a Portfolio. We reserve the right to reject
any specific Purchase Payment allocation or transfer request from any person, if
in the Portfolio investment manager's judgment, a Portfolio would be unable to
invest effectively in accordance with its investment objectives and policies, or
would otherwise potentially be adversely affected.
The following applies to any transfer:
1. We may not allow you to make transfers during the free look period.
2. Your request for a transfer must clearly state:
* which Sub-Account(s) and/or the Fixed Account is involved in
the transfer; and
* how much the transfer is for.
3. You cannot make any transfers within 7 calendar days prior to the date
your first Annuity Payment is due.
4. After the Income Date, you may not make a transfer from a fixed
Annuity Option to a variable Annuity Option.
5. After the Income Date, you can make transfers from a variable Annuity
Option to a fixed Annuity Option.
6. Your right to make transfers is subject to modification if we
determine in our sole opinion that the service of the right by one or
more Contract Owners is, or would be, to the disadvantage of other
Contract Owners. Restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which we consider to
be to the disadvantage of other Contract Owners. A modification could
be applied to transfers to or from one or more of the Sub-Accounts
and could include, but is not limited to:
* the requirement of a minimum time period between each transfer;
* not accepting a transfer request from an agent acting under a
power of attorney on behalf of more than one Contract Owner; or
* limiting the dollar amount that may be transferred between the
Sub-Accounts by a Contract Owner at any one time.
Allianz Life has reserved the right at any time without prior notice to any
party to modify the transfer provisions subject to the guarantees described
above and subject to applicable state law.
Telephone Transfers. You can make transfers by telephone. We may allow you to
authorize someone else to make transfers by telephone on your behalf. If you own
the Contract with a Joint Owner, unless you instruct Allianz Life otherwise, we
will accept instructions from either one of you. Allianz Life will use
reasonable procedures to confirm that instructions given to us by telephone are
genuine. If we do not use such procedures, we may be liable for any losses due
to unauthorized or fraudulent instructions. Allianz Life tape records all
telephone instructions.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount of money each month or quarter from any one Sub-Account or the Fixed
Account to up to eight of the other Sub-Accounts. The Sub-Account(s) you
transfer from may not be the Sub-Account(s) you transfer to in this program. You
cannot dollar cost average to the Fixed Account. By allocating amounts on a
regularly scheduled basis, as opposed to allocating the total amount at one
particular time, you may be less susceptible to the impact of market
fluctuations. You may only participate in this program during the Accumulation
Phase.
Generally, the Dollar Cost Averaging Program requires a minimum transfer of $500
per month (or $1,500 per quarter). You must have a $3,000 minimum allocation to
participate in the program.
All Dollar Cost Averaging transfers will be made on the 10th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day. You may elect either program by properly completing
the Dollar Cost Averaging form provided by Allianz Life.
Your participation in the program will end when any of the following occurs:
* the number of desired transfers have been made;
* you do not have enough money in the Sub-Account(s) or the Fixed
Account to make the transfer (if less money is available, that amount
will be dollar cost averaged and the program will end);
* you request to terminate the program (your request must be received by
us by the first of the month to terminate that month); or
* the Contract is terminated.
Allianz Life may, from time to time, offer special Dollar Cost Averaging
programs.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not currently taken into account in determining any
transfer fee. You may not participate in the Dollar Cost Averaging Program and
Flexible Rebalancing at the same time.
Flexible Rebalancing
Once your money has been invested, the performance of the Sub-Accounts may cause
your chosen allocation to shift. Flexible Rebalancing is designed to help you
maintain your specified allocation mix among the different Sub-Accounts. The
Fixed Account is not part of Flexible Rebalancing. You can direct us to readjust
your Rewards Value on a quarterly, semi-annual or annual basis to return to your
original Sub-Account allocations. Flexible Rebalancing transfers will be made on
the 20th day of the month unless that day is not a business day. If it is not,
then the transfer will be made on the previous business day. If you participate
in Flexible Rebalancing, the transfers made under the program are not currently
taken into account in determining any transfer fee.
Financial Advisers - Asset Allocation Programs
Allianz Life understands the importance of advice from a financial adviser
regarding your investments in the Contract (asset allocation program). Certain
investment advisers have made arrangements with us to make their services
available to you. Allianz Life has not made any independent investigation of
these advisers and is not endorsing such programs. You may be required to enter
into an advisory agreement with your investment adviser to have the fees paid
out of your Contract during the Accumulation Phase.
Allianz Life will, pursuant to an agreement with you, make a partial withdrawal
from the value of your Contract to pay for the services of the investment
adviser. If the Contract is Non-Qualified, the withdrawal will be treated like
any other distribution and may be included in gross income for federal tax
purposes and, if you are under age 59 1/2, may be subject to a tax penalty. If
the Contract is Qualified, the withdrawal for the payment of fees may not be
treated as a taxable distribution if certain conditions are met. You should
consult a tax adviser regarding the tax treatment of the payment of investment
adviser fees from your Contract.
Voting Privileges
Allianz Life is the legal owner of the Portfolio shares. However, when a
Portfolio solicits proxies in conjunction with a shareholder vote which affects
your investment, Allianz Life will obtain from you and other affected Contract
Owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Allianz Life owns on its
own behalf. Should Allianz Life determine that it is no longer required to
comply with the above, we will vote the shares in our own right.
Substitution
Allianz Life may substitute one of the Sub-Accounts you have selected with
another Sub-Account. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention to
do this. We may also limit further investment in a Sub-Account if we deem the
investment inappropriate.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and other expenses associated with the Contract that will
reduce your investment return. These charges and expenses are:
Insurance Charges
Each day, Allianz Life makes a deduction for its insurance charges. Allianz Life
does this as part of its calculation of the value of the Accumulation Units and
the Annuity Units. The insurance charge consists of:
1) the mortality and expense risk charge,
2) the administrative charge, and
3) the distribution expense charge.
Mortality and Expense Risk Charge. The amount of the mortality and expense risk
charge depends on whether you select the traditional death benefit or the
enhanced death benefit.
* Traditional Death Benefit. The charge is equal, on an annual basis, to
1.50% of the average daily value of the Contract invested in a Sub-
Account.
* Enhanced Death Benefit: The charge is equal, on an annual basis, to
1.70% of the average daily value of the Contract invested in a Sub-
Account.
This charge compensates us for all the insurance benefits provided by your
Contract (for example, our contractual obligation to make Annuity Payments, the
death benefits, certain expenses related to the Contract, and for assuming the
risk (expense risk) that the current charges will be insufficient in the future
to cover the cost of administering the Contract). Allianz Life may use any
profits it makes from this charge to pay for the costs of distributing the
Contract.
Administrative Charge. This charge is equal, on an annual basis, to 0.15% of the
average daily value of the Contract invested in a Sub-Account. This charge,
together with the contract maintenance charge (which is explained below), is for
all the expenses associated with the administration of the Contract. Some of
these expenses include: preparation of the Contract, confirmations, annual
statements, maintenance of Contract records, personnel costs, legal and
accounting fees, filing fees, and computer and systems costs.
Distribution Expense Charge. Currently, Allianz Life is compensated for certain
of its costs associated with distributing the Contract from certain Funds
through their Rule 12b-1 plans. Allianz Life does not currently deduct a
Distribution Expense Charge. In the event that Allianz Life is no longer
compensated for its distribution expenses through the Funds, it may, in its sole
discretion, charge a Distribution Expense Charge. The charge is guaranteed not
to exceed 0.30% of the average daily net asset value of the Contract invested in
a Sub-Account.
Contract Maintenance Charge
At each Contract anniversary, Allianz Life deducts $40 from the Rewards Value of
your Contract as a contract maintenance charge. The fee is assessed on the last
day of each Contract year. The charge is deducted pro rata from the Sub-
Accounts and the Fixed Account. The charge is for administrative expenses (see
above). This charge cannot be increased.
However, if the Rewards Value of your Contract is at least $75,000 when the
deduction for the charge is to be made, Allianz Life will not deduct this
charge. If you own more than one Contract offered under this prospectus, Allianz
Life will determine the total Rewards Value of all your Contracts. If the total
Rewards Value of all Contracts registered under the same social security number
is at least $75,000, Allianz Life will not assess the contract maintenance
charge (except in New Jersey). If the Contract is owned by a non-natural person
(e.g., a corporation), Allianz Life will look to the Annuitant to determine if
it will assess the charge.
If you make a complete surrender from your Contract other than on a Contract
anniversary and your Rewards Value is less than $75,000, Allianz Life will
deduct the full contract maintenance charge. During the Payout Phase, the charge
will be collected monthly out of each Annuity Payment.
Contingent Deferred Sales Charge
Surrenders may be subject to a contingent deferred sales charge. During the
Accumulation Phase, you can make surrenders from your Contract. Allianz Life
keeps track of each Purchase Payment you make. The amount of the contingent
deferred sales charge depends upon the length of time since you made your
Purchase Payment. The charge is:
Number of Complete Years
Since Receipt of Purchase
Payment Charge
- --------------------------------------------------------------
0-1 8.5%
1-2 8.5%
2-3 8.5%
3-4 8.5%
4-5 8.0%
5-6 7.0%
6-7 6.0%
7-8 5.0%
8-9 4.0%
9-10 3.0%
10 years or more 0.0%
However, after Allianz Life has had a Purchase Payment for 10 full years, there
is no charge when you surrender that Purchase Payment. The charge is calculated
at the time of each surrender. For partial surrenders, the charge is deducted
from the remaining Rewards Value and is deducted pro rata from the Sub-Accounts
and Fixed Account. For purposes of the contingent deferred sales charge, Allianz
Life treats surrenders as coming from the oldest Purchase Payments first and
from all Purchase Payments first. Bonuses and any earnings thereon are treated
as earnings under the Contract for purposes of the contingent deferred sales
charge. Allianz Life does not assess the contingent deferred sales charge on any
payments paid out as Annuity Payments or as death benefits. The contingent
deferred sales charge compensates Allianz Life for expenses associated with
selling the Contract.
NOTE: For tax purposes, surrenders are considered to have come from the last
money you put into the Contract. Thus, for tax purposes, earnings are considered
to come out first.
Partial Surrender Privilege. Each Contract year, on a non-cumulative basis you
can make multiple surrenders up to 10% of Purchase Payments (less any previous
surrenders taken in the current Contract year which were not subject to a
contingent deferred sales charge) and no contingent deferred sales charge will
be deducted from the 10% you take out. If you make a surrender of more than the
free amount, the amount over the 10% free amount will be subject to the
contingent deferred sales charge. Purchase Payment surrendered under the Partial
Surrender Privilege without a contingent deferred sales charge will be subject
to the applicable contingent deferred sales charge upon full surrender of the
Contract. The Partial Surrender Privilege is not available for full surrenders.
The 10% free available for each Purchase Payment taken by a partial surrender
will reduce the remaining free amount available.
You may also elect to participate in the Systematic Withdrawal Program or the
Minimum Distribution Program. These programs allow you to make surrenders
without the deduction of the contingent deferred sales charge under certain
circumstances. See "Access to Your Money" for a description of the Systematic
Withdrawal Program and the Minimum Distribution Program.
Waiver of Contingent Deferred Sales Charge Benefits. Under certain
circumstances, Allianz Life will permit you to take your money out of the
Contract without deducting a contingent deferred sales charge:
1) if after the third year of the Contract, you or the Joint Owner become
confined to a nursing home or hospital for 90 consecutive days; or
2) if after the first year of the Contract, you or the Joint Owner become
terminally ill, which is defined as life expectancy of 12 months or
less (a full withdrawal of the Contract will be required).
The waiver will not apply if any of the above conditions existed on the date
your Contract was issued.
Also, after the first year, if you or the Joint Owner become unemployed for at
least 90 consecutive days, you can take up to 50% of your money out of the
Contract without incurring a contingent deferred sales charge. Only one partial
surrender is available under this benefit during the life of the Contract. You
may not use both this benefit and the 10% Partial Surrender Privilege in the
same Contract year.
These benefits vary from state to state or may not be available in your state.
(Check with your registered representative.)
Surrenders may be subject to a 10% tax penalty in addition to any income taxes
due.
Reduction or Elimination of the Contingent Deferred Sales Charge. Allianz Life
may reduce or eliminate the amount of the contingent deferred sales charge when
the Contract is sold under circumstances which reduce its sales expenses. Some
examples are: if there is a large group of individuals that will be purchasing
the Contract or a prospective purchaser already had a relationship with Allianz
Life. Allianz Life may not deduct a contingent deferred sales charge under a
Contract issued to an officer, director or employee of Allianz Life or any of
its affiliates. Also, Allianz Life may reduce or not deduct a contingent
deferred sales charge when a Contract is sold by an agent of Allianz Life to any
members of his or her immediate family and the commission is waived. We require
our prior approval for any reduction or elimination of the contingent deferred
sales charge.
Commutation Fee
If you elect Annuity Option 2, 4 or 6 and make a liquidation, a commutation fee
will be assessed against the amount liquidated. The commutation fee is a
percentage of the amount liquidated and is equal to:
Years Since Income Date Commutation Factor
- ----------------------- ------------------
0 - 1 7%
1 - 2 6%
2 - 3 5%
3 - 4 4%
4 - 5 3%
5 - 6 2%
Over 6 1%
Transfer Fee
Currently, you can make 12 free transfers every year. We measure a year from the
day we issue your Contract. If you make more than 12 transfers a year, we will
deduct a transfer fee of $25 for each additional transfer. The transfer fee will
be deducted from the Investment Option (Sub-Account(s) or Fixed Account) from
which the transfer is made. If the entire amount in the account is transferred,
then the transfer fee will be deducted from the amount transferred. If the
transfer is from or to multiple accounts, it will be treated as a single
transfer. Any transfer fee will be deducted proportionally from the source
account if less than the entire amount in the account is transferred. If the
transfer is part of the Dollar Cost Averaging Program or Flexible Rebalancing,
it will not currently count in determining the transfer fee.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Allianz Life is responsible for the payment of
these taxes. We will make a deduction from the value of the Contract for them.
Some of these taxes are due when the Contract is issued, others are due when
Annuity Payments begin. It is Allianz Life's current practice to not charge you
for these taxes until you die, Annuity Payments begin or you make a complete
withdrawal. Allianz Life may discontinue this practice in the future and assess
the charge when the tax is due. Premium taxes generally range from 0% to 3.5% of
the Purchase Payment, depending on the state.
Income Taxes
Allianz Life reserves the right to deduct from the Contract for any income taxes
which it may incur because of the Contract. Currently, Allianz Life is not
making any such deductions.
Portfolio Expenses
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are described in the Fee Table in
this prospectus and the prospectuses for the Funds.
TAXES
- --------------------------------------------------------------------------------
NOTE: Allianz Life has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice. You should consult
your own tax adviser about your own circumstances. Allianz Life has included
additional information regarding taxes in the Statement of Additional
Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Basically, these rules provide that you will not be taxed on any earnings on the
money held in your annuity Contract until you take the money out. This is
referred to as Tax Deferral. There are different rules regarding how you will be
taxed depending upon how you take the money out and the type of Contract -
Qualified or Non-Qualified (see following sections).
You, as the Contract Owner, will not be taxed on increases in the value of your
Contract until a distribution occurs either as a surrender or as Annuity
Payments. When you make a surrender from a Non-Qualified Contract you are taxed
on the amount of the surrender that is earnings. For Annuity Payments, different
rules apply. A portion of each Annuity Payment from a Non-Qualified Contract
will be treated as a partial return of your Purchase Payments and will not be
taxed. The remaining portion of the Annuity Payment will be treated as ordinary
income. How the Annuity Payment is divided between taxable and non- taxable
portions depends upon the period over which the Annuity Payments are expected to
be made. Annuity Payments received after you have received all of your Purchase
Payments are fully includible in income.
When a Non-Qualified Contract is owned by a non-natural person (e.g., a
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the Contract will generally not be treated as an
annuity for tax purposes. This means that the Contract may not receive the
benefits of Tax Deferral. Income may be taxed as ordinary income every year.
Qualified and Non-Qualified Contracts
If you purchase the Contract under a Qualified plan, your Contract is referred
to as a Qualified Contract. Examples of Qualified plans are: Individual
Retirement Annuities including Roth IRAs (IRAs), Tax-Sheltered Annuities
(sometimes referred to as 403(b) contracts), and pension and profit-sharing
plans, which include 401(k) plans and H.R. 10 plans. If you do not purchase the
Contract under a Qualified plan, your Contract is referred to as a Non-Qualified
Contract.
A Qualified Contract will not provide any necessary or additional Tax Deferral
if it is used to fund a qualified plan that is Tax Deferred. However, the
Contract has features and benefits other than Tax Deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a Qualified Contract.
Multiple Contracts
The Code provides that multiple Non-Qualified annuity contracts which are issued
within a calendar year period to the same Contract Owner by one company or its
affiliates are treated as one annuity Contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange. You
should consult a tax adviser prior to purchasing more than one Non-Qualified
annuity Contract in any calendar year period.
Surrenders - Non-Qualified Contracts
If you make a surrender from your Contract, the Code treats such a surrender as
first coming from earnings and then from your Purchase Payments. In most cases,
such surrendered earnings are includible in income.
The Code also provides that any amount received under an annuity Contract which
is included in income may be subject to a tax penalty. The amount of the penalty
is equal to 10% of the amount that is includible in income. Some surrenders
will be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from Purchase Payments made prior to August 14, 1982.
With respect to (4) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first Annuity Payment, then the tax for the year of the
modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the tax years in which the exception
was used. A partial liquidation (surrender) during the Payout Phase may result
in the modification of the series of Annuity Payments made after such
liquidation and therefore could result in the imposition of the 10% penalty tax
and interest for the period as described above unless another exception to the
penalty tax applies. You should obtain competent tax advice before you make any
liquidations from your Contract.
Surrenders - Qualified Contracts
If you make a surrender from your Qualified Contract, a portion of the surrender
is treated as taxable income. This portion depends on the ratio of pre-tax
Purchase Payments to the after-tax Purchase Payments in your Contract. If all of
your Purchase Payments were made with pre-tax money then the full amount of any
surrender is includible in taxable income. Special rules may apply to surrenders
from certain types of Qualified Contracts.
The Code also provides that any amount received under a Qualified Contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some surrenders will be
exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid to you after leaving your employment in a series of substantially
equal periodic payments made annually (or more frequently) under a
lifetime annuity;
(5) paid to you after you have attained age 55 and you have left your
employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy upon the Qualified Contract;
(9) paid from an IRA for medical insurance (as defined in the Code);
(10) paid from an IRA for qualified higher education expenses; or
(11) paid from an IRA for up to $10,000 for qualified first-time homebuyer
expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4)
above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
Surrenders - Tax-Sheltered Annuities
The Code limits the surrender of amounts attributable to Purchase Payments made
pursuant to a salary reduction agreement by Contract Owners from Tax-Sheltered
Annuities. Surrenders can only be made when a Contract Owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship. However, in the case of hardship, the
Contract Owner can only surrender the Purchase Payments and not any
earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity Contract. Allianz Life believes that the Portfolios are being managed so
as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Allianz Life,
would be considered the owner of the shares of the Portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the Contract. It is unknown to what extent under federal tax
law Contract Owners are permitted to select Portfolios, to make transfers among
the Portfolios or the number and type of Portfolios Contract Owners may select
from without being considered the owner of the shares. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
Owner of the Contract, could be treated as the owner of the Portfolios.
Due to the uncertainty in this area, Allianz Life reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
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You can have access to the money in your Contract:
* by making a partial or total surrender;
* by receiving Annuity Payments; or
* when a death benefit is paid to your Beneficiary.
In general, surrenders can only be made during the Accumulation Phase. Under
certain circumstances, you can take money out of the Contract during the Payout
Phase if you select Annuity Option 2, 4 or 6 (See "Annuity Payments (The Payout
Phase)").
When you make a complete surrender you will receive the Contract Value on the
day the withdrawal request is received at the Service Center:
* less any applicable contingent deferred sales charge,
* less any premium tax, and
* less any contract maintenance charge.
(See "Expenses" for a discussion of the charges.)
Any partial surrender must be for at least $500. Unless you instruct Allianz
Life otherwise, the partial surrender will be made pro-rata from all the
Sub-Accounts and the Fixed Account you selected. After you make a partial
withdrawal the value of your Contract must be at least $10,000. We reserve the
right to treat a request for a withdrawal that will reduce the Contract Value
below $10,000 as a request for the full surrender of the Contract.
In the event that there are multiple bonuses applied to the Contract, we will
reduce the oldest unvested bonus amounts first.
Partial surrenders in excess of the Partial Surrender Privilege will reduce
unvested bonus amounts by such excess amount's percentage of the Contract Value
at the time of the surrender. This percentage is determined by dividing the
amount of the partial surrender (including any contingent deferred sales charge)
in excess of the Partial Surrender Privilege amount by the Contract Value.
We will pay the amount of any surrender from the Sub-Accounts within seven (7)
days of when we receive your request in good order unless the Suspension of
Payments or Transfers provision is in effect (see below).
Income taxes, tax penalties and certain restrictions may apply to any surrender
you make.
There are limits to the amount you can surrender from a Qualified plan referred
to as a 403(b) plan. For a more complete explanation see "Taxes" and the
discussion in the SAI.
Systematic Withdrawal Program
If the value of your Contract is at least $25,000, Allianz Life offers a program
which provides automatic monthly or quarterly payments to you. The minimum
amount you can surrender under the program is $500. The Systematic Withdrawal
Program is subject to the Partial Surrender Privilege which means that the total
systematic surrenders which you can make each year without Allianz Life
deducting a contingent deferred sales charge is limited to 10% of your Purchase
Payments for that year. This is determined on the last business day prior to the
day your request is received. If a Purchase Payment is no longer subject to a
contingent deferred sales charge, there is no limit to the amount or percentage
which can be taken under this program. All systematic withdrawals will be made
on the 9th day of the month unless that day is not a business day. If it is not,
then the surrender will be made the previous business day.
Income taxes, tax penalties and certain restrictions may apply to systematic
withdrawals.
Minimum Distribution Program
If you own a Qualified Contract, you may select the Minimum Distribution
Program. Under this program, Allianz Life will make payments to you from your
Contract that are designed to meet the applicable minimum distribution
requirements imposed by the Code for Qualified Contracts. Such surrenders will
not be subject to a contingent deferred sales charge. Payments may be made
monthly, quarterly, or annually unless your Contract is less than $25,000 in
which case the payments will only be made annually. If you have elected the
Minimum Distribution Program, any additional surrenders in a Contract year which
exceed 10% of Purchase Payments when combined with Minimum Distribution
surrenders will be subject to any applicable contingent deferred sales charge.
You cannot participate in the Systematic Withdrawal Program and the Minimum
Distribution Program at the same time.
Suspension of Payments or Transfers
Allianz Life may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Portfolio
shares is not reasonably practicable or Allianz Life cannot reasonably
value the Portfolio shares;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Contract Owners.
Allianz Life has reserved the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for more
than six months.
PERFORMANCE
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Allianz Life periodically advertises performance of the Sub-Accounts. Allianz
Life will calculate performance by determining the percentage change in the
value of an Accumulation Unit by dividing the increase (decrease) for that unit
by the value of the Accumulation Unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and the
Portfolio expenses. It may not reflect the deduction of any applicable
contingent deferred sales charge and contract maintenance charge. The deduction
of any applicable contract maintenance charge and contingent deferred sales
charges would reduce the percentage increase or make greater any percentage
decrease. Any advertisement will also include average annual total return
figures which reflect the deduction of the insurance charges, contract
maintenance charge, contingent deferred sales charges and the expenses of the
Portfolios. Bonus amounts will not be reflected in any performance information.
Allianz Life may also advertise cumulative total return information. Cumulative
total return is determined the same way except that the results are not
annualized. Performance information for the Portfolios of the Underlying Mutual
Funds may also be advertised; see the Fund prospectuses for more information.
Certain Portfolios have been in existence for some time and have investment
performance history. However, the Contracts are new. In order to demonstrate how
the actual investment experience of the Portfolios may affect your Accumulation
Unit values, Allianz Life has prepared performance information which can be
found in the SAI.
Allianz Life may in the future also advertise yield information. If it does, it
will provide you with information regarding how yield is calculated. More
detailed information regarding how performance is calculated is found in the
SAI.
Any performance advertised will be based on historical data. It does not
guarantee future results of the Portfolios.
DEATH BENEFIT
- --------------------------------------------------------------------------------
Upon Your Death
If you die during the Accumulation Phase, Allianz Life will pay a death benefit
to your Beneficiary (see below). If you die during the Payout Phase any benefit
will be as provided for in the Annuity Option selected.
Death Benefit Amount During the Accumulation Phase
At the time you purchase the Contract, you select the traditional death benefit
or the enhanced death benefit. If you do not make a selection, the traditional
death benefit will apply to your Contract.
Traditional Death Benefit - If you select the traditional death benefit, the
amount of the death benefit will be the greater of 1 or 2, less any applicable
premium tax.
1. The Contract Value determined as of the end of the business day during
which both due proof of death and an election of the payment method have
been received at the USAllianz Service Center;
2. The guaranteed minimum death benefit (GMDB) which is equal to the total of
all Purchase Payments you have made reduced proportionately by the
percentage of the Contract Value surrendered, including any contingent
deferred sales charge assessed.
Enhanced Death Benefit - If you select the enhanced death benefit, the amount of
the death benefit will be the greater of 1 or 2, less any applicable premium
tax.
1. The Contract Value determined as of the end of the business day during
which both due proof of death and an election of the payment method have
been received at the USAllianz Service Center;
2. The guaranteed minimum death benefit (GMDB), as defined below, determined
as of the end of the business day during which both due proof of death and
election of the payment method have been received at the USAllianz Service
Center.
The GMDB is equal to the greater of:
The total of all Purchase Payments you have made reduced proportionately by
the percentage of the Contract Value surrendered, including any contingent
deferred sales charge assessed.
The greatest anniversary value. The anniversary value is equal to the
Contract Value on a Contract anniversary, increased by additional Purchase
Payments and reduced proportionately by the percentage of the Contract
Value surrendered, including any contingent deferred sales charge assessed,
since that Contract anniversary. Contract anniversaries occurring on or
after your 81st birthday or date of death will not be taken into
consideration in determining this benefit.
The traditional death benefit and/or the enhanced death benefit may not be
approved in your state. If they are not available or if the Contract is owned by
a non-individual, the death benefit will be the Contract Value (less any premium
taxes) determined as of the end of the business day during which Allianz Life
receives both due proof of death and an election for the payment method at the
USAllianz Service Center.
Please refer to the applicable endorsements to your Contract for the specific
terms and conditions of the death benefits.
Any part of the death benefit amount that had been invested in the Sub- Accounts
remains in the Sub-Accounts until distribution begins. From the time the death
benefit is determined until we make a complete distribution, any amount in the
Sub-Accounts will be subject to investment risk which will be borne by the
Beneficiary.
If you have a Joint Owner, the age of the older Contract Owner will be used to
determine the guaranteed minimum death benefit. If the Contract is owned by a
non-natural person, then all references to you mean the Annuitant.
In the case of Joint Owners, if a Joint Owner dies, the surviving Joint Owner
will be considered the Beneficiary. Any other Beneficiary designation on record
at the time of death will be treated as a contingent Beneficiary. Joint Owners
must be spouses (this requirement may not apply in certain states).
If you have not previously designated a death benefit option, a Beneficiary must
request the death benefit be paid under one of the death benefit options below.
If the Beneficiary is the spouse of the Contract Owner, he/she can choose to
continue the Contract in his/her own name at the then current Contract value, or
if greater, the death benefit value. If a lump sum payment is elected and all
the necessary requirements, including any required tax consent from some states,
are met, the payment will be made within 7 days. Payment of the death benefit
may be delayed pending receipt of any applicable tax consents and/or forms from
a state.
Option A: lump sum payment of the death benefit.
Option B: the payment of the entire death benefit within 5 years of the date of
the Contract Owner's or any Joint Owner's death. Allianz Life will assess the
full contract maintenance charge to each Beneficiary on each Contract
anniversary.
Option C: payment of the death benefit under an Annuity Option over the lifetime
of the Beneficiary or over a period not extending beyond the life expectancy of
the Beneficiary. Distribution under this option must begin within one year of
the date of the Contract Owner's or any Joint Owner's death. The full contract
maintenance charge will continue to be assessed to each Beneficiary.
Any portion of the death benefit not applied under Option C within one year of
the date of the Contract Owner's death must be distributed within five years of
the date of death.
If the Beneficiary wants to receive the payment other than in a lump sum, he/she
may only make such an election during the 60 day period after the day that the
lump sum first became payable by Allianz Life.
If a lump sum payment is requested, the amount will be paid within 7 days of
receipt of proof of death and the valid election, including any required
governmental forms, unless the Suspension or Deferral of Payments Provision is
in effect.
If you (or any Joint Owner) die during the Payout Phase and you are not the
Annuitant, any payments which are remaining under the Annuity Option selected
will continue at least as rapidly as they were being paid at your death. If you
die during the Payout Phase, the Beneficiary becomes the Contract Owner.
Death of Annuitant
If the Annuitant, who is not a Contract Owner or Joint Owner, dies during the
Accumulation Phase, you will become the Annuitant unless you designate another
Annuitant. However, if the Contract Owner is a non-natural person (e.g., a
corporation), then the death of the Annuitant will be treated as the death
of the Contract Owner, and a new Annuitant may not be named.
If the Annuitant dies after Annuity Payments have begun, the remaining amounts
payable, if any, will be as provided for in the Annuity Option selected. The
remaining amounts payable will be paid to the Contract Owner at least as rapidly
as they were being paid at the Annuitant's death.
OTHER INFORMATION
- --------------------------------------------------------------------------------
Allianz Life
Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin
Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the state
of Minnesota in 1896. Allianz Life offers fixed and variable life insurance and
annuities and group life, accident and health insurance. Allianz Life is
licensed to do direct business in 49 states and the District of Columbia.
Allianz Life is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding.
The Separate Account
Allianz Life established a separate account named Allianz Life Variable Account
B (Separate Account) to hold the assets that underlie the Contracts, except
assets allocated to the Fixed Account. The Board of Directors of Allianz Life
adopted a resolution to establish the Separate Account under Minnesota insurance
law on May 31, 1985. Allianz Life has registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is divided into Sub-
Accounts. Each Sub-Account invests in one Portfolio of an Underlying Mutual
Fund. The obligations under the Contracts are obligations of Allianz Life.
The assets of the Separate Account are held in Allianz Life's name on behalf of
the Separate Account and legally belong to Allianz Life. However, those assets
that underlie the variable Contracts are not chargeable with liabilities arising
out of any other business Allianz Life may conduct. All the income, gains and
losses (realized or unrealized) resulting from these assets are credited to or
charged against the Contracts and not against any other contracts Allianz Life
may issue.
Distribution
USAllianz Investor Services, LLC (formerly NALAC Financial Plans, LLC), 1750
Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the
Contracts. USAllianz Investor Services LLC, is a wholly-owned subsidiary of
Allianz Life.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions up to 6% of Purchase Payments.
Sometimes, Allianz Life enters into an agreement with the broker-dealer to pay
the broker-dealer commissions as a combination of a certain amount of the
commission at the time of sale and a trail commission (which when totaled could
exceed 6% of Purchase Payments). In addition, Allianz Life may pay certain
sellers for other services not directly related to the sale of the Contracts
(such as special marketing support allowances). Commissions may be recovered
from a broker-dealer if a withdrawal occurs within 12 months of a Purchase
Payment.
Administration
Allianz Life has hired Delaware Valley Financial Services, Inc. (DVFS), 300
Berwyn Park, Berwyn, Pennsylvania, to perform certain administrative services
regarding the Contracts. The administrative services include issuance of the
Contracts and maintenance of Contract Owner's records.
Financial Statements
The consolidated financial statements of Allianz Life and the Separate Account
have been included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Insurance Company
Experts
Legal Opinions
Distributor
Reduction or Elimination of the
Contingent Deferred Sales Charge
Calculation of Performance Data
Federal Tax Status
Annuity Provisions
Financial Statements
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
issued by
ALLIANZ LIFE VARIABLE ACCOUNT B
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
________________, 2000
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
INSURANCE COMPANY AT: 1750 Hennepin Avenue, Minneapolis, MN 55403-2195, (800)
542-5427.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED
____________, AND AS MAY BE AMENDED FROM TIME TO TIME.
Table of Contents
Page
Insurance Company .........................................
Experts ...................................................
Legal Opinions ............................................
Distributor ...............................................
Reduction or Elimination of the
Contingent Deferred Sales Charge .........................
Calculation of Performance Data ...........................
Federal Tax Status ........................................
Annuity Provisions ........................................
Financial Statements ......................................
Insurance Company
Allianz Life Insurance Company of North America (the "Insurance Company") is a
stock life insurance company organized under the laws of the state of Minnesota
in 1896. The Insurance Company is a wholly-owned subsidiary of Allianz
Versicherungs-AG Holding ("Allianz"). Allianz is headquartered in Munich,
Germany, and has sales outlets throughout the world. The Insurance Company
offers fixed and variable life insurance and annuities, and group life, accident
and health insurance. On April 1, 1993, the Insurance Company changed its name
from North American Life and Casualty Company to its present name.
The Insurance Company is rated A++g by A.M. BEST, an independent analyst of the
insurance industry. The financial strength of an insurance company may be
relevant in that it may represent 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 Insurance Company as of and for the year ended
December 31, 1999 included in this Statement of Additional Information have been
audited by KPMG 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
- --------------------------------------------------------------------------------
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
Distributor
- --------------------------------------------------------------------------------
USAllianz Investor Services, LLC (formerly NALAC Financial Plans, LLC), a
subsidiary of the Insurance Company, acts as the distributor. The offering is on
a continuous basis.
Reduction or Elimination of the Contingent Deferred Sales Charge
- --------------------------------------------------------------------------------
The amount of the contingent deferred sales charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or to
a group of individuals in a manner that results in savings of sales expenses.
The entitlement to a reduction of the contingent deferred sales charge will be
determined by the Insurance Company after examination of the following factors:
1) the size of the group; 2) the total amount of purchase payments expected to
be received from the group; 3) the nature of the group for which the Contracts
are purchased, and the persistency expected in that group (i.e., the expectation
that the Contract owners will continue to hold the Contracts for a certain
period of time); 4) the purpose for which the Contracts are purchased and
whether that purpose makes it likely that expenses will be reduced; and 5) any
other circumstances which the Insurance Company believes to be relevant to
determining whether reduced sales or administrative expenses may be expected.
None of the reductions in charges for sales is contractually guaranteed.
The contingent deferred sales charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Insurance Company or any of
its affiliates. The contingent deferred sales charge may be reduced or
eliminated when the Contract is sold by an agent of the Insurance Company to any
members of his or her immediate family and the commission is waived. In no event
will any reduction or elimination of the contingent deferred sales charge be
permitted where the reduction or elimination will be unfairly discriminatory to
any person.
Calculation of Performance Data
- --------------------------------------------------------------------------------
Total Return
From time to time, the Insurance Company may advertise the performance data for
the Sub-Accounts in sales literature, advertisements, personalized hypothetical
illustrations, and Contract Owner communications. Such data will show the
percentage change in the value of an Accumulation Unit based on the performance
of a Portfolio over a stated period of time which is determined by dividing the
increase (or decrease) in value for that unit by the Accumulation Unit value at
the beginning of the period.
Any such 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 the mortality and expense risk charge, the
administrative charge, any distribution expense charge, the operating expenses
of the underlying Portfolios and any applicable contingent deferred sales charge
and contract maintenance charge ("Standardized Total Return"). The contingent
deferred sales charge and contract maintenance charge deductions are calculated
assuming a Contract is surrendered at the end of the reporting period.
The hypothetical value of a Contract purchased for the time periods described
will be determined by using the actual Accumulation Unit values for an initial
$1,000 Purchase Payment, and deducting any applicable Contract Maintenance
Charges and any applicable contingent deferred sales charge to arrive at the
ending hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 Purchase Payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
n
P(1+T) = ERV
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 payment made
at the beginning of the time periods used at the end of such time
periods (or fractional portion thereof).
The Insurance Company may also advertise performance data which will be
calculated in the same manner as described above but which will not reflect the
deduction of the contingent deferred sales charge and the contract maintenance
charge. The Insurance Company may also advertise cumulative and average total
return information over different periods of time. The Company may also present
performance information computed on a different basis ("Non-Standardized Total
Return").
Cumulative total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that no sales load is
deducted from the initial $1,000 payment at the time it is allocated to the
Portfolios and assumes that the income earned by the investment in the Portfolio
is reinvested.
Contract Owners should note that investment results will fluctuate over time,
and any presentation of total return for any period should not be considered as
a representation of what an investment may earn or what a Contract Owner's total
return may be in any future period.
Yield
The USAllianz VIP Money Market Fund ("Money Market Fund"). The Insurance Company
may advertise yield information for the Money Market Fund. The Money Market
Fund's current yield may vary each day, depending upon, among other things, the
average maturity of the underlying Portfolio's investment securities and changes
in interest rates, operating expenses, the deduction of the mortality and
expense risk charge, the administrative charge, any distribution expense charge
and the contract maintenance charge and, in certain instances, the value of the
underlying Portfolio's investment securities. Bonus amounts are not reflected in
any performance information. The fact that the Portfolio's current yield will
fluctuate and that the principal is not guaranteed should be taken into
consideration when using the Portfolio'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 Fund's current yield is computed on a base period return of a
hypothetical Contract having a beginning balance of one Accumulation Unit for a
particular period of time (generally seven days). The return is determined by
dividing the net change (exclusive of any capital changes) in such Accumulation
Unit by its beginning value, and then multiplying it by 365/7 to get the
annualized current yield. The calculation of net change reflects the value of
additional shares purchased with the dividends paid by the Portfolio, and the
deduction of the mortality and expense risk charge, the administrative charge,
any distribution expense charge and contract maintenance charge. The effective
yield reflects the effects of compounding and represents an annualization of the
current return with all dividends reinvested.
(Effective yield = [(Base Period Return + 1)365/7] - 1.)
Other Portfolios. The Insurance Company may also quote yield in sales
literature, advertisements, personalized hypothetical illustrations, and
Contract Owner communications for the other Portfolios. Each Portfolio (other
than the USAllianz VIP Money Market Fund) will publish standardized total
return information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
accumulation unit earned during the period (minus the deduction for the
mortality and expense risk charge, administrative charge and contract
maintenance charge) by the Accumulation Unit value on the last day of the period
and annualizing the resulting figure, according to the following formula:
6
Yield = 2 [((a-b) + 1) - 1]
---
cd
where:
a = net investment income earned during the period by the Portfolio
attributable to shares owned by the Sub-Account;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of Accumulation Units outstanding
during the period;
d = the maximum offering price per Accumulation Unit on the last
day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods (or one month) identified in the sales literature,
advertisement, or communication. Yield calculations assume no sales load. The
Insurance Company does not currently advertise yield information for any
Portfolio (other than the Money Market Fund).
Performance Ranking
Total return may be compared to relevant indices, including U.S. domestic and
international indices and data from Lipper Analytical Services, Inc., Standard &
Poor's Indices, or VARDS(R).
From time to time, evaluation of performance by independent sources may also be
used.
Performance Information
Certain Portfolios have been in existence for some time and have investment
performance history. In order to show how investment performance of the
Portfolios affects Accumulation Unit values, the following performance
information was developed. Bonus amounts are not reflected in any performance
information.
The Portfolios of Franklin Templeton Variable Insurance Products Trust available
under this Contract issue Class 2 shares and have a distribution plan which is
referred to as a Rule 12b-1 plan. Class 2 shares have Rule 12b-1 plan expenses
currently equal to 0.25% per year, which will affect future performance. Fund
performance for Class 2 shares reflects a "blended" figure combining (a) for
periods prior to Class 2's inception on 1/6/99, historical results of Class 1
shares and (b) for periods after 1/6/99, class 2's results reflecting an
additional 12b-1 fee expense which also affects future performance. Effective
May 1, 2000, the Templeton Developing Markets Securities Fund (a fund of
Templeton Variable Series Fund) merged into the Templeton Developing Markets
Equity Fund. The performance shown in the charts below reflect the historical
performance of the Templeton Developing Markets Equity Fund.
The charts below show Accumulation Unit performance which assumes that the
Accumulation Units were invested in each of the Portfolios for the same periods.
Chart A is for Contracts with the traditional death benefit and Chart B is for
Contracts with the enhanced death benefit. Column I represents performance
figures for the Accumulation Units which reflect the mortality and expense risk
charge, administrative charge, the contract maintenance charge, the operating
expenses of the Portfolios and assumes that you make a withdrawal at the end of
the period (therefore the contingent deferred sales charge is reflected). The
performance figures in Column II represent performance figures for the
Accumulation Units which reflect the deduction of the mortality and expense risk
charge, administrative charge, and the operating expenses of the Portfolios.
Past performance does not guarantee future results.
<TABLE>
<CAPTION>
Chart A
Total Return for the periods ended 12/31/99:
Column I Column II
- -------------------------------------------------------------------------------------------------------------------------------
Inception One Three Five Ten Since One Three Five Ten
Date Year Year Year Year Inception Year Year Year Year
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 5/5/1993 34.51% 21.26% 22.84% 19.96% 42.26% 23.06% 23.53% -
AIM V.I. Growth Fund 5/5/1993 25.27% 28.24% 26.90% - 20.55% 33.02% 29.85% 27.52% -
AIM V.I. International Equity Fund 5/5/1993 44.77% 20.31% 19.15% - 16.45% 52.52% 22.14% 19.93% -
AIM V.I. Value Fund 5/5/1993 20.04% 24.81% 24.48% - 20.70% 27.79% 26.51% 25.15% -
Alger American Growth Portfolio 1/9/1989 23.80% 31.79% 28.20% 20.77% 21.02% 31.55% 33.33% 28.80% 20.88%
Alger American Leveraged AllCap
Portfolio 1/25/1995 67.40% 46.11% - - 43.64% 75.15% 47.38% - -
Alger American MidCap Growth
Portfolio 5/3/1993 21.94% 21.64% 23.39% - 22.36% 29.69% 23.43% 24.07% -
Alger American Small
Capitalization Portfolio 9/21/1988 33.32% 18.78% 19.87% 16.15% 18.83% 41.07% 20.66% 20.63% 16.28%
Davis VA Financial Portfolio* 7/1/1999 - - - - -15.91% - - - -
Davis VA Real Estate Portfolio* 7/1/1999 - - - - -21.37% - - - -
Davis VA Value Portfolio* 7/1/1999 - - - - -6.09% - - - -
Franklin Growth and Income
Securities Fund 1/24/1989 -8.30% 7.78% 13.41% 9.43% 8.73% -0.55% 10.02% 14.34% 9.62%
Franklin Rising Dividends
Securities Fund 1/27/1992 -18.93% 4.56% 12.82% - 7.63% -11.18% 6.92% 13.76% -
Franklin Small Cap Fund 11/1/1995 85.97% 28.02% - - 27.21% 93.72% 29.65% - -
Franklin U.S. Government Fund 3/14/1989 -17.39% -1.78% 2.88% 4.63% 4.82% -9.64% 0.88% 4.22% 4.88%
JP Morgan International
Opportunities Portfolio 1/3/1995 26.70% 10.68% - - 11.04% 34.45% 12.82% - -
JP Morgan US Disciplined Equity
Portfolio 1/3/1995 8.84% 18.94% - - 21.88% 16.59% 20.80% - -
Mutual Discovery Securities Fund 11/8/1996 13.99% 7.89% - - 8.15% 21.74% 10.13% - -
Mutual Shares Securities Fund 11/8/1996 3.80% 6.03% - - 6.90% 11.55% 8.34% - -
Oppenheimer Global
Securities Fund/VA 11/12/1990 48.14% 26.54% 18.88% - 14.70% 55.89% 28.20% 19.68% -
Oppenheimer High Income
Fund/VA 4/30/1986 -5.17% 1.24% 7.29% 10.64% 9.76% 2.58% 3.76% 8.44% 10.81%
Oppenheimer Main Street
Growth & Income Fund/VA 7/5/1995 11.97% 15.15% - - 22.88% 19.72% 17.12% - -
PIMCO VIT High Yield Bond
Portfolio 4/30/1998 -7.23% - - - -4.03% 0.52% - - -
PIMCO VIT Stocks PLUS Growth &
Income Portfolio 12/31/1997 1.25% - - - 14.73% 9.00% - - -
PIMCO VIT Total Return Bond
Portfolio 12/31/1997 -10.51% - - - -2.00% -2.76% - - -
Seligman Global Technology
Portfolio 5/1/1996 107.47% 49.22% - - 39.83% 115.22% 50.44% - -
Seligman Small-Cap Value
Portfolio 5/1/1998 25.30% - - - 0.81% 33.05% - - -
Templeton Developing Markets
Securities Fund 3/15/1994 44.36% -0.91% 3.63% - 2.15% 52.11% 1.74% 4.95% -
Templeton Growth Securities
Fund 3/15/1994 11.31% 10.38% 12.55% - 11.16% 19.06% 12.53% 13.51% -
Templeton Pacific Growth
Securities Fund 1/27/1992 25.72% -13.89% -5.42% - 0.09% 33.47% -10.43% -3.57% -
USAllianz VIP Diversified
Assets*+ 11/12/1999 - - - - 1.16% - - - -
USAllianz VIP Fixed Income
Fund*+ 11/12/1999 - - - - -3.01% - - - -
USAllianz Growth Fund*+ 11/12/1999 - - - - 6.24% - - - -
Van Kampen LIT Enterprise
Portfolio 4/7/1986 16.04% 22.39% 24.62% 14.76% 11.96% 23.79% 24.15% 25.28% 14.91%
Van Kampen LIT Growth & Income
Portfolio 12/23/1996 -2.85% 12.50% - - 12.27% 4.90% 14.57% - -
+ Calculated with waiver of fees.
* For funds which have existed less than one year, non-standard cumulative total returns since inception are shown.
</TABLE>
<TABLE>
<CAPTION>
- --------
Since
Inception
- --------
<S> <C>
20.32%
20.91%
16.87%
21.04%
21.08%
44.05%
22.68%
18.88%
-8.16%
- -13.62%
1.66%
8.92%
8.05%
28.09%
4.90%
12.06%
22.59%
10.25%
9.05%
14.87%
9.82%
23.71%
0.72%
18.11%
1.93%
40.77%
5.43%
3.21%
11.89%
0.74%
1.16%
-3.01%
6.24%
12.04%
14.32%
</TABLE>
<TABLE>
<CAPTION>
Chart B
Total Return for the periods ended 12/31/99:
Column I Column II
- -------------------------------------------------------------------------------------------------------------------------------
Inception One Three Five Ten Since One Three Five Ten
Date Year Year Year Year Inception Year Year Year Year
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation
Fund 5/5/1993 34.22% 21.01% 22.58% - 19.72% 41.97% 22.81% 23.28% -
AIM V.I. Growth Fund 5/5/1993 25.01% 27.97% 26.64% - 20.31% 32.76% 29.59% 27.26% -
AIM V.I. International Equity
Fund 5/5/1993 44.47% 20.06% 18.90% - 16.22% 52.22% 21.90% 19.69% -
AIM V.I. Value Fund 5/5/1993 19.79% 24.55% 24.23% - 20.45% 27.54% 26.25% 24.90% -
Alger American Growth
Portfolio 1/9/1989 23.54% 31.52% 27.94% 20.53% 20.78% 31.29% 33.06% 28.54% 20.64%
Alger American Leveraged
AllCap Portfolio 1/25/1995 67.05% 45.81% - - 43.35% 74.80% 47.08% - -
Alger American MidCap Growth
Portfolio 5/3/1993 21.68% 21.39% 23.14% - 22.11% 29.43% 23.18% 23.18% -
Alger American Small
Capitalization Portfolio 9/21/1988 33.04% 18.54% 19.63% 15.92% 18.59% 40.79% 20.42% 20.39% 16.05%
Davis VA Financial Portfolio* 7/1/1999 - - - - -16.00% - - - -
Davis VA Real Estate Portfolio* 7/1/1999 - - - - -21.45% - - - -
Davis VA Value Portfolio* 7/1/1999 - - - - -6.20% - - - -
Franklin Growth and Income
Securities Fund 1/24/1989 -8.50% 7.55% 13.18% 9.20% 8.63% -0.75% 9.80% 14.11% 9.40%
Franklin Rising Dividends
Securities Fund 1/27/1992 -19.11% 4.33% 12.58% - 7.41% -11.36% 6.71% 13.53% -
Franklin Small Cap Fund 11/1/1995 85.58% 27.75% - - 26.95% 93.33% 29.39% - -
Franklin U.S. Government Fund 3/14/1989 -17.57% -2.00% 2.66% 4.42% 4.61% -9.82% 0.68% 4.01% 4.67%
JP Morgan International
Opportunities Portfolio 1/3/1995 26.43% 10.44% - - 10.81% 34.18% 12.59% - -
JP Morgan US Disciplined Equity
Portfolio 1/3/1995 8.61% 18.70% - - 21.63% 16.36% 20.56% - -
Mutual Discovery Securities
Fund 11/8/1996 13.74% 7.66% - - 7.92% 21.49% 9.91% - -
Mutual Shares Securities Fund 11/8/1996 3.58% 5.81% - - 6.68% 11.33% 8.13% - -
Oppenheimer Global Securities
Fund/VA 11/12/1990 47.83% 26.28% 18.63% - 14.47% 55.58% 27.94% 19.44% -
Oppenheimer High Income
Fund/VA 4/30/1986 -5.37% 1.02% 7.07% 10.42% 9.54% 2.38% 3.55% 8.22% 10.59%
Oppenheimer Main Street
Growth & Income Fund/VA 7/5/1995 11.73% 14.90% - - 22.62% 19.48% 16.89% - -
PIMCO VIT High Yield Bond
Portfolio 4/30/1998 -7.43% - - - -4.24% 0.32% - - -
PIMCO VIT Stocks PLUS Growth &
Income Portfolio 12/31/1997 1.03% - - - 14.49% 8.78% - - -
PIMCO VIT Total Return Bond
Portfolio 12/31/1997 -10.70% - - - -2.21% -2.95% - - -
Seligman Global Technology
Portfolio 5/1/1996 107.04% 48.91% - - 39.54% 114.79% 50.14% - -
Seligman Small-Cap Value
Portfolio 5/1/1998 25.03% - - - 0.60% 32.78% - - -
Templeton Developing Markets
Securities Fund 3/15/1994 44.06% -1.13% 3.41% - 1.93% 51.81% 1.54% 4.74% -
Templeton Growth Securities
Fund 3/15/1994 11.07% 10.15% 12.31% - 10.93% 18.82% 12.30% 13.28% -
Templeton Pacific Growth
Securities Fund 1/27/1992 25.45% -14.08% -5.63% - -0.12% 33.20% -10.61% -3.76% -
USAllianz VIP Diversified
Assets*+ 11/12/1999 - - - - -6.59% - - - -
USAllianz VIP Fixed Income
Fund*+ 11/12/1999 - - - - -10.76% - - - -
USAllianz Growth Fund*+ 11/12/1999 - - - - -1.51% - - - -
Van Kampen LIT Enterprise
Portfolio 4/7/1986 15.79% 22.14% 24.37% 14.53% 11.74% 23.54% 23.90% 25.03% 14.68%
Van Kampen LIT Growth & Income
Portfolio 12/23/1996 -3.06% 12.27% - - 12.04% 4.69% 14.34% - -
+ Calculated with waiver of fees.
* For funds which have existed less than one year, non-standard cumulative total returns since inception are shown.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------
Since
Inception
- --------
<S> <C>
20.08%
20.66%
16.64%
20.80%
20.83%
43.76%
22.43%
18.64%
-8.25%
- -13.70%
1.55%
8.70%
7.84%
27.84%
4.69%
11.83%
22.35%
10.03%
8.84%
14.64%
9.60%
23.47%
0.51%
17.87%
1.72%
40.49%
5.21%
3.01%
11.67%
0.54%
1.14%
-3.04%
6.21%
11.81%
14.10%
</TABLE>
Federal Tax Status
- --------------------------------------------------------------------------------
Note: The following description is based upon the Insurance Company's
understanding of current federal income tax law applicable to annuities in
general. The Insurance Company cannot predict the probability that any changes
in such laws will be made. Purchasers are cautioned to seek competent tax advice
regarding the possibility of such changes. The Insurance Company does not
guarantee the tax status of the Contracts. Purchasers bear the complete risk
that the Contracts may not be treated as "annuity contracts" under federal
income tax laws. It should be further understood that the following discussion
is not exhaustive and that special rules not described herein may be applicable
in certain situations. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
General
Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as Annuity Payments under the Annuity Option elected. For a lump
sum payment received as a total withdrawal (total redemption) or death benefit,
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the Contract. For Non-Qualified Contracts, this cost basis is generally the
purchase payments, while for Qualified Contracts there may be no cost basis. The
taxable portion of the lump sum payment is taxed at ordinary income tax rates.
For Annuity Payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed Annuity Option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. The exclusion amount
for payments based on a variable Annuity Option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the Contract has been recovered (i.e. when the
total of the excludible amounts equal the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries
under the Contracts should seek competent financial advice about the tax
consequences of any distributions.
The Insurance Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Insurance Company, and its operations form a part of the Insurance Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Insurance Company intends that all Portfolios underlying the Contract will
be managed by the investment managers in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Contract Owner control
of the investments of the Separate Account will cause the Contract Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Contract Owner's ability to transfer
among investment choices or the number and type of investment choices available,
would cause the Contract Owner to be considered as the owner of the assets of
the Separate Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Contract Owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, the Insurance Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year period to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Contract Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year period.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on purchase payments
for the Contracts will be taxed currently to the Contract Owner if the Owner is
a non-natural person, e.g., a corporation or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust or
other entity as an agent for a natural person nor to Contracts held by qualified
plans. Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.
Death Benefits
Any death benefits paid under the Contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
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.
Certain distributions from retirement plans qualified under Section 401 or
Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: (a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary, or for a specified period of 10 years
or more; or (b) distributions which are required minimum distributions; or (c)
the portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions); or (d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
Tax Treatment of Surrenders - 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 surrendered will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Surrendered 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 59 1/2; (b) after the death of the Contract
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic 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 liquidation (withdrawal) during the Payout Phase may result in the
modification of the series of Annuity Payments made after such liquidation and
therefore could result in the imposition of the 10% penalty tax and interest for
the period as described above unless another exception to the penalty tax
applies. You should obtain competent tax advice before you make any liquidations
from your Contract.
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 Surrenders - Qualified Contracts.")
Qualified Plans
The Contracts offered by the Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase payment
requirements, these Contracts may not be appropriate for some periodic payment
retirement plans. Taxation of participants in each Qualified Plan varies with
the type of plan and terms and conditions of each specific plan. Contract
Owners, Annuitants and beneficiaries are cautioned that benefits under a
Qualified Plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts issued pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Insurance Company's administrative procedures. The
Insurance Company is not bound by the terms and conditions of such plans to the
extent such terms conflict with the terms of a Contract, unless the Insurance
Company specifically consents to be bound.
A Qualified Contract will not provide any necessary or additional tax deferral
if it is used to fund a Qualified Plan that is tax deferred. However, the
Contract has features and benefits other than tax deferral that may make it an
appropriate investment for a Qualified Plan. Contract Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
Following are general descriptions of the types of Qualified Plans with which
the Contracts may be used. Such descriptions are not exhaustive and are for
general informational purposes only. The tax rules regarding Qualified Plans are
very complex and will have differing applications, depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Insurance Company in
connection with Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain Non-Qualified deferred compensation plans.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described in
this Statement of Additional Information. Generally, Contracts issued pursuant
to Qualified Plans are not transferable except upon withdrawal 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 withdrawals from Qualified Contracts.
(See "Tax Treatment of Surrenders - Qualified Contracts.")
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employee until the
employee receives distributions from the Contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations.") Employee loans are not allowed under these Contracts.
Any employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which may be deductible from the individual's taxable income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.") Under
certain conditions, distributions from other IRAs and other Qualified Plans may
be rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year periods beginning
with tax year 1998. Purchasers of Contracts to be qualified as a Roth IRA should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employee until distributed from the
Plan. The tax consequences to participants may vary, depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions and withdrawals.
Participant loans are not allowed under the Contracts purchased in connection
with these Plans. (See "Tax Treatment of Surrenders - Qualified Contracts.")
Purchasers of Contracts for use with Pension or Profit-Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
Tax Treatment of Surrenders - Qualified Contracts
In the case of a surrender under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been properly rolled over to an IRA or to another eligible Qualified
Plan, no tax penalty will be imposed. The tax penalty will not apply to the
following distributions: (a) if distribution is made on or after the date on
which the Contract Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Contract Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Contract
Owner or Annuitant (as applicable) and his or her designated beneficiary; (d)
distributions to a Contract Owner or Annuitant (as applicable) who has separated
from service after he or she has attained age 55; (e) distributions made to the
Contract Owner or Annuitant (as applicable) to the extent such distributions do
not exceed the amount allowable as a deduction under Code Section 213 to the
Contract Owner or Annuitant (as applicable) for amounts paid during the taxable
year for medical care; (f) distributions made to an alternate payee pursuant to
a qualified domestic relations order; (g) distributions made on account of
an IRS levy upon the Qualified Contract; (h) distributions from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Contract Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Contract Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this exception no longer applies after the Contract Owner or Annuitant
(as applicable) has been re-employed for at least 60 days); (i) distributions
from an Individual Retirement Annuity made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the qualified higher
education expenses (as defined in Section 72(t)(7) of the Code) of the Owner or
Annuitant (as applicable) for the taxable year; and (j) distributions from an
Individual Retirement Annuity made to the Owner or Annuitant (as applicable)
which are qualified first-time home buyer distributions (as defined in Section
72(t)(8) of the Code). The exceptions stated in items (d) and (f) above do not
apply in the case of an Individual Retirement Annuity. The exception stated in
item (c) applies to an Individual Retirement Annuity without the requirement
that there be a separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic 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 liquidation (withdrawal) during the Payout Phase may result in the
modification of the series of Annuity Payments made after such liquidation and
therefore could result in the imposition of the 10% penalty tax and interest for
the period as described above unless another exception to the penalty tax
applies. You should obtain competent tax advice before you make any liquidations
from your Contract.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2, or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities - Surrender Limitations
The Code limits the surrender of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Contract Owner: (1) attains age 59 1/2;
(2) separates from service; (3) dies; (4) becomes disabled (within the meaning
of Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Contract Owner's
Contract Value which represents contributions by the Contract Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, and to income attributable to such contributions and to
income attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers and transfers between certain Qualified
Plans. Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
Annuity Provisions
- --------------------------------------------------------------------------------
Fixed Annuity Payout
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Insurance Company and do not vary with the investment experience
of a Portfolio. The fixed Account Value on the day immediately preceding the
Income Date will be used to determine the Fixed Annuity monthly payment. The
monthly Annuity Payment will be based upon the Contract Value at the time of
annuitization, the Annuity Option selected, the age of the Annuitant and any
joint Annuitant and the sex of the Annuitant and joint Annuitant where allowed.
Variable Annuity Payout
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable Portfolio(s).
Annuity Unit Value
On the Income Date, a fixed number of Annuity Units will be purchased as
follows:
The first Annuity Payment is equal to the Adjusted Contract Value, divided first
by $1,000 and then multiplied by the appropriate Annuity Payment amount for each
$1,000 of value for the Annuity Option selected. In each 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
Income 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 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-Amount by the Annuity Unit value for that Sub-Account. On
each subsequent valuation date, the value of an Annuity Unit is determined in
the following way:
First: The Net Investment Factor is determined as described in the Prospectus
under "Purchase - Accumulation Units."
Second: The value of an Annuity Unit for a valuation period is equal to:
a. the value of the Annuity Unit for the immediately preceding valuation
period.
b. multiplied by the Net Investment Factor for the current valuation period;
c. divided by the Assumed Net Investment Factor (see below) for the valuation
period.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular Valuation Period. The Assumed Investment
Return that the Insurance Company will use is 5%. However, the Company may
agree to use a different rate (which will never exceed 7%).
Financial Statements
- --------------------------------------------------------------------------------
The audited consolidated financial statements of the Insurance Company as of and
for the year ended December 31, 1999, included herein should be considered only
as bearing upon the ability of the Insurance Company to meet its obligations
under the Contracts. The audited financial statements of the Separate Account as
of and for the year ended December 31, 1999 are also included herein.
ALLIANZ LIFE VARIABLE ACCOUNT B
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1999
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, 1999, 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
AIM Variable Insurance Funds, Inc., The Alger American Fund, Franklin Templeton
Variable Insurance Products Trust, and USAllianz Variable Insurance Products
Trust. 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, 1999, 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 LLP
Minneapolis, Minnesota
February 4, 2000
<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, 1999
(In thousands)
AIM Alger Alger American Franklin Global
V.I. Growth American Growth Leveraged Communications
Fund Fund AllCap Fund Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
AIM V.I. Growth Fund,
Class 1 - 306 shares, cost $9,508 $9,867 - - - - - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Alger American Growth Fund,
Class 1 - 162 shares, cost $9,957 - - 10,442 - - - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Alger American Leveraged AllCap Fund,
Class 1 - 129 shares, cost $6,851 - - - - 7,507 - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Franklin Global Communications Securities Fund,
Class 1 - 36,310 shares, cost $609,001 - - - - - - 902,669 -
Class 2 - 20 shares, cost $420 - - - - - - - 491
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 9,867 - 10,442 - 7,507 - 902,669 491
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 4 - 4 - 3 - (215) -
Valuemark IV 3 - 4 - 3 - (13) -
Valuemark Charter Traditional - - - - - - - 2
Valuemark Charter Enhanced - - - - - - - 1
Accrued administrative charges:
Valuemark II & III 1 - 1 - - - (26) -
Valuemark IV - - - - - - (1) -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 8 - 9 - 6 - (255) 3
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $9,859 - 10,433 - 7,501 - 902,924 488
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $5,833 - 5,894 - 4,137 - 844,307 -
Valuemark IV (note 5) 4,026 - 4,535 - 3,364 - 54,724 -
Valuemark Charter Traditional (note 6) - - - - - - - 213
Valuemark Charter Enhanced (note 6) - - - - - - - 275
Contracts in annuity payment period (note 2) - - 4 - - - 3,893 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $9,859 - 10,433 - 7,501 - 902,924 488
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Franklin Global
Health Care Franklin Growth Franklin High Franklin Income
Securities Fund and Income Fund Income Fund Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Global Health Care Securities Fund,
Class 1 - 1,081 shares, cost $10,216 $10,611 - - - - - - -
Class 2 - 8 shares, cost $75 - 83 - - - - - -
Franklin Growth and Income Fund,
Class 1 - 49,294 shares, cost $796,041 - - 876,439 - - - - -
Class 2 - 45 shares, cost $846 - - - 789 - - - -
Franklin High Income Fund,
Class 1 - 28,876 shares, cost $361,738 - - - - 284,716 - - -
Class 2 - 46 shares, cost $506 - - - - - 448 - -
Franklin Income Securities Fund,
Class 1 - 48,865 shares, cost $748,259 - - - - - - 717,826 -
Class 2 - 89 shares, cost $1,388 - - - - - - - 1,303
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 10,611 83 876,439 789 284,716 448 717,826 1,303
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 4 - 97 - 34 - 183 -
Valuemark IV 5 - 10 - 9 - 9 -
Valuemark Charter Traditional - - - 4 - 1 - 4
Valuemark Charter Enhanced - - - 1 - - - 1
Accrued administrative charges:
Valuemark II & III 1 - 11 - 4 - 22 -
Valuemark IV 1 - 1 - 1 - 1 -
Valuemark Charter Traditional - - - 1 - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 11 - 119 6 48 1 215 5
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $10,600 83 876,320 783 284,668 447 717,611 1,298
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $6,088 - 722,583 - 198,407 - 606,369 -
Valuemark IV (note 5) 4,512 - 144,218 - 85,209 - 105,486 -
Valuemark Charter Traditional (note 6) - 33 - 545 - 429 - 1,206
Valuemark Charter Enhanced (note 6) - 50 - 238 - 18 - 92
Contracts in annuity payment period (note 2) - - 9,519 - 1,052 - 5,756 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $10,600 83 876,320 783 284,668 447 717,611 1,298
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Franklin Franklin
Large Cap Growth Franklin Money Natural Resources Franklin Real
Securities Fund Market Fund Securities Fund Estate Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Large Cap Growth Securities Fund,
Class 1 - 17,954 shares, cost $269,731 $378,462 - - - - - - -
Class 2 - 26 shares, cost $458 - 542 - - - - - -
Franklin Money Market Fund,
Class 1 - 337,544 shares, cost $337,544 - - 337,544 - - - - -
Class 2 - 8,602 shares, cost $8,602 - - - 8,602 - - - -
Franklin Natural Resources Securities Fund,
Class 1 - 3,604 shares, cost $39,973 - - - - 39,395 - - -
Class 2 - 6 shares, cost $68 - - - - - 68 - -
Franklin Real Estate Fund,
Class 1 - 9,912 shares, cost $176,899 - - - - - - 147,887 -
Class 2 - 30 shares, cost $443 - - - - - - - 443
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 378,462 542 337,544 8,602 39,395 68 147,887 443
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 98 - 217 - 6 - 9 -
Valuemark IV 11 - 8 - 5 - 6 -
Valuemark Charter Traditional - 5 - 26 - - - -
Valuemark Charter Enhanced - 1 - - - - - -
Accrued administrative charges:
Valuemark II & III 12 - 26 - 1 - 1 -
Valuemark IV 1 - 1 - 1 - 1 -
Valuemark Charter Traditional - - - 3 - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 122 6 252 29 13 - 17 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $378,340 536 337,292 8,573 39,382 68 147,870 443
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $219,679 - 258,373 - 32,615 - 115,525 -
Valuemark IV (note 5) 151,537 - 77,050 - 6,761 - 31,567 -
Valuemark Charter Traditional (note 6) - 392 - 8,557 - 62 - 429
Valuemark Charter Enhanced (note 6) - 144 - 16 - 6 - 14
Contracts in annuity payment period (note 2 7,124 - 1,869 - 6 - 778 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $378,340 536 337,292 8,573 39,382 68 147,870 443
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Franklin Rising Franklin Franklin Franklin
Dividends S & P 500 Small Cap U.S. Government
Securities Fund Index Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Rising Dividends Securities Fund,
Class 1 - 29,867 shares, cost $417,038 $406,493 - - - - - - -
Class 2 - 40 shares, cost $626 - 549 - - - - - -
Franklin S&P 500 Index Fund
Class 1 - 1,343 shares, cost $13,794 - - 14,180 - - - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Franklin Small Cap Fund,
Class 1 - 17,248 shares, cost $244,267 - - - - 463,443 - - -
Class 2 - 37 shares, cost $701 - - - - - 985 - -
Franklin U.S. Government Fund,
Class 1 - 39,076 shares, cost $509,643 - - - - - - 460,317 -
Class 2 - 159 shares, cost $2,127 - - - - - - - 1,878
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 406,493 549 14,180 - 463,443 985 460,317 1,878
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 54 - 4 - 118 - 18 -
Valuemark IV 8 - 6 - 10 - 8 -
Valuemark Charter Traditional - 2 - - - 2 - 12
Valuemark Charter Enhanced - 1 - - - - - 1
Accrued administrative charges:
Valuemark II & III 6 - 1 - 14 - 2 -
Valuemark IV 1 - 1 - 1 - 1 -
Valuemark Charter Traditional - - - - - - - 1
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 69 3 12 - 143 2 29 14
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $406,424 546 14,168 - 463,300 983 460,288 1,864
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $325,172 - 7,613 - 302,040 - 388,862 -
Valuemark IV (note 5) 77,429 - 6,555 - 154,275 - 70,974 -
Valuemark Charter Traditional (note 6) - 340 - - - 904 - 1,647
Valuemark Charter Enhanced (note 6) - 206 - - - 79 - 217
Contracts in annuity payment period (note 2) 3,823 - - - 6,985 - 452 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $406,424 546 14,168 - 463,300 983 460,288 1,864
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Franklin Franklin Franklin Franklin
Value Securities Zero Coupon Zero Coupon Zero Coupon
Fund Fund - 2000 Fund - 2005 Fund - 2010
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Value Securities Fund
Class 1 - 1,349 shares, cost $10,759 $10,660 - - - - - - -
Class 2 - 17 shares, cost $131 - 130 - - - - - -
Franklin Zero Coupon Fund- 2000
Class 1 - 4,724 shares, cost $65,759 - - 59,382 - - - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Franklin Zero Coupon Fund- 2005
Class 1 - 4,097 shares, cost $63,136 - - - - 59,443 - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
Franklin Zero Coupon Fund- 2010
Class 1 - 4,292 shares, cost $71,092 - - - - - - 60,739 -
Class 2 - 0 shares, cost $0 - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 10,660 130 59,382 - 59,443 - 60,739 -
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 37 - 6 - 6 - 5 -
Valuemark IV 5 - 5 - 6 - 5 -
Valuemark Charter Traditional - 1 - - - - - -
Valuemark Charter Enhanced - - - - - - - -
Accrued administrative charges:
Valuemark II & III 4 - 1 - 1 - 1 -
Valuemark IV - - 1 - 1 - 1 -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 46 1 13 - 14 - 12 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $10,614 129 59,369 - 59,429 - 60,727 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $5,614 - 53,526 - 46,679 - 44,759 -
Valuemark IV (note 5) 4,657 - 5,831 - 12,750 - 15,961 -
Valuemark Charter Traditional (note 6) - 108 - - - - - -
Valuemark Charter Enhanced (note 6) - 21 - - - - - -
Contracts in annuity payment period (note 2) 343 - 12 - - - 7 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $10,614 129 59,369 - 59,429 - 60,727 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Mutual Mutual Templeton Templeton
Discovery Securities Shares Securities Developing Markets Global Asset
Fund Fund Equity Fund Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Mutual Discovery Securities Fund,
Class 1 - 14,046 shares, cost $164,635 $190,610 - - - - - - -
Class 2 - 30 shares, cost $365 - 413 - - - - - -
Mutual Shares Securities Fund,
Class 1 - 31,789 shares, cost $370,341 - - 420,567 - - - - -
Class 2 - 74 shares, cost $939 - - - 980 - - - -
Templeton Developing Markets Equity Fund,
Class 1 - 17,079 shares, cost $167,971 - - - - 179,157 - - -
Class 2 - 33 shares, cost $328 - - - - - 346 - -
Templeton Global Asset Allocation Fund,
Class 1 - 4,909 shares, cost $59,592 - - - - - - 57,979 -
Class 2 - 4 shares, cost $54 - - - - - - - 52
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 190,610 413 420,567 980 179,157 346 57,979 52
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 95 - 146 - 46 - 71 -
Valuemark IV 9 - 14 - 7 - 6 -
Valuemark Charter Traditional - 2 - 4 - 4 - -
Valuemark Charter Enhanced - - - 1 - - - -
Accrued administrative charges:
Valuemark II & III 11 - 18 - 6 - 9 -
Valuemark IV 1 - 2 - 1 - 1 -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 116 2 180 5 60 4 87 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $190,494 411 420,387 975 179,097 342 57,892 52
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $79,396 - 164,442 - 136,842 - 36,071 -
Valuemark IV (note 5) 106,824 - 249,799 - 41,093 - 20,133 -
Valuemark Charter Traditional (note 6) - 275 - 875 - 253 - 36
Valuemark Charter Enhanced (note 6) - 136 - 100 - 89 - 16
Contracts in annuity payment period (note 2) 4,274 - 6,146 - 1,162 - 1,688 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $190,494 411 420,387 975 179,097 342 57,892 52
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Templeton Templeton Templeton Templeton
Global Growth Global Income International International Smaller
Fund Securities Fund Equity Fund Companies Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Templeton Global Growth Fund,
Class 1 - 42,714 shares, cost $548,058 $667,615 - - - - - - -
Class 2 - 86 shares, cost $1,294 - 1,339 - - - - - -
Templeton Global Income Securities Fund,
Class 1 - 7,339 shares, cost $92,234 - - 81,239 - - - - -
Class 2 - 40 shares, cost $464 - - - 442 - - - -
Templeton International Equity Fund,
Class 1 - 40,536 shares, cost $579,632 - - - - 727,623 - - -
Class 2 - 181 shares, cost $3,112 - - - - - 3,232 - -
Templeton International Smaller Companies Fund,
Class 1 - 2,014 shares, cost $21,792 - - - - - - 22,297 -
Class 2 - 5 shares, cost $56 - - - - - - - 58
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 667,615 1,339 81,239 442 727,623 3,232 22,297 58
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 225 - 8 - 170 - 11 -
Valuemark IV 11 - 5 - 9 - 5 -
Valuemark Charter Traditional - 12 - 1 - 30 - 3
Valuemark Charter Enhanced - 1 - - - 1 - -
Accrued administrative charges:
Valuemark II & III 27 - 1 - 21 - 1 -
Valuemark IV 1 - 1 - 1 - 1 -
Valuemark Charter Traditional - 1 - - - 3 - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 264 14 15 1 201 34 18 3
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $667,351 1,325 81,224 441 727,422 3,198 22,279 55
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $484,117 - 70,284 - 628,777 - 11,825 -
Valuemark IV (note 5) 174,453 - 10,843 - 95,194 - 9,864 -
Valuemark Charter Traditional (note 6) - 1,012 - 435 - 2,895 - 4
Valuemark Charter Enhanced (note 6) - 313 - 6 - 303 - 51
Contracts in annuity payment period (note 2) 8,781 - 97 - 3,451 - 590 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $667,351 1,325 81,224 441 727,422 3,198 22,279 55
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Templeton USAllianz USAllianz USAllianz
Pacific Growth VIP Diversified VIP Fixed Income VIP Growth
Fund Assets Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Templeton Pacific Growth Fund,
Class 1 - 8,732 shares, cost $84,474 $88,975 - - - - - - -
Class 2 - 11 shares, cost $111 - 112 - - - - - -
USAllianz VIP Diversified Assets Fund,
Class 1 - 10 shares, cost $102 - - 103 - - - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
USAllianz VIP Fixed Income Fund,
Class 1 - 13 shares, cost $131 - - - - 129 - - -
Class 2 - 0 shares, cost $0 - - - - - - - -
USAllianz VIP Growth Fund,
Class 1 - 31 shares, cost $317 - - - - - - 331 -
Class 2 - 0 shares, cost $0 - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 88,975 112 103 - 129 - 331 -
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 21 - - - - - - -
Valuemark IV 6 - - - - - - -
Valuemark Charter Traditional - 1 - - - - - -
Valuemark Charter Enhanced - - - - - - - -
Accrued administrative charges:
Valuemark II & III 2 - - - - - - -
Valuemark IV 1 - - - - - - -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 30 1 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $88,945 111 103 - 129 - 331 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $77,144 - 88 - 124 - 226 -
Valuemark IV (note 5) 11,295 - 15 - 5 - 105 -
Valuemark Charter Traditional (note 6) - 63 - - - - - -
Valuemark Charter Enhanced (note 6) - 48 - - - - - -
Contracts in annuity payment period (note 2) 506 - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $88,945 111 103 - 129 - 331 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
(In thousands)
Total
All
Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
Investments at net asset value:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total assets $7,694,647 23,285
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges:
Valuemark II & III 1,485 -
Valuemark IV 185 -
Valuemark Charter Traditional - 116
Valuemark Charter Enhanced - 9
Accrued administrative charges:
Valuemark II & III 180 -
Valuemark IV 24 -
Valuemark Charter Traditional - 9
Valuemark Charter Enhanced - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,874 134
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $7,692,773 23,151
- ------------------------------------------------------------------------------------------------------------------------------------
Contract owners' equity:
Contracts in accumulation period:
Valuemark II and III (note 5) $5,883,411 -
Valuemark IV (note 5) 1,741,044 -
Valuemark Charter Traditional (note 6) - 20,713
Valuemark Charter Enhanced (note 6) - 2,438
Contracts in annuity payment period (note 2) 68,318 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total contract owners' equity $7,692,773 23,151
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations
For the year ended December 31, 1999
(In thousands)
Alger Alger Franklin
AIM American Growth American Leverage Global Communications
V.I. Growth Fund Fund AllCap Fund Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $11 - - - - - 30,155 10
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 4 - 5 - 3 - 9,416 -
Valuemark IV 3 - 4 - 3 - 481 -
Valuemark Charter Traditional - - - - - - - 1
Valuemark Charter Enhanced - - - - - - - 1
Administrative charges:
Valuemark II & III 1 - 1 - - - 1,130 -
Valuemark IV - - - - - - 54 -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 8 - 10 - 6 - 11,081 2
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 3 - (10) - (6) - 19,074 8
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 201 - - - - - 73,027 25
Realized gains (losses) on sales of
investments, net 4 - - - 17 - 57,739 (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 205 - - - 17 - 130,766 23
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 359 - 484 - 656 - 108,627 70
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net 564 - 484 - 673 - 239,393 93
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $567 - 474 - 667 - 258,467 101
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Franklin Franklin Franklin Franklin
Global Health Care Growth and Income High Income Income Securities
Securities Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $23 - 38,834 22 77,709 105 74,850 44
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 74 - 11,011 - 3,263 - 9,791 -
Valuemark IV 45 - 1,986 - 1,231 - 1,485 -
Valuemark Charter Traditional - - - 4 - 1 - 4
Valuemark Charter Enhanced - - - 1 - - - 1
Administrative charges:
Valuemark II & III 9 - 1,321 - 392 - 1,175 -
Valuemark IV 5 - 222 - 138 - 166 -
Valuemark Charter Traditional - - - 1 - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 133 - 14,540 6 5,024 1 12,617 5
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (110) - 24,294 16 72,685 104 62,233 39
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - 108,254 62 11,372 13 26,820 16
Realized gains (losses) on sales of
investments, net (444) - 72,697 (27) (13,505) (60) 18,957 -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net (444) - 180,951 35 (2,133) (47) 45,777 16
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments (413) 8 (203,466) (57) (74,035) (58) (135,753) (85)
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net (857) 8 (22,515) (22) (76,168) (105) (89,976) (69)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($967) 8 1,779 (6) (3,483) (1) (27,743) (30)
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Franklin Franklin Franklin Franklin
Large Cap Growth Money Market Natural Resources Real Estate
Securities Fund Fund Securities Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $1,404 1 16,250 111 684 1 16,917 5
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 2,414 - 3,641 - 464 - 2,022 -
Valuemark IV 1,569 - 869 - 88 - 503 -
Valuemark Charter Traditional - 4 - 25 - - - 1
Valuemark Charter Enhanced - 1 - - - - - -
Administrative charges:
Valuemark II & III 290 - 437 - 56 - 243 -
Valuemark IV 176 - 97 - 10 - 56 -
Valuemark Charter Traditional - - - 3 - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 4,449 5 5,044 28 618 - 2,824 1
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (3,045) (4) 11,206 83 66 1 14,093 4
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 23,442 7
Realized gains (losses) on sales of
investments, net 14,374 94 - - (9,180) (11) (920) -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 14,374 94 - - (9,180) (11) 22,522 7
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 74,106 84 - - 20,689 1 (51,341) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net 88,480 178 - - 11,509 (10) (28,819) 7
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
from operations $85,435 174 11,206 83 11,575 (9) (14,726) 11
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Franklin Franklin Franklin Franklin
Rising Dividends S&P 500 Index Small Cap U.S. Government
Securities Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $8,456 5 - - 1,420 - 73,938 257
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 5,510 - 6 - 2,642 - 5,965 -
Valuemark IV 1,184 - 6 - 1,255 - 909 -
Valuemark Charter Traditional - 2 - - - 2 - 12
Valuemark Charter Enhanced - 1 - - - - - 1
Administrative charges:
Valuemark II & III 661 - 1 - 317 - 716 -
Valuemark IV 133 - 1 - 141 - 102 -
Valuemark Charter Traditional - - - - - - - 1
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 7,488 3 14 - 4,355 2 7,692 14
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 968 2 (14) - (2,935) (2) 66,246 243
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 84,717 53 - - 198 - - -
Realized gains (losses) on sales of
investments, net 36,917 (1) - - 15,350 3 3,396 (20)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 121,634 52 - - 15,548 3 3,396 (20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments (184,821) (77) 386 - 211,659 284 (82,778) (250)
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net (63,187) (25) 386 - 227,207 287 (79,382) (270)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($62,219) (23) 372 - 224,272 285 (13,136) (27)
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Franklin Franklin Franklin Franklin
Value Securities Zero Coupon Zero Coupon Zero Coupon
Fund Fund - 2000 Fund - 2005 Fund - 2010
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $27 - 10,170 - 8,132 - 8,748 -
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 91 - 784 - 693 - 719 -
Valuemark IV 52 - 64 - 159 - 211 -
Valuemark Charter Traditional - 1 - - - - - -
Valuemark Charter Enhanced - - - - - - - -
Administrative charges:
Valuemark II & III 11 - 94 - 83 - 86 -
Valuemark IV 6 - 7 - 18 - 24 -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 160 1 949 - 953 - 1,040 -
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (133) (1) 9,221 - 7,179 - 7,708 -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - 1,456 - 407 - 2,122 -
Realized gains (losses) on sales
of investments, net (411) (7) 471 - 1,372 - 322 -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net (411) (7) 1,927 - 1,779 - 2,444 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 309 - (10,114) - (14,138) - (21,090) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net (102) (7) (8,187) - (12,359) - (18,646) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($235) (8) 1,034 - (5,180) - (10,938) -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Mutual Mutual Templeton Templeton
Discovery Securities Shares Securities Developing Markets Global Asset
Fund Fund Equity Fund Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $5,527 6 11,481 11 3,258 2 4,363 3
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 1,136 - 2,422 - 1,619 - 586 -
Valuemark IV 1,340 - 3,346 - 448 - 265 -
Valuemark Charter Traditional - 2 - 4 - 4 - -
Valuemark Charter Enhanced - - - 1 - - - -
Administrative charges:
Valuemark II & III 136 - 291 - 194 - 70 -
Valuemark IV 150 - 375 - 50 - 30 -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 2,762 2 6,434 5 2,311 4 951 -
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 2,765 4 5,047 6 947 (2) 3,412 3
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 4,294 3
Realized gains (losses) on sales
of investments, net 877 - 10,361 (2) (14,723) 263 217 -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 877 - 10,361 (2) (14,723) 263 4,511 3
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 33,265 48 32,828 41 81,897 18 (4,595) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net 34,142 48 43,189 39 67,174 281 (84) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $36,907 52 48,236 45 68,121 279 3,328 4
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Templeton Templeton Templeton Templeton
Global Growth Global Income International International Smaller
Fund Securities Fund Equity Fund Companies Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $14,804 17 8,318 20 43,449 147 658 -
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 6,443 - 1,175 - 8,528 - 158 -
Valuemark IV 2,090 - 155 - 1,149 - 126 -
Valuemark Charter Traditional - 12 - 1 - 29 - 3
Valuemark Charter Enhanced - 1 - - - 1 - -
Administrative charges:
Valuemark II & III 773 - 141 - 1,023 - 19 -
Valuemark IV 234 - 17 - 129 - 14 -
Valuemark Charter Traditional - 1 - - - 3 - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 9,540 14 1,488 1 10,829 33 317 3
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 5,264 3 6,830 19 32,620 114 341 (3)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 71,620 82 - - 22,510 56 - -
Realized gains (losses) on sales
of investments, net 29,748 235 (2,393) - 57,375 870 (948) 137
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 101,368 317 (2,393) - 79,885 926 (948) 137
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 10,044 45 (12,888) (22) 51,890 120 4,893 2
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments,
net 111,412 362 (15,281) (22) 131,775 1,046 3,945 139
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $116,676 365 (8,451) (3) 164,395 1,160 4,286 136
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Templeton USAllianz USAllianz USAllianz
Pacific Growth VIP Diversified VIP Fixed Income VIP Growth
Fund Assets Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2 Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $907 1 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 1,051 - - - - - - -
Valuemark IV 111 - - - - - - -
Valuemark Charter Traditional - 1 - - - - - -
Valuemark Charter Enhanced - - - - - - - -
Administrative charges:
Valuemark II & III 126 - - - - - - -
Valuemark IV 12 - - - - - - -
Valuemark Charter Traditional - - - - - - - -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,300 1 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (393) - - - - - - -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distribution
on mutual funds - - - - - - - -
Realized gains (losses) on sales
of investments, net (3,508) 38 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net (3,508) 38 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 33,561 1 1 - (2) - 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net 30,053 39 1 - (2) - 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $29,660 39 1 - (2) - 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Operations (cont.)
For the year ended December 31, 1999
(In thousands)
Total
All
Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income:
Dividends reinvested in fund shares $460,493 768
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges:
Valuemark II & III 81,636 -
Valuemark IV 21,137 -
Valuemark Charter Traditional - 113
Valuemark Charter Enhanced - 9
Administrative charges:
Valuemark II & III 9,797 -
Valuemark IV 2,367 -
Valuemark Charter Traditional - 9
Valuemark Charter Enhanced - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 114,937 131
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 345,556 637
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds 430,440 317
Realized gains (losses) on sales of investments, net 274,162 1,510
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 704,602 1,827
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments (129,766) 171
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net 574,836 1,998
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $920,392 2,635
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets For the years ended December 31, 1999 and
1998 (In thousands)
AIM V.I. Alger American
Growth Fund Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $3 - - - (10) - - -
Realized gains (losses) on investments,net 205 - - - - - - -
Net change in unrealized appreciation
(depreciation) on investments 359 - - - 484 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
from operations 567 - - - 474 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 27 - - - 6 - - -
Transfers between funds 5,530 - - - 5,632 - - -
Surrenders and terminations (61) - - - (3) - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 4,496 - - - 5,635 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 50 - - - 215 - - -
Transfers between funds 3,764 - - - 4,119 - - -
Surrenders and terminations (18) - - - (10) - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 3,796 - - - 4,324 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 9,859 - - - 10,433 - - -
Net assets at beginning of year - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $9,859 - - - 10,433 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Alger American Franklin Global Communications
Leveraged AllCap Fund Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($6) - - - 19,074 25,465 8 -
Realized gains (losses) on investments, net 17 - - - 130,766 99,245 23 -
Net change in unrealized appreciation
(depreciation) on investments 656 - - - 108,627 (40,032) 70 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
from operations 667 - - - 258,467 84,678 101 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 1 - - - 3,272 7,461 - -
Transfers between funds 3,765 - - - (24,958) (39,931) - -
Surrenders and terminations (9) - - - (250,550)(198,959) - -
Rescissions - - - - (386) (241) - -
Other transactions (note 2) - - - - 476 155 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 3,757 - - - (272,146 (231,515) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 8 - - - 3,917 12,583 - -
Transfers between funds 3,078 - - - 13,001 6,950 - -
Surrenders and terminations (9) - - - (4,391) (1,068) - -
Rescissions - - - - (16) (88) - -
Other transactions (note 2) - - - - 1 5 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 3,077 - - - 12,512 18,382 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - - - - - 179 -
Transfers between funds - - - - - - (19) -
Surrenders and terminations - - - - - - (1) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - - - - - 159 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - - - - - 237 -
Transfers between funds - - - - - - (8) -
Surrenders and terminations - - - - - - (1) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - - - - - 228 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 7,501 - - - (1,167)(128,455) 488 -
Net assets at beginning of year - - - - 904,0911,032,546 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $7,501 - - - 902,924 904,091 488 -
- -----------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Global Health Franklin
Care Securities Fund Growth and Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($110) (42) - - 24,294 22,488 16 -
Realized gains (losses) on investments,
net (444) (205) - - 180,951 128,386 35 -
Net change in unrealized appreciation
(depreciation) on investments (413) 808 8 - (203,466) (73,442) (57) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (967) 561 8 - 1,779 77,432 (6) -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 103 194 - - 8,279 16,130 - -
Transfers between funds 3,399 5,818 - - (16,044) 20,093 - -
Surrenders and terminations (2,835) (190) - - (331,869) (195,983) - -
Rescissions (2) - - - (714) (276) - -
Other transactions (note 2) (3) (1) - - 585 356 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 662 5,821 - - (339,763) (159,680) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 502 1,428 - - 11,510 51,280 - -
Transfers between funds 2,077 1,051 - - 18,552 25,926 - -
Surrenders and terminations (267) (7) - - (18,769) (5,388) - -
Rescissions (2) (258) - - (127) (943) - -
Other transactions (note 2) (1) - - - 78 46 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 2,309 2,214 - - 11,244 70,921 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 36 - - - 1,195 -
Transfers between funds - - (6) - - - (13) -
Surrenders and terminations - - - - - - (634) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 30 - - - 548 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions -Valuemark Charter Enhanced (note 6):
Purchase payments - - 43 - - - 238 -
Transfers between funds - - 2 - - - 7 -
Surrenders and terminations - - - - - - (4) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 45 - - - 241 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 2,004 8,596 83 - (326,740) (11,327) 783 -
Net assets at beginning of year 8,596 - - - 1,203,060 1,214,387 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $10,600 8,596 83 - 876,320 1,203,060 783 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Franklin
High Income Fund Income Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $72,685 33,766 104 - 62,233 77,877 39 -
Realized gains (losses) on investments,
net (2,133) 4,702 (47) - 45,777 48,389 16 -
Net change in unrealized appreciation
(depreciation) on investments (74,035) (38,630) (58) - (135,753) (126,374) (85) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (3,483) (162) (1) - (27,743) (108) (30) -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 1,791 4,834 - - 4,169 13,275 - -
Transfers between funds (18,484) (19,142) - - (69,103) (51,375) - -
Surrenders and terminations (100,108) (71,048) - - (294,539 (219,332) - -
Rescissions (186) (154) - - (1,016) (278) - -
Other transactions (note 2) 173 455 - - 767 411 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (116,814) (85,055) - - (359,722) (257,299) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 7,857 39,346 - - 9,595 42,572 - -
Transfers between funds 2,895 8,234 - - 5,898 14,799 - -
Surrenders and terminations (11,650) (4,106) - - (11,956) (3,538) - -
Rescissions (890) (1,327) - - (122) (530) - -
Other transactions (note 2) 277 50 - - 64 (5) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV (1,511) 42,197 - - 3,479 53,298 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 219 - - - 1,223 -
Transfers between funds - - 260 - - - 12 -
Surrenders and terminations - - (49) - - - (2) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 430 - - - 1,233 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions -Valuemark Charter Enhanced (note 6):
Purchase payments - - 7 - - - 79 -
Transfers between funds - - 14 - - - 17 -
Surrenders and terminations - - (3) - - - (1) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 18 - - - 95 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (121,808) (43,020) 447 - (383,986) (204,109) 1,298 -
Net assets at beginning of year 406,476 449,496 - - 1,101,597 1,305,706 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $284,668 406,476 447 - 717,611 1,101,597 1,298 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Franklin
Large Cap Growth Securities Fund Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($3,045) (1,497) (4) - 11,206 12,915 83 -
Realized gains (losses) on investments,
net 14,374 3,101 94 - - - - -
Net change in unrealized appreciation
(depreciation) on investments 74,106 24,031 84 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 85,435 25,635 174 - 11,206 12,915 83 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 3,422 3,713 - - 7,896 11,342 - -
Transfers between funds 117,374 55,930 - - 194,558 207,647 - -
Surrenders and terminations (81,624) (17,886) - - (276,520)(204,171) - -
Rescissions (255) (8) - - (187) (341) - -
Other transactions (note 2) 151 (19) - - 6,553 824 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 39,068 41,730 - - (67,700) 15,301 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 10,004 21,127 - - 12,863 44,229 - -
Transfers between funds 59,488 17,665 - - 25,077 (20,238) - -
Surrenders and terminations (20,335) (2,192) - - (25,510) (6,316) - -
Rescissions (56) (556) - - (49) (1,952) - -
Other transactions (note 2) 258 1 - - 470 199 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 49,359 36,045 - - 12,851 15,922 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 1,393 - - - 8,404 -
Transfers between funds - - 42 - - - 173 -
Surrenders and terminations - - (920) - - - (103) -
Rescissions - - (274) - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 241 - - - 8,474 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 125 - - - 57 -
Transfers between funds - - - - - - (41) -
Surrenders and terminations - - (4) - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 121 - - - 16 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 173,862 103,410 536 - (43,643) 44,138 8,573 -
Net assets at beginning of year 204,478 101,068 - - 380,935 336,797 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $378,340 204,478 536 - 337,292 380,935 8,573 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Natural Resources Franklin
Securities Fund Real Estate Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $66 75 1 - 14,093 9,568 4 -
Realized gains (losses) on investments,
net (9,180) (13,600) (11) - 22,522 25,702 7 -
Net change in unrealized appreciation
(depreciation) on investments 20,689 (3,804) 1 - (51,341)(105,327) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 11,575 (17,329) (9) - (14,726) (70,057) 11 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 315 899 - - 790 4,373 - -
Transfers between funds (5,419) (5,230) - - (29,234) (48,548) - -
Surrenders and terminations (9,951) (7,877) - - (66,788) (49,929) - -
Rescissions (65) (49) - - (283) (148) - -
Other transactions (note 2) 11 15 - - 46 161 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (15,109) (12,242) - - (95,469) (94,091) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 459 1,717 - - 1,696 16,008 - -
Transfers between funds 923 841 - - (4,570) 1,947 - -
Surrenders and terminations (618) (188) - - (4,367) (1,625) - -
Rescissions (57) (52) - - (7) (202) - -
Other transactions (note 2) (2) (15) - - 26 13 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 705 2,303 - - (7,222) 16,141 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 57 - - - 281 -
Transfers between funds - - 14 - - - 136 -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 71 - - - 417 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 4 - - - 13 -
Transfers between funds - - 2 - - - 2 -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 6 - - - 15 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,829) (27,268) 68 - (117,417)(148,007) 443 -
Net assets at beginning of year 42,211 69,479 - - 265,287 413,294 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $39,382 42,211 68 - 147,870 265,287 443 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Franklin S&P 500
Rising Dividends Securities Fund Index Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $968 (2,149) 2 - (14) - - -
Realized gains (losses) on investments,
net 121,634 134,667 52 - - - - -
Net change in unrealized appreciation
(depreciation) on investments (184,821)(101,514) (77) - 386 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (62,219) 31,004 (23) - 372 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 2,867 10,801 - - 5 - - -
Transfers between funds (38,032) 17,226 - - 7,594 - - -
Surrenders and terminations (174,156)(135,412) - - (181) - - -
Rescissions (316) (207) - - - - - -
Other transactions (note 2) 221 239 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (209,416 (107,353) - - 7,418 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 5,964 36,972 - - 274 - - -
Transfers between funds (282) 17,333 - - 6,114 - - -
Surrenders and terminations (11,026) (3,213) - - (10) - - -
Rescissions (111) (691) - - - - - -
Other transactions (note 2) 115 3 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV (5,340) 50,404 - - 6,378 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 355 - - - - -
Transfers between funds - - 2 - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 357 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 214 - - - - -
Transfers between funds - - (1) - - - - -
Surrenders and terminations - - (1) - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 212 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (276,975) (25,945) 546 - 14,168 - - -
Net assets at beginning of year 683,399 709,344 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $406,424 683,399 546 - 14,168 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Franklin U.S. Government
Small Cap Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($2,935) (4,034) (2) - 66,246 36,201 243 -
Realized gains (losses) on investments,
net 15,548 24,392 3 - 3,396 8,286 (20) -
Net change in unrealized appreciation
(depreciation) on investments 211,659 (31,057) 284 - (82,778) (7,222) (250) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 224,272 (10,699) 285 - (13,136) (37,265) (27) -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 1,798 6,424 - - 2,444 5,708 - -
Transfers between funds 8,311 4,845 - - (16,017) 12,261 - -
Surrenders and terminations (72,615) (36,786) - - (165,246)(126,296) - -
Rescissions (139) (186) - - (1,028) (188) - -
Other transactions (note 2) 302 (15) - - 294 860 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (62,343) (25,718) - - (179,553)(107,655) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 4,252 26,375 - - 7,769 20,857 - -
Transfers between funds 6,853 13,910 - - 15,383 12,943 - -
Surrenders and terminations (9,570) (2,749) - - (7,818) (2,139) - -
Rescissions (56) (368) - - (156) (701) - -
Other transactions (note 2) 112 32 - - 195 4 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 1,591 37,200 - - 15,373 30,964 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 190 - - - 1,598 -
Transfers between funds - - 456 - - - 343 -
Surrenders and terminations - - - - - - (270) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 646 - - - 1,671 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 48 - - - 213 -
Transfers between funds - - 4 - - - 14 -
Surrenders and terminations - - - - - - (7) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 52 - - - 220 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 163,520 783 983 - (177,316) (39,426) 1,864 -
Net assets at beginning of year 299,780 298,997 - - 637,604 677,030 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $463,300 299,780 983 - 460,288 637,604 1,864 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Value Franklin
Securities Fund Zero Coupon Fund - 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($133) (47) (1) - 9,221 5,241 - -
Realized gains (losses) on investments,
net (411) (74) (7) - 1,927 2,396 - -
Net change in unrealized appreciation
(depreciation) on investments 309 (407) - - (10,114) (2,765) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (235) (528) (8) - 1,034 4,872 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 326 190 - - 183 498 - -
Transfers between funds 2,439 6,072 - - (1,531) (4,978) - -
Surrenders and terminations (2,562) (129) - - (20,544) (14,347) - -
Rescissions (1) - - - (4) (4) - -
Other transactions (note 2) (2) (1) - - 117 165 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 200 6,132 - - (21,779) (18,666) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 715 916 - - 340 864 - -
Transfers between funds 1,785 2,211 - - 2,017 1,107 - -
Surrenders and terminations (521) (62) - - (406) (68) - -
Rescissions (1) (4) - - (8) (23) - -
Other transactions (note 2) 6 - - - 3 (6) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 1,984 3,061 - - 1,946 1,874 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 374 - - - - -
Transfers between funds - - (1) - - - - -
Surrenders and terminations - - (258) - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 115 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 22 - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 22 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,949 8,665 129 - (18,799) (11,920) - -
Net assets at beginning of year 8,665 - - - 78,168 90,088 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $10,614 8,665 129 - 59,369 78,168 - -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Franklin Franklin
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $7,179 3,261 - - 7,708 3,294 - -
Realized gains (losses) on investments,
net 1,779 2,485 - - 2,444 5,443 - -
Net change in unrealized appreciation
(depreciation) on investments (14,138) 1,608 - - (21,090) 769 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (5,180) 7,354 - - (10,938) 9,506 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 215 759 - - 206 682 - -
Transfers between funds (950) 3,490 - - 225 4,057 - -
Surrenders and terminations (14,198) (10,720) - - (19,296) (15,533) - -
Rescissions (15) (11) - - (7) (2) - -
Other transactions (note 2) 71 105 - - 230 49 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions
Valuemark II & III (14,877 (6,377) - - (18,642) (10,747) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 1,585 3,307 - - 2,411 5,944 - -
Transfers between funds 3,627 2,192 - - 3,934 3,245 - -
Surrenders and terminations (1,004) (284) - - (1,316) (458) - -
Rescissions (89) (68) - - (84) (20) - -
Other transactions (note 2) 89 (4) - - 5 (2) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV 4,208 5,143 - - 4,950 8,709 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (15,849) 6,120 - - (24,630) 7,468 - -
Net assets at beginning of year 75,278 69,158 - - 85,357 77,889 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $59,429 75,278 - - 60,727 85,357 - -
- -----------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Mutual Discovery Mutual Shares
Securities Fund Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $2,765 (64) 4 - 5,047 (1,566) 6 -
Realized gains (losses) on investments,
net 877 1,768 - - 10,361 4,339 (2) -
Net change in unrealized appreciation
(depreciation) on investments 33,265 (23,026) 48 - 32,828 (15,031) 41 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 36,907 (21,322) 52 - 48,236 (12,258) 45 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 889 6,337 - - 2,270 11,748 - -
Transfers between funds (9,239) 18,856 - - 261 28,224 - -
Surrenders and terminations (37,626) (22,824) - - (73,031) (42,653) - -
Rescissions (62) (132) - - (653) (194) - -
Other transactions (note 2) 110 5 - - 389 59 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (45,928) 2,242 - - (70,764) (2,816) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 3,851 35,649 - - 9,961 85,482 - -
Transfers between funds (3,004) 12,085 - - 6,279 28,604 - -
Surrenders and terminations (12,692) (3,935) - - (27,466) (8,498) - -
Rescissions (169) (577) - - (156) (1,549) - -
Other transactions (note 2) 100 59 - - 247 92 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark IV (11,914) 43,281 - - (11,135) 104,131 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 262 - - - 895 -
Transfers between funds - - (2) - - - (34) -
Surrenders and terminations - - (24) - - - (26) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 236 - - - 835 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 123 - - - 94 -
Transfers between funds - - 4 - - - 6 -
Surrenders and terminations - - (4) - - - (5) -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 123 - - - 95 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (20,935) 24,201 411 - (33,663) 89,057 975 -
Net assets at beginning of year 211,429 187,228 - - 454,050 364,993 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $190,494 211,429 411 - 420,387 454,050 975 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Templeton Developing Templeton Global
Markets Equity Fund Asset Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $947 3,912 (2) - 3,412 1,887 3 -
Realized gains (losses) on
investments, net (14,723) (8,736) 263 - 4,511 4,396 3 -
Net change in unrealized appreciation
(depreciation) on investments 81,897 (51,993) 18 - (4,595) (8,198) (2) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations 68,121 (56,817) 279 - 3,328 (1,915) 4 -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 1,065 4,084 - - 577 1,787 - -
Transfers between funds (9,812) (39,497) - - (8,133) (8,074) - -
Surrenders and terminations (35,896) (26,039) - - (13,638) (8,859) - -
Rescissions (154) (68) - - (16) (7) - -
Other transactions (note 2) 131 (56) - - 43 30 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions-Valuemark II & III(44,666) (61,576) - - (21,167) (15,123) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 2,375 9,390 - - 2,112 6,881 - -
Transfers between funds 164 (1,057) - - (1,245) 525 - -
Surrenders and terminations (2,692) (1,050) - - (2,233) (519) - -
Rescissions (6) (129) - - (2) (14) - -
Other transactions (note 2) 13 (13) - - 39 11 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV (146) 7,141 - - (1,329) 6,884 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 211 - - - 34 -
Transfers between funds - - (225) - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - (14) - - - 34 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 75 - - - 15 -
Transfers between funds - - 2 - - - (1) -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 77 - - - 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 23,309 (111,252) 342 - (19,168) (10,154) 52 -
Net assets at beginning of year 155,788 267,040 - - 77,060 87,214 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $179,097 155,788 342 - 57,892 77,060 52 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Templeton Templeton Global
Global Growth Fund Income Securities Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $5,264 8,781 3 - 6,830 9,058 19 -
Realized gains (losses) on
investments, net 101,368 82,495 317 - (2,393) 263 - -
Net change in unrealized appreciation
(depreciation) on investments 10,044 (44,136) 45 - (12,888) (1,320) (22) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 116,676 47,140 365 - (8,451) 8,001 (3) -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 3,910 10,586 - - 372 983 - -
Transfers between funds (21,594) (41,415) - - (8,997) (13,288) - -
Surrenders and terminations (143,382) (79,015) - - (38,030) (30,382) - -
Rescissions (338) (300) - - (414) (42) - -
Other transactions (note 2) 309 78 - - 37 154 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transaction
- Valuemark II & III (161,095)(110,066) - - (47,032) (42,575) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 12,834 47,491 - - 1,026 3,461 - -
Transfers between funds 8,319 11,653 - - 761 1,385 - -
Surrenders and terminations (17,858) (4,558) - - (1,634) (377) - -
Rescissions (144) (653) - - (5) (12) - -
Other transactions (note 2) 111 (12) - - 5 2 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 3,262 53,921 - - 153 4,459 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 1,732 - - - 437 -
Transfers between funds - - (132) - - - 1 -
Surrenders and terminations - - (863) - - - - -
Rescissions - - (59) - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 678 - - - 438 -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 288 - - - 21 -
Transfers between funds - - 4 - - - (15) -
Surrenders and terminations - - (10) - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 282 - - - 6 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (41,157) (9,005) 1,325 - (55,330) (30,115) 441 -
Net assets at beginning of year 708,508 717,513 - - 136,554 166,669 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $667,351 708,508 1,325 - 81,224 136,554 441 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Templeton Templeton International
International Equity Fund Smaller Companies Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $32,620 18,022 114 - 341 290 (3) -
Realized gains (losses) on investments, net 79,885 112,100 926 - (948) (547) 137 -
Net change in unrealized appreciation
(depreciation) on investments 51,890 (88,725) 120 - 4,893 (3,830) 2 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations 164,395 41,397 1,160 - 4,286 (4,087) 136 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 2,621 8,884 - - 115 865 - -
Transfers between funds (63,288) (92,026) - - (1,461) (3,005) - -
Surrenders and terminations (269,672)(171,313) - - (3,584) (2,234) - -
Rescissions (1,975) (404) - - (3) (24) - -
Other transactions (note 2) 1,097 252 - - 35 10 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (331,217)(254,607) - - (4,898) (4,388) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 3,376 21,502 - - 412 2,980 - -
Transfers between funds (471) 6,064 - - (381) (467) - -
Surrenders and terminations (8,179) (2,654) - - (1,017) (365) - -
Rescissions (40) (95) - - (3) (85) - -
Other transactions (note 2) 68 45 - - 4 (15) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV (5,246) 24,862 - - (985) 2,048 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 2,640 - - - 3 -
Transfers between funds - - (882) - - - (133) -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 1,758 - - - (130) -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 268 - - - 49 -
Transfers between funds - - 12 - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 280 - - - 49 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (172,068)(188,348) 3,198 - (1,597) (6,427) 55 -
Net assets at beginning of year 899,4901,087,838 - - 23,876 30,303 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $727,422 899,490 3,198 - 22,279 23,876 55 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Templeton USAllianz VIP
Pacific Growth Fund Diversified Assets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($393) 3,442 - - - - - -
Realized gains(losses)on investments,net(3,508) (66,038) 38 - - - - -
Net change in unrealized appreciation
(depreciation) on investments 33,561 39,890 1 - 1 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 29,660 (22,706) 39 - 1 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 738 1,634 - - - - - -
Transfers between funds (6,774) (21,917) - - 88 - - -
Surrenders and terminations (29,719) (20,611) - - - - - -
Rescissions (36) (54) - - - - - -
Other transactions (note 2) 11 48 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III (35,780) (40,900) - - 88 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 635 2,042 - - - - - -
Transfers between funds 3,409 282 - - 14 - - -
Surrenders and terminations (795) (205) - - - - - -
Rescissions (3) (42) - - - - - -
Other transactions (note 2) 21 (1) - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 3,267 2,076 - - 14 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 58 - - - - -
Transfers between funds - - (32) - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - 26 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 46 - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - 46 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,853) (61,530) 111 - 103 - - -
Net assets at beginning of year 91,798 153,328 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $88,945 91,798 111 - 103 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
USAllianz VIP USAllianz VIP
Fixed Income Fund Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $- - - - - - - -
Realized gains (losses) on investments, ne - - - - - - - -
Net change in unrealized appreciation
(depreciation) on investments (2) - - - 14 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (2) - - - 14 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments - - - - - - - -
Transfers between funds 126 - - - 224 - - -
Surrenders and terminations - - - - (8) - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark II & III 126 - - - 216 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments - - - - - - - -
Transfers between funds 5 - - - 101 - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 5 - - - 101 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Traditional - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - - - - - - -
Transfers between funds - - - - - - - -
Surrenders and terminations - - - - - - - -
Rescissions - - - - - - - -
Other transactions (note 2) - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from contract transactions -
Valuemark Charter Enhanced - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 129 - - - 331 - - -
Net assets at beginning of year - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $129 - - - 331 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<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 (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999 and 1998
(In thousands)
Total All Funds
- -----------------------------------------------------------------------------------------------------------------------------------
Class 1 Class 2
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $345,556 266,144 637 -
Realized gains (losses) on investments, net 704,602 603,355 1,827 -
Net change in unrealized appreciation
(depreciation) on investments (129,766)(699,727) 171 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations 920,392 169,772 2,635 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark II & III (note 5):
Purchase payments 50,672 134,191 - -
Transfers between funds 456 (3,907) - -
Surrenders and terminations (2,528,241)(1,708,528) - -
Rescissions (8,255) (3,318) - -
Other transactions (note 2) 12,154 4,339 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark II & III (2,473,214)(1,577,223) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark IV (note 5):
Purchase payments 118,568 540,403 - -
Transfers between funds 187,684 169,190 - -
Surrenders and terminations (204,137) (55,562) - -
Rescissions (2,359) (10,939) - -
Other transactions (note 2) 2,304 489 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark IV 102,060 643,581 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Traditional (note 6):
Purchase payments - - 21,776 -
Transfers between funds - - (40) -
Surrenders and terminations - - (3,150) -
Rescissions - - (333) -
Other transactions (note 2) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark Charter Traditional - - 18,253 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions - Valuemark Charter Enhanced (note 6):
Purchase payments - - 2,279 -
Transfers between funds - - 24 -
Surrenders and terminations - - (40) -
Rescissions - - - -
Other transactions (note 2) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
contract transactions - Valuemark Charter Enhanced - - 2,263 -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (1,450,762)(763,870) 23,151 -
Net assets at beginning of year 9,143,5359,907,405 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $7,692,7739,143,535 23,151 -
- ------------------------------------------------------------------------------------------------------------------------------------
<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, 1999
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 select portfolios of AIM Variable Insurance Funds, Inc., The Alger
American Fund, Franklin Templeton Variable Insurance Products Trust (formerly,
Franklin Valuemark Funds), and USAllianz Variable Insurance Products Trust, in
accordance with the selection made by the contract owner. Not all portfolios are
available as investment options for the products which comprise the Variable
Account. The investment advisers for each portfolio are listed in the following
table.
<TABLE>
<CAPTION>
Portfolio Investment Adviser
<S> <C>
AIM VI Growth Fund AIM Advisors, Inc.
Alger American Growth Fund Fred Alger Management, Inc.
Alger American Leveraged AllCap Fund Fred Alger Management, Inc.
Franklin Global Communications Securities
Fund Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund Franklin Advisers, Inc.
Franklin Growth and Income Fund Franklin Advisers, Inc.
Franklin High Income Fund Franklin Advisers, Inc.
Franklin Income Securities Fund Franklin Advisers, Inc.
Franklin Large Cap Growth Securities Fund Franklin Advisers, Inc.
Franklin Money Market Fund Franklin Advisers, Inc.
Franklin Natural Resources Securities Fund Franklin Advisers, Inc.
Franklin Real Estate Fund Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund Franklin Advisory Services, LLC
S&P 500 Index Fund Franklin Advisers,Inc.
Franklin Small Cap Fund Franklin Advisers, Inc.
Franklin U.S. Government Fund Franklin Advisers, Inc.
Franklin Value Securities Fund Franklin Advisory Services, LLC
Franklin Zero Coupon - 2000 Fund Franklin Advisers, Inc.
Franklin Zero Coupon - 2005 Fund Franklin Advisers, Inc.
Franklin Zero Coupon - 2010 Fund Franklin Advisers, Inc.
Mutual Discovery Securities Fund Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund Franklin Mutual Advisers, LLC
Templeton Developing Markets Equity Fund Templeton Asset Management Ltd.
Templeton Global Asset Allocation Fund Templeton Global Advisors Limited
Templeton Global Growth Fund Templeton Global Advisors Limited
Templeton Global Income Securities Fund Franklin Advisers, Inc.
Templeton International Equity Fund Franklin Advisers, Inc.
Templeton International Smaller Companies
Fund Templeton Investment Counsel, Inc.
Templeton Pacific Growth Fund Franklin Advisers, Inc.
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Fixed Income Fund Allianz of America, Inc.
USAllianz VIP Growth Fund Allianz of America, Inc.
<FN>
Certain of the Franklin Templeton Variable Insurance Products Trust portfolios
also have class 2 shares which are available to Valuemark Charter contract
owners.
</FN>
</TABLE>
<PAGE>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
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 AIM Variable Insurance Funds, Inc., The Alger American
Fund, the Franklin Templeton Variable Insurance Products Trust, and the
USAllianz Variable Insurance Products Trust.
Realized investment gains include realized gain distributions received from the
respective portfolios and gains on the sale of portfolio shares as determined by
the average cost method. Realized gain distributions are reinvested in the
respective portfolios. Dividend distributions received from the portfolios are
reinvested in additional shares of the portfolios and are recorded as income to
the Variable Account on the ex-dividend date.
Two Fixed Account investment options are available to deferred annuity contract
owners. A Flexible Fixed Option is available to all deferred annuity contract
owners and a Dollar Cost Averaging Option is available to Valuemark II,
Valuemark III, and Valuemark IV deferred annuity contract owners. These accounts
are comprised of equity and fixed income investments which are part of the
general assets of Allianz Life. The liabilities of the Fixed Accounts 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 Accounts is 3%.
The Franklin Global Health Care Securities Fund and Franklin Value Securities
Fund were added as available investment options on May 1, 1998. On November 12,
1999, the AIM VI Growth Fund, Alger American Growth Fund, Alger American
Leveraged AllCap Fund, Franklin S&P 500 Index Fund, USAllianz VIP Diversified
Assets Fund, USAllianz VIP Fixed Income Fund, and USAllianz VIP Growth Fund were
added as available investment options.
During the year ended December 31, 1999, several portfolios changed their name
as summarized, with the effective date of the change, in the following table.
<TABLE>
<CAPTION>
Current Portfolio Prior Portfolio Name Effective Date
<S> <C> <C>
Franklin Global Communications Securities Fund Franklin Global Utilities Securities FundNovember 15, 1999
Franklin Real Estate Fund Franklin Real Estate Securities Fund November 15, 1999
Franklin Rising Dividends Securities Fund Franklin Rising Dividends Fund November 15, 1999
Franklin U.S. Government Fund Franklin U.S. Government Securities Fund November 15, 1999
Franklin Large Cap Growth Securities Fund Franklin Capital Growth Fund December 15, 1999
</TABLE>
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%, 5%, or 7%. 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>
38
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
2. Significant Accounting Policies (Continued)
Expenses
Asset Based Expenses
A mortality and expense risk charge and an administrative charge are deducted
from the Variable Account on a daily basis. The charges, on an annual basis, are
summarized in the following table.
Mortality and Expense Administrative
Contract Risk Charge Charge
Valuemark II 1.25% 0.15%
Valuemark III 1.25% 0.15%
Valuemark IV 1.34% 0.15%
Valuemark Charter - Traditional 1.00% 0.15%
Valuemark Charter - Enhanced 1.20% 0.15%
Valuemark Income Plus 1.25% 0.15%
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 for Valuemark II, Valuemark III, and Valuemark IV contracts and $40
for Valuemark Charter contracts. Contract maintenance charges paid by the
contract owners during the years ended December 31, 1999 and 1998 were
$4,426,312 and $4,716,335, 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 surrender on Valuemark II, Valuemark III, and Valuemark IV deferred
annuity contracts. This charge applies only to a surrender of purchase payments
received within five years of the date of surrender for Valuemark II and
Valuemark III contracts and within seven years of the date of surrender for
Valuemark IV contracts. The amount of the contingent deferred sales charge is
shown below.
Years Since Contingent Deferred Sales Charge
Payment Valuemark II Valuemark III Valuemark IV
0-1 5% 6% 6%
1-2 5% 5% 6%
2-3 4% 4% 6%
3-4 3% 3% 5%
4-5 1.5% 1.5% 4%
5-6 0% 0% 3%
6-7 0% 0% 2%
7+ 0% 0% 0%
Total contingent deferred sales charges paid by the contract owners during the
years ended December 31, 1999 and 1998 were $16,657,195 and $8,535,795,
respectively.
A systematic withdrawal plan is available to Valuemark II, Valuemark III, and
Valuemark IV deferred annuity contract owners which allows a portion of the
contract value to be withdrawn without incurring a contingent deferred sales
charge. The exercise of the systematic withdrawal plan in any contract year
replaces the penalty free privilege for that year.
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
2. Significant Accounting Policies (Continued)
Contract Based Expenses (Continued)
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 any dollar cost averaging program are not counted.
Total transfer charges paid by the contract owners during the years ended
December 31, 1999 and 1998 were $153,188 and $159,282, respectively. Transfer
charges are reflected in the Statements of Changes in Net Assets as other
transactions. Net transfers from the Fixed Accounts for the years ended December
31, 1999 and 1998 were $188,123,947 and $165,283,144, 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.
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.
<TABLE>
<CAPTION>
3. Capitalization
Allianz Life provides capital for the establishment of new portfolios as
investment options of the Variable Account. The capitalization transactions were
as follows during the years ended December 31, 1999 and 1998.
Capitalization Date of Market Value Date of
Portfolio Amount Capitalization at Withdrawal Withdrawal
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin Global Health Care Securities Fund
- class 1 $250,000 5/1/98 $253,250 12/1/98
Franklin Value Securities Fund - class 1 250,000 5/1/98 192,000 12/1/98
Franklin Global Communications Securities
Fund - class 2 0,000 1/6/99 13,320 12/29/99
Franklin Global Health Care Securities
Fund - class 2 10,000 1/6/99 9,092 12/29/99
Franklin Growth and Income Fund - class 2 10,000 1/6/99 9,852 12/29/99
Franklin High Income Fund - class 2 10,000 1/6/99 9,895 12/29/99
Franklin Income Securities Fund - class 2 10,000 1/6/99 9,674 12/29/99
Franklin Large Cap Growth Securities Fund
- class 2 10,000 1/6/99 12,738 12/29/99
Franklin Money Market Fund - class 2 10,000 1/6/99 10,444 12/29/99
Franklin Natural Resources Securities Fund
- class 2 10,000 1/6/99 12,625 12/29/99
Franklin Real Estate Fund - class 2 10,000 1/6/99 9,141 12/29/99
Franklin Rising Dividends Securities Fund
- class 2 10,000 1/6/99 8,843 12/29/99
Franklin Small Cap Fund - class 2 10,000 1/6/99 18,630 12/29/99
Franklin U.S. Government Fund - class 2 10,000 1/6/99 9,897 12/29/99
Franklin Value Securities Fund - class 2 10,000 1/6/99 9,759 12/29/99
Mutual Discovery Securities Fund - class 2 10,000 1/6/99 11,844 12/29/99
Mutual Shares Securities Fund - class 2 10,000 1/6/99 10,866 12/29/99
Templeton Developing Markets Equity Fund
- class 2 10,000 1/6/99 14,532 12/29/99
Templeton Global Asset Allocation Fund -
class 2 10,000 1/6/99 10,353 12/29/99
Templeton Global Growth Fund - class 2 10,000 1/6/99 11,493 12/29/99
Templeton Global Income Securities Fund -
class 2 10,000 1/6/99 9,355 12/29/99
Templeton International Equity Fund - class 210,000 1/6/99 11,841 12/29/99
Templeton International Smaller Companies Fund -
class 2 10,000 1/6/99 11,922 12/29/99
Templeton Pacific Growth Fund - class 2 10,000 1/6/99 13,447 12/29/99
</TABLE>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
4. 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>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS - Valuemark II, III, and IV Accumulation Unit Activity (In thousands)
Transactions in units for each fund for the years ended December 31, 1999 and
1998 were as follows:
Alger Alger Franklin GlobalFranklin GlobalFranklin
AIM V.I. American AmericanCommunicationsHealth Care Growth and
Growth Growth Leveraged Securities Securities Income
Fund Fund AllCap Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Valuemark II & III
Accumulation units outstanding at December 31, 1997 - - - 39,623 - 46,962
Contract transactions:
Purchase payments - - - 241 20 538
Transfers between funds - - - (1,529) 586 699
Surrenders and terminations - - - (7,481) (20) (7,722)
Rescissions - - - (9) - (11)
Other transactions - - - 6 - 14
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: - - - (8,772) 586 (6,482)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 - - - 30,851 586 40,480
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 3 1 - 96 11 191
Transfers between funds 529 539 341 (870) 351 (589)
Surrenders and terminations (6) - (1) (8,394) (314) (12,443)
Rescissions - - - (12) - (27)
Other transactions - - - 16 - 22
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 526 540 340 (9,164) 48 (12,846)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 526 540 340 21,687 634 27,634
- -----------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 - - - 310 - 2,376
Contract transactions:
Purchase payments - - - 477 147 2,027
Transfers between funds - - - 262 106 1,031
Surrenders and terminations - - - (40) (1) (214)
Rescissions - - - (3) (28) (37)
Other transactions - - - - - 2
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: - - - 696 224 2,809
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 - - - 1,006 224 5,185
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 5 20 1 118 55 390
Transfers between funds 360 396 277 433 220 696
Surrenders and terminations (2) (1) (1) (138) (30) (699)
Rescissions - - - (1) - (5)
Other transactions - - - - - 3
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 363 415 277 412 245 385
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 363 415 277 1,418 469 5,570
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin
Franklin Franklin Large Cap Franklin Natural Franklin
High Income Growth Money Resources Real
Income Securities Securities Market Securities Estate
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark II & III
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1997 18,871 49,811 5,673 20,982 5,709 13,445
Contract transactions:
Purchase payments 223 459 160 566 86 147
Transfers between funds (811) (2,088) 3,882 14,858 (562) (1,976)
Surrenders and terminations (3,310) (8,767) (1,258) (14,408) (777) (1,978)
Rescissions (7) (11) (1) (24) (5) (6)
Other transactions 21 16 (2) 58 2 7
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (3,884) (10,391) 2,781 1,050 (1,256) (3,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 14,987 39,420 8,454 22,032 4,453 9,639
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 69 123 149 180 33 29
Transfers between funds (851) (2,779) 7,093 13,480 (549) (1,316)
Surrenders and terminations (4,711) (11,825) (4,823) (18,739) (992) (2,940)
Rescissions (9) (41) (15) (13) (6) (13)
Other transactions 8 31 9 448 1 2
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (5,494) (14,491) 2,413 (4,644) (1,513) (4,238)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 9,493 24,929 10,867 17,388 2,940 5,401
- -----------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 2,202 2,094 1,957 3,214 304 1,217
Contract transactions:
Purchase payments 1,834 1,710 1,503 3,217 162 604
Transfers between funds 409 599 1,238 (1,515) 73 75
Surrenders and terminations (195) (143) (156) (448) (19) (66)
Rescissions (61) (21) (40) (140) (5) (8)
Other transactions 2 - - 14 (1) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 1,989 2,145 2,545 1,128 210 606
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 4,191 4,239 4,502 4,342 514 1,823
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 366 367 584 690 45 73
Transfers between funds 140 239 3,598 1,872 123 (216)
Surrenders and terminations (550) (463) (1,175) (1,698) (61) (191)
Rescissions (42) (5) (4) (3) (5) -
Other transactions 13 3 16 33 - 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (73) 141 3,019 894 102 (333)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 4,118 4,380 7,521 5,236 616 1,490
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin
Rising Franklin Franklin Franklin Franklin Zero
Dividends S&P 500 Small U.S. Value Coupon
Securities Index Cap Government Securities Fund -
Fund Fund Fund Fund Fund 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark II & III
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1997 33,249 - 16,925 36,347 - 4,523
Contract transactions:
Purchase payments 415 - 348 310 17 25
Transfers between funds 670 - 173 617 718 (249)
Surrenders and terminations (6,653) - (2,575) (6,810) (16) (712)
Rescissions (10) - (13) (10) - -
Other transactions 12 - (2) 46 - 8
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (5,566) - (2,069) (5,847) 719 (928)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 27,683 - 14,856 30,500 719 3,595
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 105 - 96 130 12 9
Transfers between funds (1,898) 745 38 (857) 332 (74)
Surrenders and terminations (8,633) (18) (4,346) (8,796) (336) (989)
Rescissions (16) - (8) (55) - -
Other transactions 11 - 18 16 - 6
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (10,431) 727 (4,202) (9,562) 8 (1,048)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 17,252 727 10,654 20,938 727 2,547
- -----------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 1,991 - 2,965 1,359 - 94
Contract transactions:
Purchase payments 1,788 - 1,762 1,142 109 43
Transfers between funds 843 - 988 693 267 55
Surrenders and terminations (159) - (199) (116) (8) (3)
Rescissions (35) - (27) (38) (1) (1)
Other transactions - - 3 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 2,437 - 2,527 1,681 367 94
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 4,428 - 5,492 3,040 367 188
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 284 26 243 407 80 16
Transfers between funds (31) 601 269 826 221 98
Surrenders and terminations (544) (1) (546) (418) (66) (20)
Rescissions (6) - (4) (8) - -
Other transactions 6 - 6 10 1 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (291) 626 (32) 817 236 94
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 4,137 626 5,460 3,857 603 282
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin Templeton Templeton
Zero Zero Mutual Mutual Developing Global
Coupon Coupon Discovery Shares Markets Asset
Fund - Fund - Securities Securities Equity Allocation
2005 2010 Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark II & III
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1997 2,910 2,998 9,940 18,744 23,005 5,229
Contract transactions:
Purchase payments 32 26 402 795 429 69
Transfers between funds 140 138 1,284 2,150 (4,481) (598)
Surrenders and terminations (451) (582) (1,897) (3,544) (2,951) (646)
Rescissions - - (11) (16) (7) -
Other transactions 4 2 - 4 (6) 2
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (275) (416) (222) (611) (7,016) (1,173)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 2,635 2,582 9,718 18,133 15,989 4,056
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 9 8 56 134 106 21
Transfers between funds (40) 1 (849) (64) (1,139) (601)
Surrenders and terminations (595) (749) (3,134) (5,759) (3,728) (974)
Rescissions (1) - (5) (52) (15) (1)
Other transactions 3 9 10 31 13 3
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (624) (731) (3,922) (5,710) (4,763) (1,552)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 2,011 1,851 5,796 12,423 11,226 2,504
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 161 150 5,461 11,394 2,663 1,008
Contract transactions:
Purchase payments 142 226 2,832 6,911 1,055 487
Transfers between funds 92 120 907 2,362 (154) 34
Surrenders and terminations (12) (17) (338) (718) (121) (38)
Rescissions (3) (1) (45) (123) (16) (1)
Other transactions - - 5 8 (2) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 219 328 3,361 8,440 762 483
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 380 478 8,822 19,834 3,425 1,491
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 66 92 317 780 232 146
Transfers between funds 152 152 (273) 461 1 (90)
Surrenders and terminations (43) (51) (1,040) (2,158) (269) (147)
Rescissions (4) (3) (14) (12) (1) -
Other transactions 4 - 8 19 1 3
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 175 190 (1,002) (910) (36) (88)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 555 668 7,820 18,924 3,389 1,403
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Templeton Templeton
Templeton Global TempletonInternational Templeton USAllianz
Global Income International Smaller Pacific VIP Diversified
Growth Securities Equity Companies Growth Assets
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark II & III
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1997 41,433 9,434 58,179 1,998 15,833 -
Contract transactions:
Purchase payments 569 57 449 35 204 -
Transfers between funds (2,789) (773) (5,188) (288) (2,708) -
Surrenders and terminations (4,973) (1,749) (9,177) (211) (2,662) -
Rescissions (19) (2) (21) (2) (7) -
Other transactions 5 9 14 1 9 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (7,207) (2,458) (13,923) (465) (5,164) -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 34,226 6,976 44,256 1,533 10,669 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 176 22 122 7 69 -
Transfers between funds (1,329) (528) (3,285) (163) (499) 9
Surrenders and terminations (8,200) (2,221) (13,737) (347) (3,171) -
Rescissions (19) (25) (99) - (4) -
Other transactions 18 2 56 4 2 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: (9,354) (2,750) (16,943) (499) (3,603) 9
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 24,872 4,226 27,313 1,034 7,066 9
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 5,525 393 3,122 792 379 -
Contract transactions:
Purchase payments 2,951 202 1,143 271 256 -
Transfers between funds 720 79 307 (52) 53 -
Surrenders and terminations (290) (22) (143) (34) (28) -
Rescissions (41) (1) (5) (8) (5) -
Other transactions (1) - 3 (2) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 3,339 258 1,305 175 276 -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 8,864 651 4,427 967 655 -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 706 58 160 41 65 -
Transfers between funds 454 44 (18) (46) 397 1
Surrenders and terminations (1,013) (96) (407) (97) (78) -
Rescissions (9) - (2) - - -
Other transactions 6 - 4 - 2 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 144 6 (263) (102) 386 1
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 9,008 657 4,164 865 1,041 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. CONTRACT TRANSACTIONS: - VALUEMARK II, III, AND IV ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
USAllianz USAllianz
VIP Fixed VIP Total
Income Growth All
Fund Fund Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark II & III
<S> <C> <C> <C>
Accumulation units outstanding at December 31, 1997 - - 481,823
Contract transactions:
Purchase payments - - 6,622
Transfers between funds - - 1,875
Surrenders and terminations - - (91,330)
Rescissions - - (192)
Other transactions - - 230
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: - - (82,795)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 - - 399,028
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 1,967
Transfers between funds 13 22 5,213
Surrenders and terminations - (1) (130,922)
Rescissions - - (436)
Other transactions - - 739
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 13 21 (123,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 13 21 275,589
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark IV
Accumulation units outstanding at December 31, 1997 - - 51,131
Contract transactions:
Purchase payments - - 33,001
Transfers between funds - - 9,592
Surrenders and terminations - - (3,528)
Rescissions - - (694)
Other transactions - - 33
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: - - 38,404
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31, 1998 - - 89,535
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 6,433
Transfers between funds 1 10 11,368
Surrenders and terminations - - (12,003)
Rescissions - - (128)
Other transactions - - 139
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions: 1 10 5,809
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 1 10 95,344
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS)
Transactions in units for each fund for the period from January 5, 1999 (product inception) to December 31, 1999 follows:
Alger Alger Franklin GlobalFranklin GlobalFranklin
AIM V.I. American AmericanCommunicationsHealth Care Growth and
Growth Growth Leveraged Securities Securities Income
Fund Fund AllCap Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - - 6 4 44
Transfers between funds - - - (1) (1) -
Surrenders and terminations - - - - - (23)
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - - 5 3 21
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - - 5 3 21
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - - 7 5 9
Transfers between funds - - - - - -
Surrenders and terminations - - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - - 7 5 9
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - - 7 5 9
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS)
Transactions in units for each fund for the period from January 5, 1999 (product inception) to December 31, 1999 follows:
Alger Alger FranklinGlobal FranklinGlobal Franklin
AIM V.I. American AmericanCommunicationsHealth Care Growth and
Growth Growth Leveraged Securities Securities Income
Fund Fund AllCap Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - - 6 4 44
Transfers between funds - - - (1) (1) -
Surrenders and terminations - - - - - (23)
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - - 5 3 21
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - - 5 3 21
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - - 7 5 9
Transfers between funds - - - - - -
Surrenders and terminations - - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - - 7 5 9
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - - 7 5 9
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin
Franklin Franklin Large Cap Franklin Natural Franklin
High Income Growth Money Resources Real
Income Securities Securities Market Securities Estate
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 10 48 82 562 5 13
Transfers between funds 12 1 2 7 - 7
Surrenders and terminations (2) - (48) (7) - -
Rescissions - - (17) - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 20 49 19 562 5 20
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 20 49 19 562 5 20
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - 3 7 4 - 1
Transfers between funds 1 1 - (3) - -
Surrenders and terminations - - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 1 4 7 1 - 1
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 1 4 7 1 - 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin
Rising Franklin Franklin Franklin Franklin Zero
Dividends S&P 500 Small U.S. Value Coupon
Securities Index Cap Government Securities Fund -
Fund Fund Fund Fund Fund 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 18 - 11 83 48 -
Transfers between funds - - 21 18 - -
Surrenders and terminations - - - (14) (34) -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 18 - 32 87 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 18 - 32 87 14 -
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 11 - 3 11 3 -
Transfers between funds - - - 1 - -
Surrenders and terminations - - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 11 - 3 12 3 -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 11 - 3 12 3 -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Franklin Franklin Templeton Templeton
Zero Zero Mutual Mutual Developing Global
Coupon Coupon Discovery Shares Markets Asset
Fund - Fund - Securities Securities Equity Allocation
2005 2010 Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 22 70 21 2
Transfers between funds - - - (3) - -
Surrenders and terminations - - (2) (2) - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - 20 65 21 2
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - 20 65 21 2
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 10 7 7 1
Transfers between funds - - - 1 - -
Surrenders and terminations - - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - 10 8 7 1
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - 10 8 7 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
Templeton Templeton
Templeton Global TempletonInternational Templeton USAllianz
Global Income International Smaller PacificVIP Diversified
Growth Securities Equity Companies Growth Assets
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 97 25 130 - 6 -
Transfers between funds 3 - (6) - - -
Surrenders and terminations (46) - - - - -
Rescissions (3) - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 51 25 124 - 6 -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 51 25 124 - 6 -
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments 16 1 13 4 4 -
Transfers between funds - (1) 1 - - -
Surrenders and terminations (1) - - - - -
Rescissions - - - - - -
Other transactions - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions 15 - 14 4 4 -
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 15 - 14 4 4 -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
6. CONTRACT TRANSACTIONS: - VALUEMARK CHARTER ACCUMULATION UNIT ACTIVITY (IN THOUSANDS) (CONTINUED)
USAllianz USAllianz
VIP Fixed VIP Total
Income Growth All
Fund Fund Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Traditional
<S> <C> <C> <C>
Accumulation units outstanding at December 31, 1998 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 1,307
Transfers between funds - - 60
Surrenders and terminations - - (178)
Rescissions - - (20)
Other transactions - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - 1,169
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - 1,169
- -----------------------------------------------------------------------------------------------------------------------------------
Valuemark Charter Enhanced
Accumulation units outstanding at December 31, 1998 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Contract transactions:
Purchase payments - - 127
Transfers between funds - - 1
Surrenders and terminations - - (1)
Rescissions - - -
Other transactions - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in accumulation
units resulting from contract transactions - - 127
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding at December 31,1999 - - 127
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
7. UNIT VALUES - VALUEMARK II, III, AND IV
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,
1999 follows.
Valuemark II & III Valuemark IV
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units Outstanding AccumulationNet Assetsto Average Units OutstandingAccumulation Net Assets to Average
(in thousands) Unit Value(in thousands)Net Assets* (in thousands) Unit Value(in thousands) Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund
December 31,
19991 526 $11.084 $5,833 2.13+% 363 $11.083 $4,026 2.22+%
Alger American Growth Fund
December 31,
19991 540 10.922 5,894 2.19+ 415 10.921 4,535 2.28+
Alger American Leveraged AllCap Fund
December 31,
19991 340 12.160 4,137 2.33+ 277 12.159 3,364 2.42+
Franklin Global Communications Securities Fund
December 31,
1999 21,687 38.917 844,307 1.91 1,418 38.572 54,724 2.00
1998 30,851 28.308 873,319 1.90 1,006 28.082 28,248 1.99
1997 39,623 25.818 1,022,994 1.90 310 25.635 7,959 1.99
1996 53,086 20.654 1,097,873 1.90 - - - -
1995 66,669 19.565 1,305,495 1.90 - - - -
Franklin Global Health Care Securities Fund
December 31,
1999 634 9.615 6,088 2.22 469 9.601 4,512 2.31
19982 586 10.610 6,215 2.24+ 224 11 2,381 2.33+
Franklin Growth and Income Fund
December 31,
1999 27,634 26.147 722,583 1.89 5,570 25.891 144,218 1.98
1998 40,480 26.226 1,061,658 1.89 5,185 25.993 134,775 1.98
1997 46,962 24.551 1,152,961 1.89 2,376 24.354 57,877 1.98
1996 50,027 19.490 977,110 1.90 - - - -
1995 46,893 17.310 812,732 1.92 - - - -
Franklin High Income Fund
December 31,
1999 9,493 20.900 198,407 1.94 4,118 20.695 85,209 2.03
1998 14,987 21.208 317,865 1.93 4,191 21.020 88,069 2.02
1997 18,871 21.312 402,167 1.93 2,202 21.141 46,545 2.02
1996 20,736 19.375 402,379 1.94 - - - -
1995 18,756 17.252 323,580 1.96 - - - -
Franklin Income Securities Fund
December 31,
1999 24,929 24.323 606,369 1.90 4,380 24.084 105,486 1.99
1998 39,420 25.122 990,325 1.89 4,239 24.898 105,543 1.98
1997 49,811 25.065 1,248,520 1.90 2,094 24.864 52,069 1.99
1996 57,504 21.708 1,251,844 1.90 - - - -
1995 59,309 19.785 1,175,143 1.91 - - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)
Valuemark II & III Valuemark IV
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units Outstanding AccumulationNet Assets to Average Units OutstandingAccumulation Net Assets to Average
(in thousands) Unit Value(in thousands)Net Assets* (in thousands)Unit Value (in thousands) NetAssets*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Large Cap Growth Securities Fund
December 31,
1999 10,867 $20.218 $219,679 2.17% 7,521 $20.152 $151,537 2.26%
1998 8,454 15.574 131,652 2.17 4,502 15.537 69,939 2.26
1997 5,673 13.130 74,473 2.17 1,967 13.110 25,654 2.26
19963 3,722 11.254 42,110 2.17+ - - - -
Franklin Money Market Fund
December 31,
1999 17,388 14.860 258,373 1.93 5,236 14.717 77,050 2.02
1998 22,032 14.386 316,921 1.85 4,342 14.260 61,911 1.94
1997 20,892 13.865 290,904 1.85 3,214 13.756 44,200 1.94
1996 28,060 13.359 375,629 1.83 - - - -
1995 31,040 12.883 399,935 1.80 - - - -
Franklin Natural Resources Securities Fund
December 31,
1999 2,940 11.092 32,615 2.06 616 10.983 6,761 2.15
1998 4,453 8.505 37,878 2.04 514 8.430 4,332 2.13
1997 5,709 11.559 65,992 2.09 304 11.466 3,482 2.18
1996 6,998 14.467 101,248 2.05 - - - -
1995 6,919 14.109 97,630 2.06 - - - -
Franklin Real Estate Fund
December 31,
1999 5,401 21.386 115,525 1.98 1,490 21.176 31,567 2.07
1998 9,639 23.107 222,740 1.94 1,823 22.901 41,773 2.03
1997 13,445 28.169 378,751 1.94 1,217 27.944 34,023 2.03
1996 12,757 23.668 301,974 1.97 - - - -
1995 10,998 18.073 198,773 1.99 - - - -
Franklin Rising Dividends Securities Fund
December 31,
1999 17,252 18.846 325,172 2.15 4,137 18.712 77,429 2.24
1998 27,683 21.165 585,952 2.12 4,428 21.034 93,151 2.21
1997 33,249 20.074 667,473 2.14 1,991 19.968 39,752 2.23
1996 35,569 15.303 545,127 2.16 - - - -
1995 33,789 12.498 422,992 2.18 - - - -
Franklin S&P 500 Index Fund
December 31,
19991 727 10.467 7,613 1.95+ 626 10.465 6,555 2.04+
Franklin Small Cap Fund
December 31,
1999 10,654 28.353 302,040 2.17 5,460 28.247 154,275 2.26
1998 14,856 14.600 216,872 2.17 5,492 14.558 79,977 2.26
1997 16,925 14.952 253,045 2.17 2,965 14.923 44,268 2.26
1996 12,784 12.913 165,578 2.17 - - - -
19954 1,302 10.146 13,260 2.30+ - - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)
Valuemark II & III Valuemark IV
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
(in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin U.S. Government Fund
December 31,
1999 20,938 $18.574 $388,862 1.91% 3,857 $18.394 $70,974 2.00%
1998 30,500 19.014 579,909 1.90 3,040 18.847 57,334 1.99
1997 36,347 17.947 652,317 1.90 1,359 17.805 24,222 1.99
1996 44,598 16.650 742,973 1.91 - - - -
1995 34,313 16.298 559,234 1.92 - - - -
Franklin Value Securities Fund
December 31,
1999 727 7.736 5,614 2.21+ 603 7.724 4,657 2.30+
19982 719 7.717 5,542 2.52+ 367 7.713 2,834 2.61+
Franklin Zero Coupon Fund - 2000
December 31,
1999 2,547 21.023 53,526 2.05 282 20.819 5,831 2.14
1998 3,595 20.684 74,353 1.80 188 20.502 3,815 1.89
1997 4,523 19.512 88,260 1.80 94 19.358 1,801 1.89
1996 5,636 18.475 104,125 1.80 - - - -
1995 6,066 18.294 110,965 1.80 - - - -
Franklin Zero Coupon Fund - 2005
December 31,
1999 2,011 23.205 46,679 2.05 555 22.983 12,750 2.14
1998 2,635 25.003 65,876 1.80 380 24.786 9,402 1.89
1997 2,910 22.532 65,573 1.80 161 22.357 3,585 1.89
1996 3,579 20.517 73,434 1.80 - - - -
1995 3,504 20.914 73,292 1.80 - - - -
Franklin Zero Coupon Fund - 2010
December 31,
1999 1,851 24.164 44,759 2.05 668 23.929 15,961 2.14
1998 2,582 27.920 72,114 1.80 478 27.674 13,233 1.89
1997 2,998 24.740 74,199 1.80 150 24.544 3,676 1.89
1996 3,297 21.522 70,969 1.80 - - - -
1995 3,437 22.431 77,136 1.80 - - - -
Mutual Discovery Securities Fund
December 31,
1999 5,796 13.701 79,396 2.41 7,820 13.662 106,824 2.50
1998 9,718 11.226 109,094 2.40 8,822 11.205 98,842 2.49
1997 9,940 11.983 119,104 2.46 5,461 11.971 65,375 2.55
19965 1,471 10.180 15,074 2.77+ - - - -
Mutual Shares Securities Fund
December 31,
1999 12,423 13.237 164,442 2.19 18,924 13.199 249,799 2.28
1998 18,133 11.837 214,642 2.17 19,834 11.814 234,337 2.26
1997 18,744 11.993 224,796 2.20 11,394 11.981 136,521 2.29
19965 2,613 10.330 27,141 2.40+ - - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)
Valuemark II & III Valuemark IV
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
(in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Templeton Developing Markets Equity Fund
December 31,
1999 11,226 $12.188 $136,842 2.79% 3,389 $12.125 $41,093 2.88%
1998 15,989 7.993 127,804 2.81 3,425 7.958 27,259 2.90
1997 23,005 10.340 237,895 2.82 2,663 10.305 27,448 2.91
1996 22,423 11.487 259,346 2.89 - - - -
1995 15,618 9.582 150,481 2.81 - - - -
Templeton Global Asset Allocation Fund
December 31,
1999 2,504 14.408 36,071 2.22 1,403 14.347 20,133 2.31
1998 4,056 13.589 55,102 2.24 1,491 13.543 20,200 2.33
1997 5,229 13.786 72,082 2.34 1,008 13.752 13,864 2.43
1996 4,104 12.514 52,117 2.26 - - - -
19956 1,338 10.591 14,234 2.30+ - - - -
Templeton Global Growth Fund
December 31,
1999 24,872 19.466 484,117 2.28 9,008 19.364 174,453 2.37
1998 34,226 16.309 558,162 2.28 8,864 16.238 143,943 2.37
1997 41,433 15.176 628,785 2.28 5,525 15.124 83,558 2.37
1996 40,327 13.560 550,066 2.33 - - - -
1995 28,309 11.339 322,284 2.37 - - - -
Templeton Global Income Securities Fund
December 31,
1999 4,226 16.635 70,284 2.05 657 16.472 10,843 2.14
1998 6,976 17.905 124,899 2.03 651 17.746 11,582 2.12
1997 9,434 16.957 159,973 2.02 393 16.821 6,620 2.11
1996 11,857 16.781 198,968 2.01 - - - -
1995 14,181 15.522 220,143 2.04 - - - -
Templeton International Equity Fund
December 31,
1999 27,313 23.022 628,777 2.30 4,164 22.858 95,194 2.39
1998 44,256 18.437 815,915 2.28 4,427 18.322 81,113 2.37
1997 58,179 17.711 1,030,420 2.29 3,122 17.617 55,008 2.38
1996 64,375 16.081 1,036,583 2.29 - - - -
1995 59,883 13.263 794,670 2.32 - - - -
Templeton International Smaller Companies Fund
December 31,
1999 1,034 11.441 11,825 2.51 865 11.403 9,864 2.60
1998 1,533 9.364 14,354 2.50 967 9.342 9,037 2.59
1997 1,998 10.825 21,626 2.46 792 10.809 8,557 2.55
19963 1,388 11.145 15,527 2.18+ - - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
7. UNIT VALUES - VALUEMARK II, III, AND IV (CONTINUED)
Valuemark II & III Valuemark IV
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
(in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands) Net Assets*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Templeton Pacific Growth Fund
December 31,
1999 7,066 $10.915 $77,144 2.48% 1,041 $10.838 $11,295 2.57%
1998 10,669 8.078 86,200 2.50 655 8.028 5,274 2.59
1997 15,833 9.431 149,327 2.43 379 9.381 3,566 2.52
1996 22,061 14.932 330,159 2.39 - - - -
1995 22,483 13.630 306,843 2.41 - - - -
USAllianz VIP Diversified Assets Fund
December 31,
19991 9 10.170 88 2.40+ 1 10.168 15 2.49+
USAllianz VIP Fixed Income Fund
December 31,
19991 13 9.751 124 2.15+ 1 9.749 5 2.24+
USAllianz VIP Growth Fund
December 31,
19991 21 10.733 226 2.30+ 10 10.731 105 2.39+
<FN>
* For the year ended December 31, including the effect of the expenses of the
underlying funds.
+ Annualized.
1 Period from November 12, 1999 (fund commencement) to December 31, 1999.
2 Period from May 1, 1998 (fund commencement) to December 31, 1998.
3 Period from May 1, 1996 (fund commencement) to December 31, 1996.
4 Period from November 1, 1995 (fund commencement) to December 31, 1995.
5 Period from November 8, 1996 (fund commencement) to December 31, 1996.
6 Period from May 1, 1995 (fund commencement) to December 31, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
8. UNIT VALUES - VALUEMARK CHARTER
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 the period from January 5, 1999 (product inception) to
December 31, 1999 follows.
Valuemark Charter Traditional Valuemark Charter Enhanced
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
(in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands)Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Global Communications Securities Fund
December 31, 1999 5 $39.861 $213 1.92% 7 $39.011 $275 2.12%
Franklin Global Health Care Securities Fund
December 31, 1999 3 9.626 33 2.22 5 9.594 50 2.42
Franklin Growth and Income Fund
December 31, 1999 21 26.792 545 1.90 9 26.220 238 2.10
Franklin High Income Fund
December 31, 1999 20 21.405 429 1.94 1 20.949 18 2.14
Franklin Income Securities Fund
December 31, 1999 49 24.923 1,206 1.90 4 24.391 92 2.10
Franklin Large Cap Growth Securities Fund
December 31, 1999 19 20.337 392 2.17 7 20.188 144 2.37
Franklin Money Market Fund
December 31, 1999 562 15.225 8,557 1.94 1 14.901 16 2.14
Franklin Natural Resources Securities Fund
December 31, 1999 5 11.374 62 2.07 - 11.131 6 2.27
Franklin Real Estate Fund
December 31, 1999 20 21.919 429 1.98 1 21.452 14 2.18
Franklin Rising Dividends Securities Fund
December 31, 1999 18 19.156 340 2.16 11 18.857 206 2.36
Franklin Small Cap Fund
December 31, 1999 32 28.565 904 2.17 3 28.328 79 2.37
Franklin U.S. Government Fund
December 31, 1999 87 19.049 1,647 1.92 12 18.643 217 2.12
Franklin Value Securities Fund
December 31, 1999 14 7.749 108 2.21 3 7.753 21 2.41
Mutual Discovery Securities Fund
December 31, 1999 20 13.779 275 2.42 10 13.692 136 2.62
Mutual Shares Securities Fund
December 31, 1999 65 13.362 875 2.19 8 13.278 100 2.39
Templeton Developing Markets Equity Fund
December 31, 1999 21 12.331 253 2.82 7 12.189 89 3.02
Templeton Global Asset Allocation Fund
December 31, 1999 2 17.693 36 2.22 1 17.527 16 2.42
Templeton Global Growth Fund
December 31, 1999 51 19.717 1,012 2.29 15 19.490 313 2.49
Templeton Global Income Securities Fund
December 31, 1999 25 17.033 435 2.06 - 16.670 6 2.26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account B
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
8. UNIT VALUES - VALUEMARK CHARTER (CONTINUED)
Valuemark Charter Traditional Valuemark Charter Enhanced
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of
Accumulation Expenses Accumulation Expenses
Units OutstandingAccumulationNet Assetsto Average Units OutstandingAccumulationNet Assetsto Average
(in thousands)Unit Value(in thousands)Net Assets* (in thousands)Unit Value(in thousands Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Templeton International Equity Fund
December 31, 1999 124 $23.368 $2,895 2.32% 14 $23.004 $303 2.52%
Templeton International Smaller Companies Fund
December 31, 1999 - 11.547 4 2.53 4 11.462 51 2.73
Templeton Pacific Growth Fund
December 31, 1999 6 11.121 63 2.51 4 10.948 48 2.71
<FN>
* For the year ended December 31, including the effect of the expenses of the
underlying funds.
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and 1998
Allianz Life Insurance Company of North America
And Subsidiaries
Independent Auditors' Report
The Board of Directors
Allianz Life Insurance Company of North America and subsidiaries:
We have audited the accompanying consolidated balance sheets of Allianz Life
Insurance Company of North America and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations, comprehensive
(loss) income, stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1999. 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, 1999
and 1998, and the results of their operations and cash flows for each of the
years in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of calculating deferred acquisition costs and future benefit
reserves for two-tiered annuities.
KPMG LLP
February 7, 2000
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Balance Sheets
December 31, 1999 and 1998 (in thousands)
Assets 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments:
Fixed maturities, at fair value $ 4,582,350 2,538,291
Equity securities, at fair value 675,541 512,404
Mortgage loans on real estate 528,933 457,128
Certificates of deposit and short-term securities 139,571 166,366
Policy loans 46,573 7,118
Real estate 154,063 80,637
Options 68,217 15,109
Investment in equity investments 3,045 80,928
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments 6,198,293 3,857,981
Cash 58,110 67,195
Accrued investment income 73,774 36,649
Receivables (net of allowance for uncollectible accounts of
$3,395 in 1999 and $3,254 in 1998) 310,866 323,971
Reinsurance recoverable:
Funds held on deposit 1,151,941 1,170,170
Recoverable on future policy benefit reserves 3,330,612 1,191,098
Recoverable on unpaid claims 405,086 293,179
Receivable on paid claims 74,483 24,986
Goodwill (net of accumulated amortization of $3,847 in 1999) 304,561 0
Value of business acquired 210,363 0
Deferred acquisition costs 801,763 930,059
Other assets 55,811 35,755
Federal income tax recoverable 10,484 4,060
- ------------------------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 12,986,147 7,935,103
Separate account assets 8,488,404 9,915,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $21,474,551 17,850,253
- ------------------------------------------------------------------------------------------------------------------------------------
<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, 1999 and 1998 (in thousands)
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities Future benefit reserves:
Life $ 1,874,904 1,445,844
Annuity 7,796,583 3,588,491
Policy and contract claims 927,915 770,846
Unearned premiums 49,013 53,778
Reinsurance payable 212,239 129,397
Deferred income on reinsurance 186,888 106,065
Deferred income taxes 51,356 257,903
Accrued expenses 108,232 91,631
Commissions due and accrued 55,904 41,000
Other policyholder funds 77,782 20,586
Other liabilities 98,251 89,038
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 11,439,067 6,594,579
Separate account liabilities 8,488,404 9,915,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 19,927,471 16,509,729
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1 par value, 20 million shares authorized, issued and outstanding 20,000 20,000
Additional paid-in capital 830,274 407,088
Retained earnings 632,320 673,857
Accumulated other comprehensive income 64,486 239,579
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,547,080 1,340,524
Commitments and contingencies (notes 7 and 12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $21,474,551 17,850,253
- ------------------------------------------------------------------------------------------------------------------------------------
<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 Operations
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 447,026 416,199 339,841
Other life policy considerations 31,786 52,668 83,816
Annuity considerations 239,070 222,632 219,262
Accident and health premiums 843,906 773,570 747,718
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,561,788 1,465,069 1,390,637
Premiums and annuity considerations ceded 478,239 411,316 438,018
- ------------------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 1,083,549 1,053,753 952,619
Investment income, net 274,860 217,066 162,350
Realized investment gains 112,253 89,226 61,488
Other 72,301 78,174 53,760
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,542,963 1,438,219 1,230,217
- ------------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 382,464 461,891 336,090
Annuity benefits 243,398 251,463 206,189
Accident and health insurance benefits 765,257 623,640 566,746
- ------------------------------------------------------------------------------------------------------------------------------------
Total benefits 1,391,119 1,336,994 1,109,025
Benefit recoveries 443,441 501,719 426,607
- ------------------------------------------------------------------------------------------------------------------------------------
Net benefits 947,678 835,275 682,418
Commissions and other agent compensation 304,816 322,697 310,665
General and administrative expenses 162,798 116,007 106,744
Taxes, licenses and fees 26,292 15,848 20,605
Amortization of goodwill 3,847 0 0
Amortization of value of business acquired, net of interest credited 4,161 0 0
Change in deferred acquisition costs, net 129,142 (2,979) (63,742)
- ------------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 1,578,734 1,286,848 1,056,690
- ------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from operations before income taxes (35,771) 151,371 173,527
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense: Current 63,371 48,410 31,571
Deferred (73,727) 2,822 28,283
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense (10,356) 51,232 59,854
- ------------------------------------------------------------------------------------------------------------------------------------
(Loss) income before cumulative effect of change in accounting (25,415) 100,139 113,673
Cumulative effect of change in accounting, net of tax benefit of $8,682 (16,122) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
<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 Comprehensive (Loss) Income
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss) gain:
Foreign currency translation adjustments, net of tax 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized (losses) gains on fixed maturities and equity securities: Unrealized
holding (losses) gains arising during the period net of tax (benefit) expense of
$(55,781), $57,703 and $71,594 in 1999, 1998,
and 1997, respectively (103,590) 107,162 132,961
Reclassification adjustment for gains included in net income, net of tax
expense of $39,289, $30,627, and $21,588 in 1999, 1998, and 1997,
respectively 72,964 56,879 40,093
- ------------------------------------------------------------------------------------------------------------------------------------
Total unrealized holding (losses) gains (176,554) 50,283 92,868
- ------------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive (loss) income (175,093) 48,522 91,893
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive (loss) income $ (216,630) 148,661 205,566
- ------------------------------------------------------------------------------------------------------------------------------------
<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, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning and end of year $ 20,000 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred stock:
Balance at beginning of year 0 25,000 25,000
Redemption of stock during the year 0 (25,000) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 0 0 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital: Balance at beginning of year 407,088 407,088 407,088
Capital contribution 423,186 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 830,274 407,088 407,088
- ------------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 673,857 574,447 462,925
Net income 41,537) 100,139 113,673
Cash dividend to stockholder 0 (729) (2,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 632,320 673,857 574,447
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income: Accumulated unrealized holding gain:
Balance at beginning of year 245,788 195,505 102,637
Net unrealized gain (loss) on investments
during the year, net of deferred federal income taxes (176,554) 50,283 92,868
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 69,234 245,788 195,505
Accumulated unrealized foreign currency (loss):
Balance at beginning of year (6,209) (4,448) (3,473)
Net unrealized gain (loss) on foreign currency
translation during the year, net of deferred federal income taxes 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (4,748) (6,209) (4,448)
- ------------------------------------------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income 64,486 239,579 191,057
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $1,547,080 1,340,524 1,217,592
- ------------------------------------------------------------------------------------------------------------------------------------
<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, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Realized investment gains (112,253) (89,226) (61,488)
Deferred federal income tax expense (82,409) 2,822 28,283
Charges to policy account balances (66,945) (104,681) (148,159)
Interest credited to policy account balances 251,303 262,956 251,182
Change in:
Accrued investment income (1,921) 1,696 (2,215)
Receivables 17,873 (61,295) (107,398)
Reinsurance recoverable (435,498) (162,959) (1,205,410)
Deferred acquisition costs 128,296 (2,979) (63,742)
Future benefit reserves (136,722) 25,183 138,370
Policy and contract claims and other policyholder funds 184,939 154,213 92,230
Unearned premiums (4,765) 3,610 17,992
Reinsurance payable 13,820 17,713 68,725
Current tax recoverable (6,424) 16,701 (8,306)
Accrued expenses and other liabilities (31,349) 14,797 12,113
Commissions due and accrued 5,627 1,483 2,414
Depreciation and amortization (5,917) (12,711) (13,312)
Equity in earnings of equity investments (690) (2,207) 0
Other, net (1,151) 94 18
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments (284,186) 65,210 (998,703)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (325,723) 165,349 (885,030)
- ------------------------------------------------------------------------------------------------------------------------------------
<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)
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows (used in) provided by operating activities $ (325,723) 165,349 (885,030)
Cash flows (used in) provided by investing activities:
Purchase of fixed maturities (1,171,682) (1,256,653) (1,748,950)
Purchase of equity securities (404,985) (1,518,096) (1,699,847)
Purchase of real estate (66,502) (36,367) (8,398)
Purchase of options (32,617) (11,503) (3,482)
Funding of mortgage loans (114,840) (168,870) (103,626)
Sale of fixed maturities 1,123,115 1,460,969 1,921,534
Matured fixed maturities 21,280 28,152 1,150
Sale of equity securities 385,559 1,560,695 1,691,789
Sale of real estate 0 7,103 551
Repayment of mortgage loans 41,355 29,105 29,520
Net change in certificates of deposit and short-term securities 38,121 (49,242) 87,848
Purchase of Life USA, net of cash acquired (370,881) (79,091) 0
Other (5,438) (5,489) 94,126
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (557,515) (39,287) 262,215
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) financing activities:
Policyholders' deposits to account balances 1,033,877 864,446 748,430
Policyholders' withdrawals from account balances (663,733) (562,667) (524,579)
Change in assets held under reinsurance agreements 80,823 7,876 150,526
Funds (repaid) borrowed on dollar reverse repurchase agreements, net 0 (369,664) 239,468
Capital contribution 423,186 0 0
Redemption of preferred stock 0 (25,000) 0
Cash dividends paid 0 (729) (2,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 874,153 (85,738) 611,694
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash (9,085) 40,324 (11,121)
Cash at beginning of year 67,195 26,871 37,992
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 58,110 67,195 26,871
- ------------------------------------------------------------------------------------------------------------------------------------
<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)
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of noncash transactions:
Fair value of assets acquired in acquisition of LifeUSA:
Fixed maturities $ 2,283,214 0 0
Equity securities 21,358 0 0
Certificates of deposit and short-term securities 11,285 0 0
Policy loans 37,618 0 0
Options 20,491 0 0
Cash 62,767 0 0
Accrued investment income 35,204 0 0
Receivables (net of allowance for uncollectible accounts of $145) 4,768 0 0
Recoverable on future policy benefit reserves - annuity 3,023,377 0 0
Deferred tax asset 29,825 0 0
Other assets 21,291 0 0
Liabilities assumed in acquisition of LifeUSA:
Future policy benefit reserves - annuity 5,395,155 0 0
Reinsurance payable 69,022 0 0
Accrued expenses 14,611 0 0
Commissions due and accrued 9,277 0 0
Other policyholder funds 29,729 0 0
Other liabilities 42,552 0 0
<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, 1999, 1998 and 1997 (in thousands, except share data)
(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 wholly owned subsidiary of
Allianz Aktiengesellschaft Holding (Allianz AG), a Federal Republic of Germany
company.
The Company is a life insurance company that is licensed to sell group and
individual life, annuity and accident and health policies in the United States,
Canada and several U.S. territories. Based on 1999 net revenues and
considerations, 36%, 18% and 46% 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, third party
marketing organizations and with independent agents. The Company has a
significant relationship with The Franklin Templeton Group and its broker/dealer
network related to sales of its variable life and variable annuity products.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major subsidiaries, Life USA Holding,
Inc. (Life USA) and Preferred Life Insurance Company of New York, and other less
significant subsidiaries have been consolidated. The consolidated financial
statements only include the results of Life USA's operations subsequent to
October 1, 1999, the date of its acquisition by the Company (see note 2). 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.
Traditional Life, Group Life and Group Accident and Health Insurance
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.
Nontraditional and Variable Life and Annuity Business
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
Value of Business Acquired and Goodwill
The value of insurance in force purchased is recorded as the value of business
acquired (VOBA). The initial value was determined by an actuarial study using
the present value of future profits in calculating the value of the insurance
purchased. An accrual of interest is added to the unamortized balance using the
rates credited to the policyholder accounts. The balance is amortized in
relation to the present value of expected future gross profits in the same
manner as deferred acquisition costs. The amortization period is expected to be
approximately 20 years from the date the business was acquired. The activity in
the VOBA balance for 1999 is summarized below.
Balance, beginning of year$ 0
Additions 214,524
Interest 1,975
Amortization (6,136)
------
Balance, end of year 210,363
------
The amortization of the VOBA in each of the next five years is expected to be:
2000 - $21,491; 2001 - $20,123; 2002 - $18,329; 2003 - $18,105; and 2004 -
$16,958.
Goodwill is the excess of the amount paid to acquire a company over the fair
value of its net assets and VOBA, reduced by amortization and valuation
adjustments, if any. Goodwill is amortized on a straight-line basis over 20
years. The value of VOBA and goodwill will be monitored at least annually based
on estimates of future earnings. For VOBA, those earnings relate to the
insurance in force purchased. For goodwill, estimates will be based on
production subsequent to the purchase. If estimated future earnings are less
than the carrying amount of the related asset, the carrying value of the asset
may not be recoverable. If impairment is indicated, the carrying value will be
reduced to its fair value with a corresponding charge to earnings.
Deferred Acquisition Costs
Acquisition costs, consisting of commissions and other costs that 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 1999,
1998 and 1997 were $312,036, $202,644, and $219,266, 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 range from 6% to 3.5%.
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.
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
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.
Investments
The Company has classified all of its fixed maturity and equity portfolio as
"available-for-sale" and, accordingly, the securities are carried at fair value.
Short-term investments are carried at amortized cost, which approximates market
value. 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. The Company
analyzes loan impairment at least once a year when assessing the adequacy of the
allowance for possible credit losses. The Company does not accrue interest on
impaired loans and accounts for interest income on such loans on a cash basis.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1999 and 1998, investments with a carrying value of $164,045
and $116,197, 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.
Accounting for Option Contracts
Certain annuity products provide additional benefits to the policy annuitization
value based on the growth in the Standard & Poor's (S&P) 500 Index. The Company
has analyzed the characteristics of these benefits and has purchased option
contracts tied to the S&P 500 Index with similar characteristics to hedge these
risks. Management monitors correlation of in force amounts and option contract
values to ensure proper matching. If persistency assumptions were to deviate
significantly from anticipated rates, management would purchase or sell option
contracts as deemed appropriate. As of December 31, 1999, management believes a
proper hedge exists.
The option contracts are reported at fair value on the consolidated balance
sheet. The fair value of the options is deemed by management to approximate the
estimated market values. Unrealized gains and losses on the option contracts are
recorded in annuity benefits on the consolidated statement of operations to
offset increases in the future policy benefits liability recorded for the index
benefit.
The Company purchases "over-the-counter" European-Asian call option contracts
based upon the S&P 500 Index. Two types of options are purchased: five- and
seven-year options with daily averaging of the index during the last year of the
contract and five-year cliquet options which use monthly averaging of the index
during each year and resets at each anniversary date of the contract. The strike
price depends on the product, index period, cap and credited rate. The Company
only purchases option contracts from counterparties rated AA- or better and the
option contracts are not used for trading purposes.
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
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 fair
value. The assets of each account are legally segregated and are not subject to
claims that arise out of any other business of the Company.
Fair values of separate account assets were determined using the market value of
the underlying 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
Effective January 1, 1999, the Company changed its methodology for calculating
deferred acquisition costs and future benefit reserves for two tiered deferred
annuities. The revised calculation better reflects the income streams from this
product. Under the previous method of accounting, a disproportionate amount of
gains were recognized when contract annuitization or surrenders occurred. The
new methodology provides for profit emergence over the life of the block of
annuities. The cumulative effect of the change in accounting principle for the
years prior to 1999 in the amount of $16,122, net of taxes, is recorded in the
accompanying consolidated statement of operations. The effect of the change in
methodology does not have a significant impact on the financial statements for
prior years, therefore no proforma retroactive information is included.
In 1999, the Company adopted Statement of Position (SOP) 97-3, Accounting for
Insurance and Other Enterprises for Insurance-Related Assessment, and SOP 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. No material adjustments were made to the consolidated financial statements
upon adoption of these statements.
In 1998, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits. No adjustments were made to the
consolidated financial statements upon adoption of these pronouncements.
Accounting Pronouncements to be Adopted
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The statement
establishes accounting and reporting standards for derivative financial
instruments and other similar financial instruments and for hedging activities.
In June 1999, SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of Effective Date of FASB Statement No. 133 was issued.
This statement defers the effective date to fiscal years beginning after June
15, 2000. The Company will adopt these statements on January 1, 2001. The impact
of adoption of SFAS No. 133 on the financial position of the Company has not
been determined.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(2) Business Combination
On October 1, 1999, the Company acquired all of the outstanding capital stock
(including all outstanding options) of Life USA that it did not already own for
approximately $423 million in cash. The acquisition was financed by a capital
contribution from AZOA.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the consolidated financial statements include only the results of
Life USA's operations from the date of acquisition. The value of business
acquired was approximately $215 million and is being amortized in relation to
the present value of future gross profits, which will be approximately 20 years.
The remaining excess of the purchase price over the fair value of assets
acquired in the amount of $308 million has been recorded as goodwill and is
being amortized on a straight-line basis over 20 years.
During 1999, expenses of approximately $7 million were recorded related to the
acquisition of Life USA and its integration with the Company. These expenses
resulted primarily from the costs of the integration of the Company's and Life
USA's strategies, policies and practices. These charges include filing fees,
legal fees and other consulting fees related to the acquisition.
Following are the Company's unaudited pro forma results for the years ended
December 31, 1999 and 1998 assuming the acquisition occurred on January 1, 1998.
Unaudited
1999 1998
- ------------------------------------------------------------------------------
Total revenue $ 1,766,792 1,654,531
Net (loss) income (44,624) 103,236
- ------------------------------------------------------------------------------
These unaudited pro forma results have been prepared for comparative purposes
only and include additional amortization expenses as a result of goodwill and
certain other adjustments. They do not purport to be indicative of the results
of operations that actually would have resulted had the combination occurred on
January 1, 1998 or that may result in the future.
In 1998, the Company accounted for its investment in Life USA under the equity
method of accounting and carried its investment at cost, adjusted for its share
of Life USA's earnings, amortization of goodwill and dividends received. The
difference between the cost of the investment and underlying equity was to be
amortized on a straight-line basis over ten years. As of December 31, 1998, the
company held 21.41% of the outstanding common stock of Life USA with an
approximate market value of $68,290. The carrying value of the Life USA
investment at year-end 1998 was $80,928, which was $20,983 higher than the
equity in net assets of $59,945.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments
Investments at December 31, 1999 consist of:
Amount
shown on
Amortized Estimated consolidated
cost fair balance
or cost value sheet
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. government $ 294,587 291,996 291,996
States and political subdivisions 57,378 52,452 52,452
Foreign government 172,877 169,686 169,686
Public utilities 227,934 220,602 220,602
Corporate securities 2,981,913 2,873,327 2,873,327
Mortgage backed securities 345,794 347,235 347,235
Collateralized mortgage obligations 634,680 627,052 627,052
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities $4,715,163 4,582,350 4,582,350
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Banks, trusts and insurance companies 22,935 23,831 23,831
Industrial and miscellaneous 413,279 651,710 651,710
- ------------------------------------------------------------------------------------------------------------------------------------
Total equity securities $ 436,214 675,541 675,541
- ------------------------------------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 528,933 XXXXXX 528,933
Certificates of deposit and short-term securities 139,571 XXXXXX 139,571
Policy loans 46,573 XXXXXX 46,573
Real estate 154,063 XXXXXX 154,063
Options 51,131 XXXXXX 68,217
Investment in equity investments 3,045 XXXXXX 3,045
- ------------------------------------------------------------------------------------------------------------------------------------
Total other investments $ 923,316 XXXXXX 940,402
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments $6,074,693 XXXXXX 6,198,293
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
At December 31, 1999 and 1998, the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values
of securities are as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
U.S. Government $ 294,587 3,340 5,931 291,996
States and political subdivisions 57,378 0 4,926 52,452
Foreign government 172,877 334 3,525 169,686
Public utilities 227,934 20 7,352 220,602
Corporate securities 2,981,913 3,902 112,488 2,873,327
Mortgage backed securities 345,794 5,026 3,585 347,235
Collateralized mortgage obligations 634,680 2,126 9,754 627,052
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 4,715,163 14,748 147,561 4,582,350
Equity securities 436,214 289,441 50,114 675,541
- ------------------------------------------------------------------------------------------------------------------------------------
Total $5,151,377 304,189 197,675 5,257,891
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
U.S. Government $ 274,813 36,717 234 311,296
States and political subdivisions 94,640 6,481 0 101,121
Foreign government 34,652 2,079 0 36,731
Public utilities 66,236 5,948 202 71,982
Corporate securities 1,441,359 67,234 9,891 1,498,702
Mortgage backed securities 401,505 26,799 0 428,304
Collateralized mortgage obligations 80,599 10,141 585 90,155
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 2,393,804 155,399 10,912 2,538,291
Equity securities 278,753 245,913 12,262 512,404
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,672,557 401,312 23,174 3,050,695
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The changes in unrealized (losses) gains on fixed maturity securities were $(277,300), $22,170, and $58,422 in each of the years
ended December 31, 1999, 1998 and 1997, respectively.
The changes in unrealized gains in equity investments, which include common stocks and nonredeemable preferred stocks were $5,676,
$55,188, and $84,718 for the years ended December 31, 1999, 1998 and 1997, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
The amortized cost and estimated fair value of fixed maturities at December 31, 1999, 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> <C>
Due in one year or less $ 102,823 102,554
Due after one year through five years 1,055,901 1,037,031
Due after five years through ten years 1,279,988 1,243,845
Due after ten years 1,295,977 1,224,633
Mortgage backed securities and collateralized mortgage obligations 980,474 974,287
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $4,715,163 4,582,350
- ------------------------------------------------------------------------------------------------------------------------------------
Gross gains of $151,920, $105,723, and $70,335 and gross losses of $39,717, $18,217, and $8,654 were realized on sales of
securities in 1999, 1998 and 1997, respectively.
Net realized investment gains (losses) for the respective years ended December 31 are summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturities, at market $ (4,474) 30,299 40,268
Equity securities 116,677 57,207 21,413
Mortgage loans (1,680) ,320) (982)
Real estate 331 3,133 635
Other (601) 93) 154
- ------------------------------------------------------------------------------------------------------------------------------------
Net gains before taxes 112,253 89,226 61,488
Tax expense on net realized gains 39,257 31,229 21,521
- ------------------------------------------------------------------------------------------------------------------------------------
Net gains after taxes $ 72,996 7,997 39,967
- ------------------------------------------------------------------------------------------------------------------------------------
The valuation allowances on mortgage loans at December 31, 1999, 1998 and 1997 and the changes in the allowance for the years
then ended are summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Year $ 9,599 8,279 7,279
Charged to operations 1,680 1,320 1,000
Recoveries 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
End of Year $ 11,279 9,599 8,279
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
Major categories of net investment income for the respective years ended December 31 are:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities $ 212,992 155,397 211,335
Mortgage loans 40,011 34,449 25,232
Policy loans 737 497 6,526
Short-term investments 1,823 15,022 12,804
Dividends:
Preferred stock 212 668 748
Common stock 5,259 5,190 4,603
Interest on assets held by reinsurers 8,097 8,272 8,858
Rental income on real estate 13,356 7,505 5,657
Other invested assets 6,405 1,132 3,781
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 288,892 228,132 279,544
Investment expenses related to coinsurance agreements (note 8) 2,660 2,689 98,417
Investment expenses 11,372 8,377 18,777
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 274,860 217,066 162,350
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
During the first two months of 1998, the Company entered into mortgage backed security reverse repurchase transactions
("dollar rolls") with certain securities dealers. Under this program, the Company sold certain securities for delivery in the
current month and simultaneously contracted with the same dealer to repurchase similar, but not identical, securities on a
specified future date. The Company gave up the right to receive principal and interest on the securities sold. As of December 31,
1999 and 1998 there were no outstanding amounts under the Company's dollar roll program. Average balances outstanding for the
first two months of 1998 were $120,525 and weighted average interest rates were 6.5%. The maximum balance outstanding during 1998
was $120,525. No dollar rolls were transacted in 1999.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(4) Summary Table of Fair Value Disclosures
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------- ----- ------- -----
Financial assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturities, at market:
U.S. Government $ 291,996 291,996 311,296 311,296
States and political subdivisions 52,452 52,452 101,121 101,121
Foreign governments 169,686 169,686 36,731 36,731
Public utilities 220,602 220,602 71,982 71,982
Corporate securities 2,873,327 2,873,327 1,546,342 1,546,342
Mortgage backed securities 347,235 347,235 380,664 380,664
Collateralized mortgage obligations 627,052 627,052 90,155 90,155
Equity securities 675,541 675,541 512,404 512,404
Mortgage loans 528,933 530,033 457,128 495,202
Short term investments 139,571 139,571 166,366 166,366
Policy loans 46,573 46,573 7,118 7,118
Options 68,217 68,217 15,109 15,109
Investment in equity investments 3,045 4,286 80,928 68,290
Receivables 310,866 310,866 323,971 323,971
Separate accounts assets 8,488,404 8,488,404 9,915,150 9,915,150
Financial liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Investment contracts 7,609,726 7,208,876 3,645,657 3,035,787
Separate account liabilities 8,488,404 8,361,112 9,915,150 9,765,791
- ------------------------------------------------------------------------------------------------------------------------------------
See Note 1 "Summary of Significant Accounting Policies" for description of the methods and significant assumptions used to
estimate fair values.
(5) Receivables
Receivables at December 31 consist of the following:
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums due $ 264,685 270,657
Agents balances 4,809 10,088
Related party receivables 2,230 3,852
Reinsurance commission receivable 9,304 8,022
Scholarship enrollment fees 14,125 12,010
Due from administrators 4,550 13,271
Other 11,163 6,071
- ------------------------------------------------------------------------------------------------------------------------------------
Total receivables $ 310,866 323,971
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(6) Accident and Health Claims Reserves
Accident and health claims reserves are based on estimates that are 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, 1999 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.
Activity in the accident and health claims reserves, exclusive of long term care, hospital indemnity and AIDS reserves of
$19,542, $9,918, and $12,479 in 1999, 1998 and 1997, respectively, is summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $128,764, $141,033, and $124,320 $ 366,425 312,886 273,813
Adjustment primarily related to commutation of block of business (53,585) 0 0
Incurred related to:
Current year 431,279 417,042 346,901
Prior years 3,264 (12,217) (12,087)
- ------------------------------------------------------------------------------------------------------------------------------------
Total incurred 434,543 404,825 334,814
- ------------------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 193,341 204,100 150,942
Prior years 185,696 147,186 144,798
- ------------------------------------------------------------------------------------------------------------------------------------
Total paid 379,037 351,286 295,740
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
recoverables of $175,142, $128,764, and $141,033 $ 368,346 366,425 312,887
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The Company incurred additional losses in 1999 on prior year incurred claims primarily on its reinsurance assumed (non-HMO)
business. Due to lower than anticipated losses related to prior years, the provision for claims and claim adjustment expenses
decreased in 1998 and 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(7) Reinsurance
In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a
portion of benefits paid by ceding risks under excess coverage and coinsurance contracts. The Company retains a maximum of $1
million coverage per individual life. Reinsurance contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the Company. 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.
Life insurance, annuities and accident and health business assumed from and ceded to other companies is as follows:
Percentage
Assumed Ceded of amount
Direct from other to other Net assumed
Year ended amount companies companies amount to net
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999:
<S> <C> <C> <C> <C> <C>
Life insurance in force $36,994,161 129,809,733 24,174,006 142,629,888 91.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 205,208 273,604 67,069 411,743 66.5%
Annuities 199,341 39,729 95,232 143,838 27.6%
Accident and health 541,847 302,059 315,938 527,968 57.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 946,396 615,392 478,239 1,083,549 56.8%
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998:
Life insurance in force $34,118,554 98,832,792 19,483,581 113,467,765 87.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 244,416 224,451 93,812 375,055 59.8%
Annuities 220,812 1,820 50,385 172,247 1.1%
Accident and health 479,237 294,333 267,119 506,451 58.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 944,465 520,604 411,316 1,053,753 49.4%
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997:
Life insurance in force $32,234,241 72,682,842 19,873,094 85,043,989 85.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 252,859 170,798 110,579 313,078 54.6%
Annuities 217,353 1,910 30,789 188,474 1.0%
Accident and health 436,105 311,612 296,650 451,067 69.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 906,317 484,320 438,018 952,619 50.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Included in reinsurance receivables at December 31, 1999 are $2,095,817 and $849,279 recoverable from two insurers who, as of
December 31, 1999, were both rated A+ by A.M. 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.
Of the amounts ceded to others, the Company ceded life insurance inforce of $3,387,592, $2,067,664, and $1,163,533 in 1999,
1998 and 1997, respectively, and life insurance premiums earned of $6,008, $4,165, and $2,538 in 1999, 1998 and 1997,
respectively, to its ultimate parent Allianz AG. The Company also ceded accident and health premiums earned to Allianz AG of
$3,131, $2,817, and $2,467 in 1999, 1998 and 1997.
</FN>
</TABLE>
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(7) Reinsurance (Continued)
Effective January 1, 1999, the Company entered into a 100% coinsurance agreement
with an unrelated insurance company to coinsure a block of preneed life and
annuity business with 1999 premium of $10,300. In connection with this
agreement, the Company recognized a recoverable on future benefit reserves of
$95,000, received a ceding commission of $2,600 and transferred cash of $91,700.
The unearned ceding commission represents deferred revenue that will be
amortized over the revenue-producing period of the related reinsured policies.
During 1999, $1,200 was amortized and included in other revenue in the
consolidated statements of operations. The servicing of the coinsured business
was also transferred to a third party administrator.
Effective December 31, 1999, the Company entered into a 100% coinsurance
agreement with an unrelated insurance company to coinsure the remaining block of
preneed life and annuity business with 1999 premium of $97,100. In connection
with this agreement, the Company recognized a recoverable on future benefit
reserves of $245,000, received a ceding commission of $73,900 and transferred
cash of $154,000. The unearned ceding commission represents deferred revenue
that will be amortized over the revenue-producing period of the related
reinsured policies. The servicing of the coinsured business was also transferred
to a third party administrator. Because the agreement was effective December 31,
1999, no revenue was recognized on this transaction in 1999.
Effective January 1, 1997, the Company entered into a 100% coinsurance agreement
with an unrelated insurance company to coinsure a block of business with life
insurance inforce of $13,200,000 and 1997 premium of $90,000. The coinsured
block included certain universal life and traditional life insurance policies
and annuity contracts. In connection with this agreement, the Company recognized
a recoverable on future benefit reserves of $1,102,000, received a ceding
commission of $138,500 and transferred assets of $881,000, which support the
business. The unearned ceding commission represents deferred revenue that will
be amortized over the revenue-producing period of the related reinsured
policies. During 1999, 1998 and 1997 $14,996, $15,965 and $22,647, respectively,
was amortized and included in other revenue in the consolidated statements of
operations. The servicing of the coinsured business was also transferred to a
third party insurer who is also the retrocessionaire of the block. Effective
January 1, 1998, the coinsurance agreement was amended to include another block
of business with future benefit reserves of $66,000, capitalized deferred
acquisition costs of $1,935 and deferred income of $750.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(8) Income Taxes
Income Tax (Benefit) Expense
Total income tax expense (benefit) for the years ended December 31 are as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense attributable to operations:
<S> <C> <C> <C>
Current tax expense $ 63,371 48,410 31,571
Deferred tax (benefit) expense (73,727) 2,822 28,283
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to operations (10,356) 51,232 59,854
Tax benefit due to cumulative effect of change in accounting (8,682) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to net income (19,038) 51,232 59,854
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Attributable to unrealized gains and losses for the year (94,283) 26,127 49,748
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax effect on equity $ (113,321) 77,359 109,602
- ------------------------------------------------------------------------------------------------------------------------------------
Components of Income Tax (Benefit) Expense
Income tax expense computed at the statutory rate of 35% varies from tax expense reported in the consolidated statements of
operations for the respective years ended December 31 as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense computed at the statutory rate $ (12,520) 52,980 60,735
Dividends received deductions and tax-exempt interest (2,605) (3,294) (2,792)
Foreign tax (1,014) (133) 916
Interest on tax deficiency 800 900 1,100
Goodwill amortization 1,365 0 0
Other 3,618 779 (105)
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense as reported $ (10,356) 51,232 59,854
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(8) Income Taxes (Continued)
Components of Deferred Tax Assets and Liabilities on the Balance Sheet Tax effects of temporary differences giving rise to
the significant components of the net deferred tax liability at December 31 are as follows:
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
<S> <C> <C>
Provision for post retirement benefits $ 2,286 2,223
Allowance for uncollectible accounts 929 929
Policy reserves 282,573 173,414
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 285,788 176,566
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs 219,869 272,815
Net unrealized gain 25,701 128,883
Value of business acquired 73,627 0
Other 17,947 32,771
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 337,144 434,469
- ------------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 51,356 257,903
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
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.
The Company and its subsidiaries, with the exception of Life USA Insurance 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 $57,121, $30,808, and $39,914 in 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998
the Company had a tax recoverable from AZOA of $3,251 and $3,030, respectively.
At December 31, 1999 and 1998, the Company had a tax recoverable separate from the agreement with AZOA in the amount of
$7,233 and $1,030, respectively. These amounts are for foreign taxes and Life USA taxes recoverable prior to the purchase by the
Company.
</FN>
</TABLE>
<PAGE>
24
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(9) Related Party Transactions
In conjunction with the purchase of LifeUSA on October 1, 1999, the Company
received a capital contribution from AZOA in the amount of $423,186.
The Company reimbursed AZOA $3,582, $2,495, and $2,519 in 1999, 1998 and 1997,
respectively, for certain administrative and investment management services
performed. The Company's liability to AZOA for such services was $581 and $490
at December 31, 1999 and 1998, respectively.
The Company shares a data center with and receives other system support from
affiliated insurance companies. Usage and other system support charges paid by
the Company were $902, $1,291 and $2,826 in 1999, 1998 and 1997, respectively.
The Company's liability for data center and other system support charges was
$157 and $345 at December 31, 1999 and 1998, 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.
The Company had 25 million shares of Series A preferred stock outstanding until
March 1998, which was held by AZOA with a dividend rate of 6.4% and a book value
of $25,000. In March 1998, the Company redeemed and canceled the 25 million
shares of Series A preferred stock.
(10) Employee Benefit Plans
The Company participates in the Allianz Primary Retirement Plan (Primary
Retirement Plan), a defined contribution plan. The Company makes contributions
to a money purchase pension plan on behalf of eligible participants. All
employees, excluding agents, are eligible to participate in the Primary
Retirement Plan after two years of service. The contributions are based on a
percentage of the participant's salary with the participants being 100% vested
upon eligibility. It is the Company's policy to fund the plan costs as accrued.
Total pension contributions were $2,025, $756, and $810 in 1999, 1998 and 1997,
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 75% of eligible employees' contributions up
to a maximum of 6% of a participant's compensation. The plan can also declare a
profit sharing allocation of up to 5.0% of base pay at year-end based upon the
profitability of AZOA. All employees 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 $980, $868, and $1,057 in 1999, 1998 and 1997, respectively, toward
planned contributions.
Employees of Life USA also participated in a defined contribution plan, which
will be merged with the Allianz Plan effective January 1, 2000. Total Company
contributions made subsequent to October 1, 1999 were $329.
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, 1999 and 1998 was $6,532 and $6,352, respectively.
This liability is included in "Other liabilities" in the accompanying balance
sheet.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(11) Statutory Financial Data and Dividend Restrictions
Statutory accounting is directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded
in financial statements prepared under GAAP are excluded or vary in determining statutory policyholders' surplus and net gain from
operations. Currently, 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 and annuity benefit reserves calculated for statutory accounting do not include provisions for withdrawals. The NAIC
has completed a project to codify statutory accounting practices, the result of which will constitute the primary source of
"prescribed" statutory accounting practices. Accordingly, that project, which is currently in the process of state adoption and
expected to be effective January 1, 2001, will 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 has not quantified the effects of adopting the NAIC codification on their statutory
financial statements.
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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Statutory basis $ 873,617 654,371 97,768 35,188 72,343
Adjustments:
Change in reserve basis (289,261) (226,145) (80,952) 2,036 (99,981)
Deferred acquisition costs 801,763 930,059 (128,296) 2,979 63,742
Difference in accounting for
purchase of Life USA 340,675 0 (6,373) 0 0
Net deferred taxes (51,356) (257,903) 82,409 (2,822) (28,283)
Statutory asset valuation reserve 236,210 178,011 0 0 0
Statutory interest maintenance reserve 43,786 48,697 (4,912) 14,361 7,994
Modified coinsurance reinsurance 0 (2,358) 0 29,595 81,790
Unrealized (losses) gains
on investments (136,719) 158,391 0 0 0
Nonadmitted assets 7,411 14,946 0 0 0
Deferred income on reinsurance (186,888) (106,065) 0 0 0
Other liabilities related
to reinsurance (32,998) (52,337) 0 0 0
Valuation allowance on mortgage loans (11,279) (9,599) (1,680) (1,320) (1,000)
Loss from non-insurance subsidiaries 0 0 (11,714) (618) (1,260)
Other (47,881) 10,456 11,613 20,740 18,327
- ------------------------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $1,547,080 1,340,524 (42,137) 100,139 113,672
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The Company is required to meet minimum statutory capital and surplus requirements. The Company's statutory capital and
surplus as of December 31, 1999 and 1998 were in compliance with these requirements. The maximum amount of dividends that 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 1998, the Company paid AZOA dividends on preferred stock in the amount $729. A common stock dividend of $551 was paid in
1997. Dividends of $49,391 could be paid in 2000 without prior approval of the Commissioner of Commerce.
</FN>
</TABLE>
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(11) Statutory Financial Data and Dividend Restrictions (Continued)
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's adjusted capital is in excess of the Company action level as of
December 31, 1999 and 1998.
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 Company does not currently use permitted
statutory accounting practices that have a significant impact on its statutory
financial statements.
(12) Commitments and Contingencies
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion of
management, the ultimate resolution of such litigation will not have a material
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.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(13) Foreign Currency Translation
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 comprehensive income. An analysis of this account for
the respective years ended December 31 follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $ (6,209) (4,448) (3,473)
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments 2,248 (2,710) (1,500)
Amount of income tax (expense) benefit for period
related to aggregate adjustment (787) 949 525
- ------------------------------------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $ (4,748) (6,209) (4,448)
- ------------------------------------------------------------------------------------------------------------------------------------
Canadian foreign exchange rate at end of year 0.6924 0.6535 0.6992
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(14) Supplementary Insurance Information
The following table summarizes certain financial information by line of business for 1999, 1998 and 1997:
As of December 31
- ------------------------------------------------------------------------------------------------------------------------------------
Future policy Other
Deferred benefits, policy
policy losses, claims and
acquisition claims and Unearned benefits
costs loss expense premiums payable
- ------------------------------------------------------------------------------------------------------------------------------------
1999:
<S> <C> <C> <C> <C>
Life $ 231,927 1,874,904 3,049 116,569
Annuities 561,966 7,728,072 0 1,771
Accident and health 7,870 0 45,964 809,575
- ------------------------------------------------------------------------------------------------------------------------------------
$ 801,763 9,602,976 49,013 927,915
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
Life $ 217,262 1,445,844 3,859 97,647
Annuities 694,388 3,588,491 0 1,727
Accident and health 18,409 0 49,919 671,472
- ------------------------------------------------------------------------------------------------------------------------------------
$ 930,059 5,034,335 53,778 770,846
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
Life $ 189,971 1,297,269 5,215 63,572
Annuities 717,721 3,251,829 0 1,881
Accident and health 19,388 0 44,953 487,660
- ------------------------------------------------------------------------------------------------------------------------------------
$ 927,080 4,549,098 50,168 553,113
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(14) Supplementary Insurance Information (Continued)
For the year ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
Premium Benefits, Net change
revenue claims in
and other Net losses, and policy Other
contract investment settlement acquisition operating
considerations income expenses costs (a) expenses
- ------------------------------------------------------------------------------------------------------------------------------------
1999:
<S> <C> <C> <C> <C> <C>
Life $ 411,743 36,171 319,210 (14,665) 153,281
Annuities 143,838 211,432 163,329 133,268 166,715
Accident and health 527,968 27,257 465,139 10,539 173,910
- ------------------------------------------------------------------------------------------------------------------------------------
$1,083,549 274,860 947,678 129,142 493,906
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
Life $ 375,055 34,731 306,318 (27,291) 141,705
Annuities 172,247 158,458 135,356 23,333 151,719
Accident and health 506,451 23,877 393,601 979 161,128
- ------------------------------------------------------------------------------------------------------------------------------------
$1,053,753 217,066 835,275 (2,979) 454,552
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
Life $ 313,078 24,352 230,357 (14,363) 99,913
Annuities 188,474 118,028 124,535 (44,924) 186,789
Accident and health 451,067 19,970 327,526 (4,455) 151,312
- ------------------------------------------------------------------------------------------------------------------------------------
$ 952,619 162,350 682,418 (63,742) 438,014
- ------------------------------------------------------------------------------------------------------------------------------------
(a) See note 1 for total gross amortization.
</TABLE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
The financial Statements of the Company and the Variable Account are
included in Part B hereof.
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account(1)
2. Not Applicable
3.a. Principal Underwriter's Agreement(2)
3.b. Selling Agreement
4. Individual Variable Annuity Contract(5)
4.a. Waiver of Contingent Deferred Sales Charge Endorsement(5)
4.b. Traditional Death Benefit Endorsement(5)
4.c. Enhanced Death Benefit Endorsement(5)
4.d. Individual Retirement Annuity Endorsement(5)
4.e. Unisex Endorsement(5)
4.f. Pension Plan and Profit Sharing Plan Endorsement(5)
4.g. Group Pension Plan Death Benefit Endorsement(5)
4.h. 403(b) Annuity Endorsement(5)
4.i. Roth IRA Endorsement(5)
5. Application for Individual Variable Annuity Contract
6. (i) Copy of Articles of Incorporation of the Company(1)
(ii) Copy of the Bylaws of the Company(1)
7. Not Applicable
8.a. Form of Fund Participation Agreement between North American
Life and Casualty Company and Franklin Valuemark Funds(1)
8.b. Form of Fund Participation Agreement between AIM Variable
Insurance Funds, Inc., Allianz Life Insurance Company of North
America and NALAC Financial Plans LLC(3)
8.c. Form of Fund Participation Agreement between Alger American
Fund, Allianz Life Insurance Company of North America and Fred
Alger and Company(3)
8.d. Form of Fund Participation Agreement between USAllianz Variable
Insurance Products Trust, Allianz Life Insurance Company of
North America and BISYS Fund Services Limited Partnership(3)
8.e. Form of Fund Participation Agreement between Davis Variable
Account Fund, Inc., Davis Distributors, LLC and Allianz Life
Insurance Company of North America(4)
8.f. Form of Fund Participation Agreement between Van Kampen Life
Investment Trust, Van Kampen Funds, Inc., Van Kampen Asset
Management Inc. and Allianz Life Insurance Company of North
America(4)
8.g. Form of Fund Participation Agreement between Allianz Life
Insurance Company of North America and J.P. Morgan Series Trust
II(4)
8.h. Form of Fund Participation Agreement between Oppenheimer Variable
Account Funds, Oppenheimer Funds Inc. and Allianz Life Insurance
Company of North America(4)
8.i. Form of Fund Participation Agreement between Allianz Life Insurance
Company of North America, PIMCO Variable Insurance Trust, and PIMCO
Fund Distributors, LLC(4)
8.j. Form of Fund Participation Agreement between Seligman Portfolios,
Inc. and Allianz Life Insurance Company of North America(4)
9. Opinion and Consent of Counsel
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Company Organizational Chart
(1) Incorporated by reference to Registrant's Form N-4 (File Nos. 333-06709 and
811-05618) electronically filed on June 24, 1996.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
Form N-4 (File Nos. 333-06709 and 811-05618) electronically filed on
December 13, 1996.
(3) Incorporated by reference to Registrant's Form N-4 (File Nos. 333-06709 and
811-05618) electronically filed on November 12, 1999.
(4) Incorporated by reference to Registrant's Pre-Effective Amendment to Form
N-4 (File Nos. 333-82329 and 811-05618) electronically filed December 30,
1999.
(5) Incorporated by reference to Form N-4 (File Nos. 333-95729 and 811-5618)
electronically filed January 31, 2000.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Insurance Company:
Name and Principal Positions and Offices
Business Address with Depositor
- - ---------------------------- ---------------------------------
Lowell C. Anderson Chairman of the Board
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert W. MacDonald Director and Chief
1750 Hennepin Avenue Executive Officer
Minneapolis, MN 55403
Margery G. Hughes President and Chief
1750 Hennepin Avenue Administrative Officer
Minneapolis, MN 55403
Mark A. Zesbaugh Senior Vice President and
1750 Hennepin Avenue Chief Financial Officer
Minneapolis, MN 55403
Herbert F. Hansmeyer Director
777 San Marin Drive
Novato, CA 94998
Michael P. Sullivan Director
7505 Metro Boulevard
Minneapolis, MN 55439
Dr. Gerhard Rupprecht Director
Reinsburgstrasse 19
D-70178
Stuttgart, Germany
Edward J. Bonach President-Special Markets
1750 Hennepin Avenue Division
Minneapolis, MN 55403
Robert S. James President - Individual
1750 Hennepin Avenue Division
Minneapolis, MN 55403
Rev. Dennis Dease Director
c/o University of St. Thomas
215 Summit Avenue
St. Paul, MN 55105-1096
James R. Campbell Director
c/o Norwest Corp.
Norwest Center
Sixth & Marquette
Minneapolis, MN 55479-0116
Robert M. Kimmitt Director
Wilmer, Cutler & Pickering
2445 M Street NW
Washington, DC 20037-1420
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
The Company organizational chart is filed as Exhibit 14 herein.
Item 27. Number of Contract Owners
Not Applicable.
Item 28. Indemnification
The Bylaws of the Insurance Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a Director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therein.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Insurance Company pursuant to the foregoing, or otherwise, the Insurance Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Insurance Company of expenses
incurred or paid by a director, officer or controlling person of the Insurance
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
a. USAllianz Investor Services, LLC (formerly 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(managers) and directors (Board of
Governors) of USAllianz Investor Services, LLC:
Positions and Offices
Business Address with Underwriter
- - ---------------------- ----------------------
Christopher H. Pinkerton Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Thomas B. Clifford Chief Manager and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael T. Westermeyer Secretary and Governor
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine L. Mielke Compliance Officer
1750 Hennepin Avenue
Minneapolis, MN 55403
Michael M. Ahles Vice President and Treasurer
1750 Hennepin Avenue
Minneapolis, MN 55403
Lawrance C. Skibo Executive Vice President
1750 Hennepin Avenue
Minneapolis, MN 55403
Catherine Q. Farley Vice President
1750 Hennepin Avenue
Minneapolis, MN 55403
Brian A. Jeffs Regional Vice President
1750 Hennepin Avenue
Minneapolis, MN 55403
Robert S. James Director
1750 Hennepin Avenue
Minneapolis, MN 55403
c. Not Applicable
Item 30. Location of Accounts and Records
Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota
55403 and Delaware Valley Financial Services, USAllianz Service Center, 300
Berwyn Park, Berwyn, Pennsylvania 19312, maintain physical possession of the
accounts, books or documents of the Variable Account required to be maintained
by Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules promulgated thereunder.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Allianz Life Insurance Company of North America ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Insurance Company hereby represents that it is relying upon a No Action
Letter issued to the American Council of Life Insurance, dated November 28, 1988
(Commission ref. IP-6-88), and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it has caused this Registration
Statement to be signed on its behalf in the City of Minneapolis and State of
Minnesota, on this 27th day of March, 2000.
ALLIANZ LIFE
VARIABLE ACCOUNT B
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ MICHAEL T. WESTERMEYER
--------------------------------
Michael T. Westermeyer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ MICHAEL T. WESTERMEYER
------------------------------
Michael T. Westermeyer
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
Chairman of the Board 3/27/00
Lowell C. Anderson* ------
Lowell C. Anderson Date
3/27/00
Director and Chief Executive ------
Robert W. MacDonald* Officer Date
Robert W. MacDonald
3/27/00
Margery G. Hughes* President and Chief Administrative ------
Margery G. Hughes Officer Date
3/27/00
Mark A. Zesbaugh* Chief Financial Officer and ------
Mark A. Zesbaugh Senior Vice President Date
Herbert F. Hansmeyer* Director 3/27/00
Herbert F. Hansmeyer ------
Date
Michael P. Sullivan* Director 3/27/00
Michael P. Sullivan ------
Date
Dr. Gerhard Rupprecht* Director 3/27/00
Dr. Gerhard Rupprecht ------
Date
Rev. Dennis Dease* Director 3/27/00
Rev. Dennis Dease ------
Date
James R. Campbell* Director 3/27/00
James R. Campbell ------
Date
Robert M. Kimmitt* Director 3/27/00
Robert M. Kimmitt ------
Date
*By Power of Attorney
By: /S/ MICHAEL T. WESTERMEYER
--------------------------------
Michael T. Westermeyer
Attorney-in-Fact
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM N-4
ALLIANZ LIFE VARIABLE ACCOUNT B
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
EXHIBIT PAGE
EX-99.B3.b Selling Agreement
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Independent Auditors' Consent
EX-99.B14 Company Organizational Chart
GENERAL AGENCY AGREEMENT
AGREEMENT between ____________________________________________________
(Broker/Dealer) and ________________________________________________ (Life Agent
or Agency) hereinafter taken together and referred to as "General Agent" and
USAllianz Investor Services, LLC ("USAZ").
WITNESSETH:
WHEREAS, General Agent is itself, or is affiliated with an entity which is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") and which is a member of the National Association of Securities Dealers,
Inc. (the "NASD") and is also duly licensed as a life insurance agency under
the insurance laws of the various states in which it operates; and
WHEREAS, USAZ has been authorized by Allianz Life Insurance Company Of North
America and Preferred Life Insurance Company Of New York (hereinafter
collectively referred to as "Life Company" to obtain and appoint general agents
of Life Company to solicit for and sell those certain variable insurance
policies (the "Policies") which are described on the Commission Schedule which
is attached hereto and incorporated herein; and
WHEREAS, the parties desire General Agent to solicit for and sell the Policies;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
undertakings herein set forth, the parties hereby agree as follows:
1.APPOINTMENT General Agent is hereby appointed as a general agent of Life
Company for the sale of the Policies in those states where General Agent is duly
licensed to do so and in those states where Life Company is authorized to sell
such Products. General Agent shall have no exclusive territory for the sale of
the Policies. USAZ shall inform General Agent of those jurisdictions in which
the Policies may be lawfully sold.
2.AUTHORITY TO SOLICIT AND SELL
General Agent shall have the authority, pursuant to the rules and regulations of
Life Company and USAZ to solicit sales of the Policies, obtain completed
applications therefor and accept premiums paid thereon. All applications for the
Policies shall be on forms duly authorized by Life Company in accordance with
the insurance laws and regulations of the various states in which such Policies
are sold. All such applications and premiums shall be promptly remitted to USAZ
or to Life Company in accordance with the rules and regulations of USAZ and Life
Company applicable to such transactions. Premiums are received in fiduciary
capacity by General Agent for USAZ or Life Company and remittance shall not
exceed 30 days.
No solicitation for a Policy shall be made by any person associated with General
Agent unless and until such person has been duly appointed as an agent of Life
Company in accordance with applicable insurance laws and regulations. General
Agent is not authorized to solicit for the sale of the Policies in any
jurisdiction where such product is not duly authorized to be sold.
3.AUTHORITY TO RECOMMEND APPOINTMENT OF AGENTS
General Agent is authorized to recommend to USAZ those persons associated with
General Agent who are to be appointed as agents of Life Company and who are to
be authorized to solicit for the sale of the Policies in accordance herewith.
USAZ shall have absolute discretion to accept or reject such recommendation for
the appointment of any such person as an agent for the sale of the Policies.USAZ
shall also have the absolute right to terminate any such person as an agent of
Life Company.
4.TRAINING, COMPLIANCE AND LICENSING
General Agent shall have the sole responsibility for the training and
supervision of all persons appointed as agents hereunder. General Agent and all
persons associated with General Agent shall, in the solicitation and sale of the
Policies, comply with all written procedures, rules and regulations of USAZ or
Life Company applicable thereto. General Agent and all persons associated with
General Agent shall use only those sales, advertising and promotional materials
which have been approved in writing by USAZ.
General Agent shall have the responsibility for compliance with all laws, rules
and regulations applicable to the solicitation and sale of the Policies by
General Agent and by all persons associated with General Agent. General Agent
shall indemnify and hold USAZ and Life Company harmless from any li ability
(including but not limited to costs of defense and attorney's fees) arising from
any act or omission of General Agent or of any affiliate of General Agent, or of
any officer, director, employee of General Agent or of sales persons associated
with General Agent.
General Agent, its affiliates, its officers, directors, employees, and sales
personnel, shall obtain and maintain all licenses, registrations, and
appointments required by any law, regulation, or other requirement of the SEC,
the NASD, or of any jurisdiction where the Policies are to be sold.
5.COMPENSATION
General Agent shall receive commissions on premiums on all Policies issued as a
result of applications obtained by it and accepted by Life Company. Commissions
payable hereunder are specified in the Commission Schedule which is attached
hereto and incorporated herein. Such Commission Schedule may b e amended or
modified at any time by USAZ without notice. Any such amendment or modification
shall apply only to applications for Policies which are obtained by General
Agent after the date of such modification or amendment.
In the event an application or premium payment is rejected by USAZ or Life
Company or if a premium is refunded to a purchaser and General Agent has
received compensation on the amount so rejected or refunded, General Agent shall
promptly repay such compensation to USAZ.Also, repayment of commission may apply
to surrenders within twelve months of premium payment. Such commission
repayments are specified in the Commission Schedule. If such repayment is not
promptly made, USAZ may, at its option, deduct such amount from any future
payments due General Agent or may otherwise institute proceedings against
General Agent to recover such amounts.
6.AFFILIATED ENTITY
In the event General Agent utilizes an affiliated entity to satisfy
broker-dealer requirements pursuant to permission granted by a no-action letter
issued by the SEC, such affiliated broker-dealer shall countersign this
Agreement and shall be duly bound hereby.
7.ENTIRE AGREEMENT
This Agreement is the complete and exclusive statement of the agreement between
the parties as to the subject matter hereof which supersedes all proposals or
agreements, oral or written, and all other communications or letters of intent
between the parties related to the subject matter of this Agreement.
8.MODIFICATION OF AGREEMENT
This Agreement can only be modified by a written agreement duly signed by the
persons authorized to sign agreements on behalf of the parties. Variance from
the terms or conditions of this Agreement or any order or other written
notifications will be of no effect.
9.SEPARABILITY OF PROVISIONS
If any provision or provisions of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or be impaired thereby.
10.ASSIGNMENT
This Agreement and the rights, duties, and obligations of the parties hereto
shall not be assignable by either party hereto without the prior written consent
of the other, and any purported assignment shall be void.
11.WAIVER
No waiver by either party of any default by the other in the performance of any
promise, term, or condition of this Agreement shall be construed to be a waiver
by such party of any other or subsequent default in performance of the same or
any other covenant, promise, term, or condition hereof. No prior transactions
or dealings between the parties shall be deemed to establish any custom or usage
waiving or modifying any provision hereof.
12.NOTIFICATION OF CLAIMS, DEMANDS, OR ACTIONS
Each party hereto shall promptly notify the other in writing of any claims,
demands, or actions having any bearing on this Agreement.
13.PERFORMANCE IN ACCORDANCE WITH LAW
Each party agrees to perform its obligation hereunder in accordance with all
applicable laws, rules, and regulations now or hereafter in effect.
14.BINDING AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their successors, and permitted assigns.
15.ACTS BEYOND THE CONTROL OF THE PARTIES
No liability shall result to either party, nor shall either party be deemed to
be in default hereunder, as a result of delay in its performance or from its
non-performance hereunder caused by circumstances beyond its control, including
but not limited to: act of God, act of war, riot, epidemic, fir e, flood, or
other disaster, or act of government. Nevertheless, the party shall be required
to be diligent in attempting to remove such cause or causes.
16.RELATIONSHIP OF THE PARTIES
Each of the parties will act as an independent contractor under the terms of
this Agreement and neither is now, or in the future, an agent, or a legal
representative of the other for any purposes. Neither party has any right or
authority to supervise or control the activities of the other party's employees
in connection with the performance of this Agreement or to assign or create any
application of any kind, express, or implied, on behalf of the other party or to
bind it in any way, to accept any services of process upon it or to receive any
notice of any nature whatsoever on its behalf.
17.ARBITRATION
Any controversy relating to this Agreement shall be determined by arbitration in
the City of Minneapolis, Minnesota, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. All parties agree to
be bound by the results of this arbitration; judgment upon the aware so rendered
may be entered and enforced in any court of competent jurisdiction.
18.TERMINATION This agreement shall automatically terminate upon breach by
either party or any of the terms and conditions hereof, or upon the dissolution,
bankruptcy, or insolvency of either party. This Agreement may be terminated by
either party at any time upon written notice. Termination shall not affect
General Agent's right to any compensation earned on premiums received and
accepted by Life Company prior to the effective date of such termination.
19.GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Minnesota.
20.CAPTIONS
Captions contained in this Agreement are for reference purposes only and do not
constitute part of this Agreement.
21.NOTICE
All notices which are required to be given or submitted pursuant to this
Agreement shall be in writing and shall be deemed given when deposited with the
United States Postal Service, postage prepaid, registered or certified mail,
return receipt requested, to the last address of record of the party being
notified which is maintained by the other party in the ordinary course of
business.
IN WITNESS WHEREOF, the parties have executed this Agreement in Minneapolis,
Minnesota on _______________________, _____.
GENERAL AGENT:
-------------------------------------------
Name of Broker Dealer
By ________________________________________
-------------------------------------------
Print Name and Title
-------------------------------------------
Name of Life Agent of Agency
By ________________________________________
-------------------------------------------
Name and Title
USAllianz Investor Services, LLC
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
By _____________________________
- --------------------------------
Name and Title
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 12, 2000
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Re: Opinion of Counsel - Allianz Life Variable Account B
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Pre-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Deferred Variable Annuity
Contract (the "Contract") to be issued by Allianz Life Insurance Company of
North America and its separate account, Allianz Life Variable Account B.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Allianz Life Variable Account B is a unit investment trust as the 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 a copy thereof, 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
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America and
the Contract Owners of Allianz Life Variable Account B:
We consent to the use of our report dated February 4, 2000 on the financial
statements of Allianz Life Variable Account B and our report dated February 7,
2000 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."
Our report dated February 7, 2000 on the consolidated financial statements of
Allianz Life Insurance Company of North America and subsidiaries refers to a
change in the method of calculating deferred acquisition costs and future
benefit reserves for two-tiered annuities.
/S/ KPMG LLP
------------------
KPMG LLP
Minneapolis, Minnesota
April 7, 2000
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 USAllianz Investor Services, LLC.
